Sale for Deferred Consideration - Court of Appeal Reverses Lewis v Metropolitan Realisations

On 12 June 2009 the Court of Appeal handed down a judgment reversing the decision of Proudman J which originally held that the sale by a trustee in bankruptcy of the debtor’s interest in his dwelling house for deferred consideration constituted “ realisation” for the purposes of section 283A of the Insolvency Act 1986.

The facts in this case are that on the day before the third anniversary of the bankruptcy the joint trustee’s of Mr Lewis had assigned the debtor’s interest to Metropolitan under terms which provided immediate consideration of £1 together with 25% of any future proceeds of sale. Proudman J had held that this amounted to a realisation of the debtor’s interest and accordingly it did not re-vest in the bankrupt.

The decision was appealed by the bankrupt and in finding in his favour the Court of Appeal considered the meaning of the term “realise” and concluded that “realisation” involved the conversion of the property into full cash consideration and that this was inconsistent with leaving any part of its value outstanding in an unfulfilled monetary obligation. The Court concluded that within the meaning of section 283A full cash consideration had not been obtained and that the debtor’s interest had not been realised and that it reverted to him.

Lewis v Metropolitan Property Realisations Limited [2009] EWCA Civ 448