Carter Bells involved in making new law

(July 2017) Abdulla v Whelan et al EWHC 605 (Ch)

Carter Bells has recently been involved in making new law in the fields of landlord and tenant and insolvency. Carter Bells acted for the successful party in an appeal to the High Court on an important question that relates to the disclaimer provisions in s.315 to 321 of the Insolvency Act 1986 and the position of the landlord where one of two or more joint tenants is declared bankrupt.

The appellant (a potential third party creditor) argued that the purpose and function of the insolvency regime, as explained in dicta by the House of Lords in Hindcastle Ltd v Barbara Attenborough Associates Ltd AC 70, would be frustrated if the bankrupt tenant was not allowed to escape all of her obligations under a jointly held lease. His position was that a disclaimer by the trustee in bankruptcy had the effect of terminating the lease such that no rent was payable by the bankrupt’s estate thereafter.

For the trustee in bankruptcy and the landlord it was argued that as a joint legal estate is by definition held on trust by the tenants for each other the tenancy does not fall into the bankrupt’s estate. S.283(3)(a) of the Insolvency Act 1986 applied. It therefore followed that a purported disclaimer of a jointly held lease by the trustee in bankruptcy was void insofar as the legal estate was concerned.

It was held by the Judge that all that could be disclaimed was the bankrupt’s beneficial interest in the lease, if any, and the bankrupt tenant remained personally liable for the rent as he or she was before the bankruptcy and until the expiry of the term. Accordingly, the landlord was entitled to prove in the bankruptcy as a creditor of the bankrupt.

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