Bankruptcy and disrepair

In the end, I couldn’t resist writing this one up from the report in January 09’s LAG updates. It is a very late report and only a County Court decision, but is a) just too topical for these insolvent times and b) vaguely technically interesting.

Lambeth LBC v Grazette (Lambeth County Court 7 November 2008) was an application to revive a secure tenancy under s.85 HA 1985.

Ms Grazette was Lambeth’s secure tenant. An SPO on rent arrears was made in June 2003 and breached by Ms Grazette afterwards. In January 2005 Ms Grazette was adjudicated bankrupt, which was automatically discharged in June 2006. In 2008 Ms Grazette applied under s.85 to revive the tenancy. Lambeth sought conditions under s.85(3) preventing Ms Grazette from pursuing an historical disrepair claim on revival.

The DJ granted the revival, but, while conditions should not be imposed merely because of failure to comply with previous orders, including the SPO, and arrears of rent, the bankruptcy altered the position.

Insolvency Act 1986 s.278 meant that the bankrupt’s estate was crystallised. S.283(1) and s.436 meant that the definition of property encompassed the prospective (or here retrospective) cause of action. Hence the cause of action and the benefit of it vested in the trustee in bankruptcy in January 2005. The discharge released Ms Grazette from her debts, but the estate remained vested in the trustee.

Ms Grazette therefore had no locus standi to pursue a claim for disrepair prior to January 2005 and there would be no personal benefit for a claim for the period prior to discharge.

The DJ imposed a condition preventing a claim for damages for disrepair. This did not mean she could not claim for specific performance for extant disrepair.

Presumably, this would hold true for a bankrupt secure tenant – a claim for damages would have to be made by the trustee, while the tenant bankrupt could claim only for specific performance.

Interesting – and a decision made before the White v Knowsley etc. judgment in the Lords. It would be interesting to see if that made any difference to the imposition of conditions – certainly it would seem to limit the wide discretion the DJ claimed under s.85(3)(b).

Also, what if Ms Grazette had only raised a claim in respect of June 2006 onwards – post discharge. Surely the same point would not apply?

About Giles Peaker

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts, and still is Nearly Legal on Google +.
Posted in Disrepair, Housing law - All, secure-tenancy and tagged , , , .

4 Comments

  1. If the logic is that any claim for disrepair would (as a chose in action) vest in the trustee in bankruptcy upon the bankruptcy occurring, then discharge won’t affect the position (since Ms Grazette would have no cause of action for the pre-bankruptcy period).

    The DJ imposing a condition seems a little odd since, if that logic is correct, Ms Grazette cannot sue and therefore does not need to be ordered not to.

    The only slightly strained aspect of the logic is that the secure tenancy does not vest in the trustee since it is personal to Ms Grazette. I don’t have my insolvency texts to hand but would the right to sue under the tenancy pass even if the tenancy did not?

    • Yes – no cause of action pre-discharge, I follow, but it would appear that she may have had a claim for a post discharge period (June 06 to whenever works were done).

      Unless, I suppose, the argument might be that the causation of the disrepair/the defects (and hence the arising of the claim) occurred pre-discharge, regardless of whether she was claiming damages for the period or not.

  2. Just a thought about when a tenant should despite bankruptcy be able to pursue damages for disrepair for a period pre bankruptcy.

    As I understand the law re bankruptcy and possession orders — see the infamous Harlow DC v Hall — [except I believe for ground 8 as the crunch time in ground 8 is the date of hearing]the landlord can rely on arrears of rent as at date of isue when the cause of action accrued.

    When considering the resurrection of a tenancy where there has been a subsequent bankruptcy the tenant would have an interest in pursuing compensation for breaches pre bankruptcy but only to the extent of money owed to the landlord under the tenancy agreement eg by way of set off to reduce rent arrears at bankruptcy.

  3. Nikki, I can see the tenant’s interest in doing so. But could they? What this suggests is that a chose in action based upon events prior to the bankruptcy crystallises as part of the estate and therefore belong to the trustee, not just those arising during the bankruptcy.

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