BLATCHFORD v. THE UNITED KINGDOM
Inadmissible
David Thór Björgvinsson;Giovanni Bonello;Lech Garlicki;Ledi Bianku;Nicolas Bratza;Päivi Hirvelä
1. The applicants, Mr John Blatchford and Mrs Jane Blatchford, are British nationals who were born in 1944 and 1948 respectively and live in Margate. They were represented before the Court by Marsden Duncan, a firm of solicitors practising in Ramsgate. The United Kingdom Government (“the Government”) were represented by their Agent, Ms H. Upton, of the Foreign and Commonwealth Office. 2 The applicants traded as builders and roofing contractors under the trade name of Anchor and Arrow. The business premises were located at Northdown Road, Margate, Kent. They were subject to a mortgage and loans held by Barclays Bank Plc (“Barclays”). 3. The applicants lived, and still live, at Omer Avenue, Margate, Kent. That property was also subject to a mortgage in favour of Barclays. 4. On 22 October 1992, the applicants appeared at Canterbury County Court pursuant to a creditor's petition lodged under section 264(1)(a) of the Insolvency Act 1986 (“the 1986 Act” – see paragraphs 57-69 below). They sought more time to try and settle their debts as their son had agreed to purchase the property at Omer Avenue from them for a sum which would have allowed them to satisfy their creditors. The applicants did not have legal representation at the hearing because they could not afford to pay for a solicitor. The court refused their request for more time and made a bankruptcy order against them. 5. The effect of the order was that the official receiver took charge, on an interim basis, of the applicants' estate, pursuant to section 287(1) of the 1986 Act (see paragraph 64 below). The applicants subsequently had discussions with the official receiver's office and provided details of their financial situation. 6. In July 1993, United Friendly Insurance Company, the second applicant's life insurance company, paid to the second applicant the sum of GBP 2,893.41, the cash surrender value of a life insurance policy in her name. 7. Around the same time, the applicants' local authority, Thanet Council, obtained a warrant for the arrest of the first applicant for non-payment of business rates and poll tax. 8. K.C. was subsequently appointed trustee in bankruptcy. Under section 306(1) of the 1986 Act, the applicants' estate vested in him and he was entitled to manage and dispose of the property comprised in the estate as he saw fit. 9. On 2 August 1993, the applicants received a letter from K.C. advising them that he had been appointed trustee in bankruptcy. On 3 August 1993, unknown to the applicants, K.C. registered a caution over the property at Omer Avenue under section 313 of the 1986 Act (see paragraph 65 below). 10. On 19 August 1993, K.C. contacted the applicants asking them to surrender to him the sums which they had received from the United Friendly Insurance Company. The applicants replied that they were concerned about the outstanding warrant for arrest in respect of the first applicant. They asked K.C. to resolve the situation with Thanet Council and advised him that once the warrant had been set aside, they would send him the money received from the insurance company. 11. K.C. did not assist with the warrant. The applicants wrote to him advising him that they would use the insurance money to remove the threat of the arrest and imprisonment of the first applicant. They subsequently paid GBP 1,400 of the money obtained from the insurance company to Thanet Council to discharge the outstanding debt. They used the remainder of the money on general living expenses. However, further business rates had accumulated in the meantime and the applicants were concerned that Thanet Council could recommence action for non-payment at any time. 12. On 16 December 1993, the applicants' solicitor advised them that Thanet Council had agreed to a court order to stay the arrest warrant. On an unknown date, the applicants became aware that K.C. had commenced a claim against the second applicant for repayment of GBP 2,893.41 (the sum paid to the second applicant by the United Friendly Insurance Company) plus interest and asking for further information about the payment made to Thanet Council. On 17 December 1993, the second applicant was informed that she had been denied legal aid to contest the proceedings because any sums awarded would become the property of her creditors. 13. On 8 March 1994, Barclays advised the applicants that it would be content to discuss restructuring their debt provided that there was agreement that the property at Northdown Road be sold. 14. On 2 February 1994, the County Court ordered the second applicant to pay to K.C., as trustee in bankruptcy, the sum of GBP 2,893.41 plus costs, a total of GBP 3,216.97. 