Some months ago a case hit the courts which drove a coach and horses through the Trustee’s 3 year ‘use it or lose it’ rule. That decision has now been upset by the Court of Appeal in what I believe is an equitable and common sense judgment which prevents legal trickery circumventing parliament’s proper intentions. That is to say, the three year rule is intact.
Here’s an extract from the recent R3 statement:
In a judgment handed down today, the Court of Appeal reversed the decision of Proudman J that a sale by a trustee in bankruptcy of the debtor’s interest in his dwelling house for a deferred consideration constituted “realisation” of that interest for the purposes of section 283A of the Insolvency Act 1986. The joint trustees in bankruptcy of Mr Lewis and Metropolitan Realisations had entered into a deed, under the terms of which the trustees assigned the estate’s interest to Metropolitan for £1 and in the event of Metropolitan effecting a sale of the property it would pay 25 per cent of the net proceeds to the trustees. The assignment was dated the day before the third anniversary of the bankruptcy. Proudman J had held that this arrangement amounted to a “realisation” of the bankrupt’s interest in the property, and that accordingly it did not re-vest in the bankrupt. The bankrupt appealed. Allowing the appeal, the Court of Appeal considered the meaning of the term “realise” in the broad context of the scheme of the Insolvency Act.The Court concluded that the term “realisation” was used in a sense which involved the turning of the realised property into cash, and was inconsistent with part of its value being left outstanding in an unfulfilled monetary (or other) obligation. The Court concluded that “realise” in section 283A involves getting in the full cash consideration for the deal. As a result, the bankrupt’s interest had reverted to him, and Metropolitan had no interest.
Lewis v Metropolitan Property Realisations Limited  EWCA Civ 448.