Law Report: Joint tenancy is not affected: Re Palmer (a deceased debtor): Court of Appeal - (Lord Justice Balcombe, Lord Justice Evans and Lord Justice Roch); 11 March 1994

The beneficial interest of a joint tenant was not, on his death, to be treated as part of his insolvent estate by the making of an insolvency administration order; it accrued to the surviving joint tenant.

The Court of Appeal allowed an appeal by Avril Palmer from Mr Justice Vinelott's order ((1993) 3 WLR 877) that Gavin Hilary Palmer's estate included an undivided moiety of a freehold property held by Mr and Mrs Palmer as joint tenants.

Mr Palmer died on 22 November 1990. On 17 August 1991 an involvency administration order was made against his estate. There were large claims against the estate. Under paragraph 12 of Part II of Schedule 1 to the Administration of Insolvent Estates of Deceased Persons Order 1986, section 283 of the Insolvency Act 1986, which defines a deceased debtor's estate, takes effect as if the insolvency administration order had been made on the date of the death of the deceased debtor.

Mr Justice Vinelott, on the basis of paragraph 12 combined with the common law rule that a judicial act, such as the administration order, is presumed to have been made on the first moment of the day when it was done and takes precedence over other non-judicial acts on the same day, decided that the effect of the insolvency administration order was to sever the joint tenancy with retrospective effect, so that an undivided moiety of the beneficial estate in the house devolved as part of Mr Palmer's estate.

Mrs Palmer, who was deprived of that part of the property as a surviving beneficial joint tenant, appealed on the grounds that the judge's construction of the 1986 Order was ultra vires section 421 of the 1986 Act, under which the Order was made.

Roger Kaye QC and Lexa Hilliard (Jones Myers, Leeds) for Mrs Palmer; Daniel Serota QC and John Briggs (RC Moorhouse & Co, Leeds) for the trustee of the estate.

LORD JUSTICE BALCOMBE said that section 421 only empowered the making of an order which applied the Act to the administration of the insolvent estates of deceased persons. Nothing altered the ordinary meaning of the 'estate of a deceased person'. The estate of a deceased joint tenant did not include his unsevered interest under a beneficial joint tenancy: that accrued by right of survivorship to the surviving joint tenant and did not pass to his person representatives or form part of his estate. The effect of the judge's decision was to treat that interest, which was in fact unsevered at death, as having been notionally severed at the earliest moment of the day on which he died and thus falling into the estate.

Paragraph 12, by itself, was not enough to vest in the trustee a half share of the house, since at the moment of Mr Palmer's death, his interest in the property ceased and accrued by survivorship to his widow. The result of vesting the half share in the trust was achieved by applying the 'general rule' that judicial acts took precedence over other acts.

Thus to one legislative fiction - that for the purposes of section 283 the insolvency adminstration order made on 17 August 1991 was treated as having been made on 22 November 1990 - there was added another judicial fiction: that the order was made at the first moment of 22 November 1990 before the moment of Mr Palmer's death.

The 'general rule' was of considerable antiquity and its universality had been questioned. If necessary, his Lordship would be prepared to hold that it was now time that this ancient rule should be given its quietus in so far as it operated to require the court to assume something that was known to be untrue.

However, it was sufficient to say that the rule could not be allowed to operate so that, by piling one fiction upon another, a statutory instrument modifying primary legislation was to be construed in such a manner as to render it prima facie ultra vires.

If Parliament had intended that the interest of a deceased debtor in property held jointly should be treated as forming part of his estate for the purposes of its administration in bankruptcy, it could have expressly so provided.

LORD JUSTICE EVANS, concurring, said that the time had come to say that the fiction that a judicial act was effective from the first moment of the day on which it took place should have no place when the true facts were known, at least in cases where the court's jurisdiction was concerned.

The trustee's case involved adding the common law fiction that the insolvency administration order was made at the earliest moment of the day to which the statutory fiction applied, and therefore whilst Mr Palmer was alive.

Mr Palmer did not die bankrupt, nor was the deceased person whose estate became insolvent necessarily insolvent when he died. Nothing in the Act or Order empowered the court to make an insolvency administration order in respect of the estate of the person who was not deceased, nor could any rule of law be relied on to produce the fictional result that a person was dead at a time when in fact he was still alive.

The insolvency administration order took effect at the moment of Mr Palmer's death. His interest in the joint tenancy of the property could only continue whilst he was alive. The order could only take effect when he died. It followed that the interest was not affected by the order. It never formed part of his estate.

LORD JUSTICE ROCH agreed.