Trustees in bankruptcy and obtaining vacant possession—Garwood v Bolter

In what circumstances can a trustee in bankruptcy be allowed an application for vacant possession? Katherine Hallett of 13 Old Square Chambers comments on the decision in Garwood v Bolter [2015] EWHC 3619 (Ch) that clarifies what a trustee must do procedurally to satisfy the court before it will allow such an application.

Briefly, what was the background to the case?

The trustee applied for orders for sale with vacant possession in respect of three properties owned by the bankrupt. None of the properties was occupied by the bankrupt—the trustee had made extensive efforts to discover both the identities of the occupiers and the basis of their occupation.

The trustee did not discover the occupiers’ identities—he therefore issued this application against the bankrupt and ‘Persons Unknown’.

During the case, the identities of the occupiers became known. In addition, it was revealed that two of the three properties were occupied under tenancy agreements which the bankrupt had purported to grant after the bankruptcy order. These were not therefore binding on the trustee. The third property was occupied pursuant to an assured shorthold tenancy which apparently pre-dated the bankruptcy and was therefore prima facie binding on the trustee.

What were the issues that the judge had to decide?

HHJ Behrens (sitting as a judge of the High Court) had to determine on appeal whether the district judge at first instance had been correct to dismiss the trustee’s application for vacant possession.

There were two issues:

  • should the district judge have refused possession on the basis that she was not satisfied with service on the occupiers?
  • should the district judge have refused possession on the basis that the trustee should have brought separate possession proceedings against the occupiers?

Why did these issues arise in this case?

As to the service point, it was unclear how ‘Persons Unknown’ had originally been served and whether, once they were subsequently served with the application notice, they had ever been served with the supporting witness statement. It was also unclear (to the district judge at first instance) whether the occupiers had been given notice of the adjourned (final) hearing. They did not attend and nor did the bankrupt.

As to the possession proceedings point, having been invited by a district judge at an earlier hearing to consider serving section 21 notices on the occupiers under the Housing Act 1988, the trustee did subsequently do so, but did not commence any other proceedings pursuant to those notices or otherwise. It was assumed that the notice in respect of the tenancy agreement binding on the trustee had terminated that tenancy. The other two agreements were not binding on him in any event.

The district judge was willing to make orders for sale. However, she was not prepared to make orders for possession, because she was concerned about the procedures which had been adopted by the trustee.

What were the main legal arguments put forward?

The trustee argued that the district judge had erred in failing to order vacant possession.

On the service point, the trustee argued that the district judge should have taken a more flexible approach to service of the notification of the hearing date, because the occupiers had in fact been notified. Even if the trustee had been unable to prove at the hearing that the occupiers had been given notice, the district judge should not have dismissed the application for possession but should have required evidence on the point.

On the second issue, the trustee argued that separate possession proceedings against the occupiers were not necessary—the court had wide powers under section 363 of the Insolvency Act 1986 (IA 1986), including jurisdiction to make possession orders in cases of this kind. It was submitted that none of the normal Civil Procedure Rules 1998 (CPR), SI 1998/3132, Pt 55 rules applied to insolvency matters.

What did the judge decide, and why?

Despite accepting that the occupiers had little prospect of mounting a successful substantive defence to a claim for possession, the judge dismissed the appeal. The judge thought that there was some force in the trustee’s case on service. However, he bore in mind that the appeal was against a discretionary decision of the district judge. In any event, his conclusion on the second issue made a decision on the first irrelevant.

As to whether possession proceedings should have been brought separately against the occupiers, the judge had ‘considerable reservations’ about the submission that CPR 55 did not apply. He was ‘far from clear’ that the trustee could simply obtain possession against the occupiers without any form of pleading against them.

To what extent is the judgment helpful in clarifying the law in this area?

The judge accepted that the bankruptcy court may (in certain cases) have jurisdiction to make a possession order under IA 1986,s 363. However, he did not accept that the trustee could simply proceed without pleading out a cause of action against the occupiers.

What practical lessons can those advising take away from this case? In particular, what steps should a trustee take when faced with unknown occupiers of properties comprising part of the bankruptcy estate?

First, the trustee must do all he can to ascertain:

  • the identities of occupiers, and
  • the basis upon which they occupy

This may involve using his investigative powers under IA 1986, ss 333(1), 363(3) and/or 366(1) before issuing possession proceedings.

Second, the trustee must consider the correct form of possession proceedings against occupiers (including the requisite notices requiring possession beforehand).

Third, the trustee should consider, if information is discovered once proceedings are on foot, whether he needs to amend or even discontinue those existing proceedings. It may be that matters can be remedied by staying or adjourning the existing proceedings, while other possession proceedings are started, both of which may then be consolidated.

Fourthly, in proceedings concerning ‘Persons Unknown’, the trustee should personally serve the proceedings and then use registered or recorded mail for other important correspondence (including notifications of hearing dates). Complete evidence of service should then be prepared.

Katherine Hallett is a barrister at 13 Old Square Chambers, specialising in insolvency, property and commercial litigation, including advisory work. She is regularly instructed in claims involving property disputes in an insolvency context.

Interviewed by Nicola Laver.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

Further Reading

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The steps the trustee in bankruptcy should take to protect their interest in the bankrupt's property on appointment

A summary checklist and timeline for applications to court by a trustee in bankruptcy for possession and sale of the bankrupt's property

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First published on LexisPSL Restructuring and Insolvency

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