Insolvency

Bankruptcy of grantee of right of pre-emption - right ofpre-emption constituting 'property' vested in trustee in bankruptcyDear v Reeves: CA (Lords Justices Mummery and May): 1 March 2001The applicant sought a declaration that a right of pre-emption which had been granted to the bankrupt was 'property' which vested in the trustee in bankruptcy.

Judge Rudd in the Southampton County Court refused the application.

The applicant appealed.

Paul McCormick (instructed by Page Gulliford & Gregory, Southampton) for the applicant.

Anthony Higgins (instructed by Stokes Solicitors, Portsmouth) for the defendant.Held, allowing the appeal, that although it might be difficult to put a value on a right of pre-emption because the grantor might never decide to sell the property, it was not necessary to for such a right to have any present or immediate value for it to be 'property' within section 436 of the Insolvency Act 1986; that the right was a 'thing in action', in the sense that there existed a negative obligation which would not exist but for its existence and which was binding on the grantor who was obliged not to sell the property without first offering it to the grantee; that the obligation was enforceable by legal action by the grantee or his assignee; that such a right therefore constituted 'property' within the meaning of section 436 which vested in the trustee in bankruptcy, for otherwise the purpose of the Act to vest the bankrupt's property in the trustee for the benefit of the creditors would be frustrated; and that a declaration would be granted accordingly.