On 4 November 2019 the Upper Tribunal (Lands Chamber) (UT) handed down its judgment, dismissing the appeal made by a trustee in bankruptcy, that the First Tier Tribunal (FTT) had jurisdiction to decide whether the bankrupt held a beneficial interest in a jointly owned property.
Following his appointment in 2016 the Trustee applied to register a standard form restriction to protect his interest in a property jointly owned by the bankrupt and P. Notice of the application was given by the Land Registry to P upon receipt of which P objected, claiming that the bankrupt had no beneficial interest in the property.
The Registrar referred the matter to the FTT pursuant to sections 73 and 108 of the Land Registration Act 2002 (LRA 02) which provide as follows:
“…anyone may object to an application to the Registrar”
“If it is not possible to dispose by agreement of an objection…the Registrar must refer the matter to the [FTT]”.
“The [FTT] has the following functions
- determining matters referred to it under section 73(7).
Having satisfied itself that it had jurisdiction to deal with the matter, the FTT found on the facts that the bankrupt and P held the property upon a constructive trust for P alone. The Trustee appealed this decision to the UT on the grounds that the FTT did not have jurisdiction to make a determination as to the parties’ beneficial interests because exclusive jurisdiction to determine issues of fact and law in a bankruptcy lay with the courts under the Insolvency Act 1986 (IA 86). The trustee does not appear to have appealed the finding itself.
Fancourt J sitting as judge in the UT dismissed the appeal. In doing so he acknowledged the existence of two competing jurisdictions, namely the LRA 02 and the IA 86, but found no reason why the IA 86 should be deemed to prevail and override the statutory provisions of the LRA 02. Rather, the language of each statute should be construed objectively and with a view to avoiding inconsistency. Applying this approach, he noted that section 108 LRA 02 did not exclude jurisdiction to determine issues of fact and law in a bankruptcy and that sections 363 IA 86 (General control of court) and section 373 IA 86 (Jurisdiction in relation to insolvent individuals) did not prevent any matter properly falling within the jurisdiction of the FTT from being decided there.
Following on from this, Fancourt J noted that the whilst section 108 LRA did not require the FTT to direct that court proceedings be issued to determine issues of fact and law in a bankruptcy case, the FTT did nevertheless have a discretion to do so, where for example the dispute related to the extent rather than the existence of a beneficial interest. However, the benefit of a determination by the FTT was that this would lead to an easier and cheaper administration of the bankrupt’s affairs and faster protection of the trustee’s interest if the FTT found in favour of the trustee, the process being much faster than court proceedings.
Notwithstanding the above, Fancourt J drew attention to section 285 IA 86 which allows the court to stay any action, execution or other legal process against the property or person of the bankrupt. It remains to be seen how the court would deal with an application to stay FTT proceedings on this basis and judicial clarity on this would be welcome.
An alternative procedure for ascertaining a bankrupt’s interest in property is to be welcomed if that process is faster and cheaper than court proceedings. However, it remains to be seen in what circumstances the FTT will exercise its discretion to direct that the matter be determined by the court.
It can be difficult to separate the issue as to whether a party has a beneficial interest in property from arguments as to the extent of that interest in the absence of an express declaration of trust. The case law on this issue is extensive and in her leading judgment in the case of Stack v Dowden  UKHL 17 Baroness Hale stated that, “It must now be accepted that…the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property…”. As such, the evidence required to establish the interests of the parties can be substantial and complex and, in many cases, require the cross examination of the parties. Given that members of the FTT are not always legally qualified, the prospect of such cases being determined in this forum is a cause for concern and as such insolvency professionals will be looking closely to see whether the FTT is willing to deal with such complex cases going forward.