Insolvency

Council property bought by tenant at discount under right to buy held on trust for bankrupt's wife - proceeds invested in property in bankrupt's son's name - right to buy not constituting actual contribution and property transactions set asideAshe v Mumford and others: CA (Kennedy, Waller and Jonathan Parker LJJ): 18 October 2000

The mother of the bankrupt bought the council-owned property of which she was a secure tenant at a 50% discount pursuant to the right to buy and held the property for her life and thereafter in trust for the bankrupt's wife, who had funded the transaction.

The property was later sold after improvement and the proceeds were used to buy another property in the name of the bankrupt's son.

The trustee in bankruptcy applied to have the transactions set aside.

The judge in the county court held the transactions to be a sham devised by the bankrupt.

Turner J allowed an appeal by the bankrupt, his wife and son, holding that the right to buy constituted an actual contribution and applied to the case.

The trustee in bankruptcy appealed.

Marilyn Kennedy-McGregor (instructed by Nicholsons, Lowestoft) for the trustee in bankruptcy.

David Pugh (instructed by Fosters, Norwich) for the bankrupt.

Andrew Lindqvist (instructed by Moroneys, Wymondham) for the wife.

Anthony Allston (instructed by Hansell Stevenson, Norwich) for the son.

Held, allowing the appeal, that although the right to buy a council property could constitute a contribution in certain circumstances it was not an absolute rule that it would always do so and the court would apply a flexible approach depending on the circumstances of the case; and that the judge in the county court, having considered the issue of right to buy, had correctly held the transactions to be a sham and such a finding also displaced the presumption of a resulting trust.