15. The official receiver subsequently applied for an order postponing the discharge of the second applicant from bankruptcy until such time as she had paid the sum of GBP 1,735 (composed of the sum of GBP 1,600 being the balance of monies received from the insurance policy payment once the business rates had been paid plus the sum of GBP 135, a debt to the applicants' business which had been paid directly to the second applicant) or until two years had elapsed, whichever was earlier. 16. On 16 May 1994, Barclays offered to restructure the applicants' debt owed to it by way of a remortgage. It was agreed that the property at Northdown Road would be sold and the applicants undertook to sign all documentation necessary to effect the sale. 17. On 9 August 1994, K.C. advised the applicants that he was considering applying to the court to extend their bankruptcy because of lack of co-operation. He provided no details of their alleged failure to cooperate. 18. On an unspecified date in 1994, the property at Northdown Road was sold for GBP 13,500. The sale was arranged by Barclays and the applicants signed the documentation as agreed. The applicants considered that the sale proceeds were about GBP 20,000 less than the value of the property. K.C. was aware of Barclays' intention to sell the property for this sum. The second applicant subsequently sought to have K.C. removed as trustee in bankruptcy on the ground that he was incompetent. She was denied legal aid because any sums awarded would become the property of her creditors. 19. On 16 July 1995, Barclays restructured the applicants' debt, setting aside some of the interest owed and allowing the remainder of the debt to be repaid over a period of fourteen years. This was done with the knowledge of K.C. 20. On 22 October 1995, the first applicant was discharged from bankruptcy. 21. On 5 February 1996, K.C. issued a notice to creditors of a meeting of creditors to be held on 12 March 1996. The notice advised that K.C. considered that he had realised as much of the estate as was practically possible and that he was applying to be released as trustee. He commented in the notice that there was no equity in the property owned by the applicants. 22. On 12 March 1996, a creditors' meeting was held, at which K.C. was released from his duties as trustee. 23. On 22 October 1997, the second applicant was discharged from bankruptcy. 24. The applicants subsequently applied for a certificate of their discharge from bankruptcy, which was provided to both applicants in February 1998. 25. In January 2003, the applicants wished to purchase a new house. In the course of negotiations, it was discovered that there was a caution recorded on the Land Register in favour of K.C. in respect of the property at Omer Avenue. The applicants applied to have the caution removed. The Land Registry wrote to the official receiver asking whether there was any objection to the removal of the caution from the Register. 26. On 21 March 2003, the Assistant Land Registrar wrote to the applicants advising that, no reply having been received from the official receiver, the caution in favour of K.C. would be cancelled that day. 27. On 3 April 2003, a caution was registered in the Land Register against the property at Omer Avenue by the official receiver's office. 28. In October 2004, the applicants sought to have the caution removed but the official receiver objected. 29. On 5 January 2005, D.C. was appointed by the official receiver as trustee in bankruptcy for the applicants. 30. On 28 January 2005, D.C. sent a notice of a creditors' meeting. He noted that at the time that K.C. obtained his release as trustee, there was no equity in the matrimonial home. D.C. intended therefore to investigate and realise the beneficial interest in the matrimonial home. 31. On 18 March 2005, a creditors' meeting was held at which the trustee's disbursements and remuneration were agreed and it was agreed to administer the bankruptcy on a joint basis. 32. On 20 December 2005, an application was made to register a caution against the property at Omer Avenue in favour of D.C. 33. On 7 March 2006, D.C.'s solicitors wrote to the applicants enclosing two schedules showing the sums required to discharge all bankruptcy costs and liabilities. One schedule showed the sum owed where only liabilities in respect of creditors who had made a claim against the estate were included and amounted to GBP 157,064.54; the other showed the sum owed where all known creditors, whether or not they had made a claim, were included and amounted to GBP 262,205.70. Both schedules calculated the amount actually claimed by creditors to be GBP 60,137.16. The amount not yet claimed, and included in the second schedule, was GBP 45,608.13. The remainder of the sums in the two schedules was composed of costs and expenses of the official receiver and the trustee in bankruptcy, fees payable to the Department of Trade and Industry (“DTI”) and statutory interest at the rate of 8 per cent from 22 October 1992 to 21 March 2006. In the first schedule, the statutory interest amounted to GBP 64,981.08; in the second schedule, it amounted to GBP 114,262.86. The solicitors advised that if the applicants were unable to procure such sums within three calendar months, they might wish to consider a voluntary sale of the property at Omer Avenue. 