No jurisdiction for bankruptcy court to stay possession claim (Re Roderick John Lynch)

No jurisdiction for bankruptcy court to stay possession claim (Re Roderick John Lynch)

The High Court allowed an appeal deciding that the judge below had erred in law in ordering a stay of possession proceedings in the county court and directing a trial of the validity of the lender’s charge as an issue in the bankruptcy. The appeal court held that the judge below had no jurisdiction to make such an order under the Insolvency Act 1986 (IA 1986) and had failed to properly exercise any discretion that she may have had. Written by Christopher Boardman, barrister, at Radcliffe Chambers.

Re Roderick John Lynch Inspiration Finance Ltd v Cadwallader (in his capacity as trustee in bankruptcy of Roderick John Lynch) and another [2020] EWHC 15 (Ch)

What are the practical implications of this case?

This case is an important illustration of the principle that the bankrupt’s property vests in the trustee in bankruptcy under IA 1986, s 306 subject to the proprietary interests of third parties, including those with charges over real property.

The court held that the enforcement of third-party proprietary interests are not proceedings within the bankruptcy. The fact that a dispute arises as to the validity of a lender’s security interest will not therefore render that dispute an issue arising in the bankruptcy itself. Therefore, it will not be open to judges (in this case an Insolvency and Companies Court Judge (ICCJ)) to interfere with the jurisdiction of the county court to determine possession proceedings.

Where a lender seeks to enforce its security after the making of a bankruptcy order, it should name the trustee in bankruptcy as a party to the proceedings. It is up to the trustee (with or without the benefit of directions from the bankruptcy court) to decide what role they wish to play.

Where the bankrupt is in possession, the lender should also name the bankrupt as a defendant. This will ensure that the bankrupt is personally bound to comply in with any order that the court may make.

What was the background?

Shortly after a bankruptcy order was made against Mr Roderick Lynch (the bankrupt), proceedings were commenced in the county court by a lender, Inspiration Finance Ltd (Inspi

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About the author:

Zahra started working as a paralegal at Lexis Nexis in Banking and Insolvency teams in April 2019. Zahra graduated with a 2.1 honours in a BA French and Spanish, completed the GDL at BPP University and is seeking some experience before commencing the LPC. She has undertaken voluntary work for law firms in London, Argentina and Colombia.