VESTING ORDERS

PART 5

September 2008

VESTING ORDERS

34.85 Vesting orders – general

Where a liquidator or trustee has disclaimed his/her interest in property, it is open to certain persons (see paragraph 34.86) to make application to court for the property to be vested in them [note 1] [note 2].

There should normally be no need for the official receiver to be party to, or otherwise involved in, an application for a vesting order.

 

34.86 Persons who may apply for a vesting order (amended February 2014)

Persons who may apply for a vesting order are as follows: 

  • any person who claims an interest in the disclaimed property [note 3] [note 4], or
  • any person who is under a liability in respect of the disclaimed property, not being a liability discharged by the bankruptcy [note 5] [note 6], and
  • (in respect of bankruptcy only and where the disclaimed property is property in a dwelling house) any person who at the time when the bankruptcy petition was presented was in occupation of or entitled to occupy the dwelling house, even if only part of the disclaimed property is a dwelling house [note 7] [note 7a]. 

 

34.87 Time limit for an application for a vesting order

An application for a vesting order must be made within three months of the applicant becoming aware of the disclaimer, or of his/her receiving a copy of the liquidator’s/trustee’s notice of disclaimer (see paragraph 34.52) [note 8] [note 9].  This time limit is not explained in the notice of disclaimer or the letter [note 10] that accompanies it when served on the interested party.  Where the official receiver is aware that a party has indicated an intention to apply for a vesting order, it would be appropriate to bring the time limit to their attention.

The period of three months may be extended at the discretion of the court [note 11].

 

34.88 Application for a vesting order

(Amended April 2010)

The application for a vesting order must be accompanied by a witness statement that:

  • sets out the type of the application (i.e., whether it is as a claim on the property, an undischarged liability or occupation of a dwelling house) [note 12] [note 13],
  • specifies the date on which the notice of disclaimer was received, or otherwise the date on which the applicant became aware of the disclaimer [note 14] [note 15], and
  • specifies the grounds for the application and the order desired [note 16] [note 17].

 

34.89 Notice of hearing to be given to liquidator or trustee

(Amended April 2010)

On receiving the application for a vesting order, the court will set a hearing date and venue. The applicant is required to give the liquidator or trustee notice of the date, time and venue for the hearing, accompanied by copies of the application and related witness statement, no later than 5 business days before the date fixed  (for cases with petitions before 6 April 2010 the time limit is 7 days before the date fixed) [note 18] [note 19].

 

 

34.90 Making of a vesting order

The court, on hearing the application, may make an order vesting the disclaimed property in, or for its delivery, to:

  • A person entitled to it or a trustee for such person [note 20] [note 21],
  • A person subject to a liability in respect of the disclaimed property [note 22] [note 23] (where it would be just to do so for the purpose of compensating that person in relation to their liability [note 24] [note 25], or
  • (in a bankruptcy) where the disclaimed property is a dwelling house, any person who at the time when the bankruptcy petition was presented was in occupation of or entitled to occupy the dwelling house [note 26].

A conveyance, assignment or transfer is not needed to complete a vesting order [note 27] [note 28] [note 29] [note 30].

See also paragraph 34.92 in respect of vesting orders made in respect of properties held under a lease.

 

34.91 Vesting order to be made on terms court thinks fit

On considering an application for a vesting order, the court has discretion to make the vesting order on such terms as it thinks fit [note 31] [note 32].  When making a vesting order, the court has the power to order that any surplus, in which no other person had claimed an interest, resulting from the sale of the disclaimed property should be given back to the liquidator or trustee for the benefit of creditors [note 33].

This situation may arise where the property turns out to have a value in excess of that originally assessed by the official receiver, or where charges against the property are lower than anticipated.  If, on receiving notice of an application for a vesting order, the official receiver forms the opinion that there may be a value to the estate of the asset he/she should bring this to the attention of the court so that an order can be made taking as to how to deal with any surplus.

 

34.91a Vesting order can apply to part of the property (added February 2014)

It has been held that a vesting order can apply to part of the property disclaimed, where, for example, only part of the property is a dwelling house (see paragraph 34.86) [note 33a].

 

34.92 Vesting orders relating to leasehold property

Where the court makes a vesting order in respect of property held under a lease, it must be on the terms of making that person:

  • subject to the same liabilities as the insolvent was under at the date of the commencement of the winding-up or presentation of the bankruptcy petition [note 34] [note 35], or
  • if the court thinks fit, subject to the same liabilities and obligations as that person would be subject to if the lease had been assigned to him/her at the date of the commencement of the winding-up or presentation of the bankruptcy petition [note 36] [note 37].

Where persons decline to accept an order made under these terms, the court may make adjustments to interests in the property concerned [note 38] [note 39].

 

34.93 Bankrupt applying for vesting order (November 2008)

A vesting order cannot be made in favour of a bankrupt, except in the circumstances where the property is a dwelling house and the bankrupt was in occupation of or entitled to occupy the dwelling house (see paragraph 34.57).  For the purpose of a disclaimer, the term “dwelling house” can be taken to include leased, as well as freehold property. 

Apart from where the disclaimed property is a dwelling house (see above), and as explained at paragraph 34.86, the only persons who can be  the beneficiaries of a vesting order are those entitled to the property, or those subject to a liability under the property – neither of which would apply to the bankrupt. 

Obviously, the bankrupt would have no liability under the property by virtue of the making of the bankruptcy order.

As regards whether the bankrupt can claim an entitlement to the property, it has been viewed that any entitlement that the bankrupt may have had would be ended by the operation of the disclaimer, as the effect of the disclaimer is to bring to an end the interest of the bankrupt and his/her estate in the property [note 40] [note 41].

 

 

 

[Back to Part 4 – Effect of disclaimer]

Further Information