A sued B to recover monies loaned to B. Two years after proceedings were commenced A was adjudicated bankrupt, but neither B, nor the court, knew of this, and the court ordered B to repay the monies. What steps, if any, can B take upon learning of A’s bankruptcy?
In this case, B sought to introduce fresh evidence of A’s bankruptcy to the Court of Appeal and then argued that the bankruptcy divested A of the cause of action and/or that the judgment should be set aside because of A’s non-disclosure of it.
The Court dismissed the appeal. It held that the fact that the Official Receiver (“OR”) was initially appointed the receiver of A’s estate (under s.287 of the Insolvency Act 1986) did not vest A’s estate in the OR and that B had failed to demonstrate that A’s estate had vested in his trustee before judgment had been given. Further it held that even if the cause of action had vested in A’s trustee before judgment, B had to show that A had known it had.
At first blush this is perhaps a rather surprising case. One automatically assumes that upon a bankruptcy order being made, the bankrupt’s estate vests in the trustee. However, that is not the case. Under s.287, between the making of the order and the time at which the bankrupt’s estate vests in his trustee, the OR is the receiver and manager of the bankrupt’s estate and is under a duty to act as such. The OR only becomes the trustee of the estate if he decides not to summon a general meeting of creditors and notifies the creditors of that decision.
A bankrupt’s estate only vests in his trustee upon his appointment, or, in the case of the OR, when he gives notice that there will not be a creditors meeting, not upon the making of the bankruptcy order.