34. On 10 March 2006, the applicants replied to the solicitors, asking for clarification of the two different sums. They also provided further information requested. 35. On 14 March 2006, the solicitors replied explaining the two different sums and acknowledging receipt of the further information. 36. On 20 March 2006, D.C. sent a letter to the applicants to fix an appointment to value the property at Omer Avenue. 37. On 21 March 2006 D.C.'s solicitors wrote again enclosing two further schedules, one for the first applicant and one for the second applicant, setting out details of their creditors, as previously disclosed by the applicants. 38. On 22 March 2006, the applicants were advised by their solicitors that they would not get legal aid in order to contest D.C.'s caution registered against the property at Omer Avenue. 39. On 29 March 2006, the applicants wrote to D.C.'s solicitors asking for a final settlement figure. They indicated their intention to raise funds by obtaining a mortgage over the property at Omer Avenue and advised D.C. of the possibility of obtaining further sums from a member of their family. They disputed some of the figures provided in the schedules and asked for an extension of the three-month period (see paragraph 33 above) which they considered too short in light of the longevity of the bankruptcy. 40. On 4 April 2006 the solicitors replied, noting that pursuant to a change in the law the trustee in bankruptcy was required to take steps to deal with the property at Omer Avenue by April 2007. They extended the deadline for response from the applicants to 18 April 2006. As to the sums required to settle the applicants' debts, the solicitors confirmed that the final figures were those appearing in the schedules provided by letter of 7 March 2006. 41. On 12 April 2006, the applicants wrote to D.C.'s solicitors indicating that they had engaged the services of a mortgage broker and would be in touch as soon as they had made arrangements. 42. On 10 May 2006 the solicitors wrote noting that they had heard nothing since the letter of 12 April 2006 and asking for confirmation of the terms proposed by 24 May 2006. 43. On 13 May 2006 the applicants replied to the solicitors indicating that they were still seeking a mortgage and asking for further clarifications. 44. On 17 May 2006, the solicitors wrote again, responding to the applicants' queries and seeking a response by 29 May 2006. They indicated that they reserved their position as to whether to commence possession and sale proceedings in the event that no satisfactory response was received. 45. On 27 May 2006, the applicants wrote to D.C.'s solicitors asking how much money would be required to settle the bankruptcy proceedings. 46. On 15 June 2006, D.C.'s solicitors wrote advising that D.C. would be unable to agree a settlement with the applicants without the approval of the creditors. However, the applicants were invited to provide details of any settlement they wished to propose and any offer made would be put to creditors. 47. On 5 July 2006, D.C.'s solicitors wrote inviting the applicants to make an offer by 19 July 2006. This deadline was extended to 1 August 2006 at the applicants' request. On 20 July 2006, the deadline was extended, unprompted, by D.C.'s solicitors to 23 August 2006. In the event that no offer was made by that date, the solicitors advised that they were instructed to issue proceedings for possession and sale of the property at Omer Avenue without further notice. 48. On 18 August 2006, the applicants replied denying that D.C. had any right or interest in the property at Omer Avenue. However, they offered GBP 15,000 to settle matters. 49. By letter of 22 August 2006, D.C.'s solicitors replied noting the offer made and asking for the applicants' best offer by 29 August 2006. The applicants replied on 29 August 2006 asking for clarification of what would be an acceptable amount to settle the bankruptcy proceedings. 50. D.C.'s solicitors replied on 31 August 2006 indicating that they were not in a position to suggest an appropriate amount and giving the applicants until 7 September 2006 to make their best offer. 51. On 27 September 2006, D.C.'s solicitors wrote to the applicants noting that the applicants' final offer of GBP 20,000 would be insufficient to meet the costs, fees and expenses of the bankruptcy and that there was little incentive for creditors to accept the offer. The solicitors enclosed a schedule showing, by way of example, the estimated sum required in order to ensure creditors a dividend of GBP 0.20 per GBP 1.00. The sum came to GBP 35,614.62. The applicants were given until 6 October 2006 to consider the level of their offer. 52. On 6 October 2006, the applicants faxed a letter to D.C.'s solicitors offering GBP 35,614.62 in final settlement. They indicated that they would require some time to gather the funds together. 53. On 9 October 2006, D.C.'s solicitors wrote reminding the applicants that the sum of GBP 35,614.62 was specified merely as an example and that it would have to be referred to creditors for consideration. On 11 October 2006, the applicants confirmed that they wished their offer of GBP 35,614.62 to be put to creditors. On 13 October 2006, D.C.'s solicitors noted the applicants' offer and agreed to put it to the creditors. 54. On 31 October 2006, D.C. referred in a letter to the relevance of the length of time which had elapsed since the bankruptcy orders were first made, to the fact that there was little or no equity in the property at the time of the making of the orders and for some time subsequently and to his efforts to approach the matter on a “conciliatory basis”. 55. On 5 December 2006, D.C.'s solicitors wrote to the applicants confirming that their offer of GBP 35,614.62 had been accepted by the creditors. Settlement was to take place by 17 January 2007 at the latest. 56. On 12 January 2007, the applicants' solicitors provided them with forms of assignment transferring the trustee's interest in the property at Omer Avenue from D.C. to the applicants. The applicants also arranged to remortgage the property to obtain funds. On 26 January 2007, the applicants were advised that the transaction had been completed. 57. The Insolvency Act 1986 sets out the procedure to be followed in bankruptcy and the powers of the trustee. 58. Section 305(2) of the Act provides that the function of the trustee is to: “... get in, realise and distribute the bankrupt's estate in accordance with the following provisions of this Chapter; and in the carrying out of that function and in the management of the bankrupt's estate the trustee is entitled, subject to those provisions, to use his own discretion.” 59. Section 283 provides that the bankrupt's estate comprises all property belonging to or vested in the bankrupt at the commencement of the bankruptcy, excluding items necessary to the bankrupt for use personally by him in his employment, business or vocation or for satisfying the basic domestic needs of the bankrupt and his family. 60. The duration of the bankruptcy is defined in section 278 as beginning on the day the bankruptcy order is made and continuing until the individual is discharged. 61. Discharge is dealt with in section 279, which, at the relevant time, provided that: “(1) Subject as follows, a bankrupt is discharged from bankruptcy— ... (b) ... by the expiration of the relevant period under this section. (2) That period is as follows— ... (b) ... the period of 3 years beginning with the commencement of the bankruptcy.” 62. However, under section 279(3), where the court is satisfied on the application of the official receiver that an undischarged bankrupt has failed or is failing to comply with any of his obligations, the court may order that the relevant period under section 279(2)(b) shall cease to run for such period, or until the fulfilment of such conditions, as may be specified in the order. 63. Section 281 sets out the effect of a discharge and provides as follows: “(l) Subject as follows, where a bankrupt is discharged, the discharge releases him from all the bankruptcy debts, but has no effect— (a) on the functions (so far as they remain to be carried out) of the trustee of his estate, or (b) on the operation, for the purposes of the carrying out of those functions, of the provisions of this Part; and, in particular, discharge does not affect the right of any creditor of the bankrupt to prove in the bankruptcy for any debt from which the bankrupt is released. (2) Discharge does not affect the right of any secured creditor of the bankrupt to enforce his security for the payment of a debt from which the bankrupt is released.” 64. Under sections 287 and 300, at any time when there is no trustee in bankruptcy appointed, the official receiver is the receiver and manager of the bankrupt's estate. 65. Section 313 makes special provision for the bankrupt's home. It provided, at the relevant time, as follows: “(l) Where any property consisting of an interest in a bankrupt's dwelling house which is occupied by the bankrupt or by his spouse or former spouse is comprised in the bankrupt's estate and the trustee is, for any reason, unable for the time being to realise that property, the trustee may apply to the court for an order imposing a charge on the property for the benefit of the bankrupt's estate. (2) If on an application under this section the court imposes a charge on any property, the benefit of that charge shall be comprised in the bankrupt's estate and is enforceable, up to the value from time to time of the property secured, for the payment of any amount which is payable otherwise than to the bankrupt out of the estate and of interest on that amount at the prescribed rate. (3) An order under this section made in respect of property vested in the trustee shall provide, in accordance with the rules, for the property to cease to be comprised in the bankrupt's estate and, subject to the charge (and any prior charge), to vest in the bankrupt.” 66. Section 338 of the 1986 Act provides that: “Where any premises comprised in a bankrupt's estate are occupied by him ... on condition that he makes payments towards satisfying any liability arising under a mortgage of the premises or otherwise towards the outgoings of the premises, the bankrupt does not, by virtue of those payments, acquire any interest in the premises.” 67. Section 285 provides that: “(1) At any time when proceedings on a bankruptcy petition are pending or an individual has been adjudged bankrupt the court may stay any action, execution or other legal process against the property or person of the debtor or, as the case may be, of the bankrupt. (2) Any court in which proceedings are pending against any individual may, on proof that a bankruptcy petition has been presented in respect of that individual or that he is an undischarged bankrupt, either stay the proceedings or allow them to continue on such terms as it thinks fit. (3) After the making of a bankruptcy order no person who is a creditor of the bankrupt in respect of a debt provable in the bankruptcy shall— (a) have any remedy against the property or person of the bankrupt in respect of that debt, or (b) before the discharge of the bankrupt, commence any action or other legal proceedings against the bankrupt except with the leave of the court and on such terms as the court may impose.” 68. Under section 375(1), the County Court has the power, exercisable at any time, to review the order for bankruptcy, to vary it or to revoke it. 69. Section 303 provides that if a bankrupt or any of his creditors or any other person is dissatisfied by any act, omission or decision of a trustee of the bankrupt's estate, he may apply to the court; and on such an application the court may confirm, reverse or modify any act or decision of the trustee, may give him directions or may make such other order as it thinks fit. 70. The Enterprise Act 2002 introduced changes to the 1986 Act. It entered into force on 1 April 2004. 71. Section 279 of the 1986 Act was amended to reduce the period of bankruptcy prior to discharge from three years to one year. 72. Section 313 was also amended to limit the value of a charge on a bankrupt's property to “the charged value”, which was defined as “the amount specified in the charging order as the value of the bankrupt's interest in the property at the date of the order plus interest on that amount from the date of the charging order at the prescribed rate”. 73. Finally, a new section 283A was introduced into the 1986 Act and provides as follows: “(1) This section applies where property comprised in the bankrupt's estate consists of an interest in a dwelling-house which at the date of the bankruptcy was the sole or principal residence of— (a) the bankrupt, (b) the bankrupt's spouse ... (2) At the end of the period of three years beginning with the date of the bankruptcy the interest mentioned in subsection (1) shall— (a) cease to be comprised in the bankrupt's estate, and (b) vest in the bankrupt (without conveyance, assignment or transfer). (3) Subsection (2) shall not apply if during the period mentioned in that subsection— (a) the trustee realises the interest mentioned in subsection (1), (b) the trustee applies for an order for sale in respect of the dwelling-house, (c) the trustee applies for an order for possession of the dwelling-house, (d) the trustee applies for an order under section 313 in Chapter IV in respect of that interest, or (e) the trustee and the bankrupt agree that the bankrupt shall incur a specified liability to his estate (with or without the addition of interest from the date of the agreement) in consideration of which the interest mentioned in subsection (1) shall cease to form part of the estate. (4) Where an application of a kind described in subsection (3)(b) to (d) is made during the period mentioned in subsection (2) and is dismissed, unless the court orders otherwise the interest to which the application relates shall on the dismissal of the application— (a) cease to be comprised in the bankrupt's estate, and (b) vest in the bankrupt (without conveyance, assignment or transfer). ... (6) The court may substitute for the period of three years mentioned in subsection (2) a longer period— (a) in prescribed circumstances, and (b) in such other circumstances as the court thinks appropriate.” 74. Under transitional provisions, the three year period in respect of pre-commencement bankruptcies commenced on 1 April 2004 and therefore terminated on 31 March 2007.