Court finds official receiver sold London plot without authority

A High Court judge has criticised the official receiver (OR), a civil servant working for the insolvency service, for selling off a plot of land without authority and without properly checking bankruptcy documents. According to a ruling handed down today (26 Oct), the plot is situated in the Hilly Fields area of Lewisham, South East London, and was bought by the claimant Martin Walker and his parents in 1994 for £15,000. The plot was put into a trust divided into three equal shares: for Walker, and the other two for each of his parents. Walker was declared bankrupt in 1997 and declared to the insolvency service his one-third interest in the plot. In 2013 a potential purchaser approached the OR wanting to buy the plot. The official receiver couldn’t find the original bankruptcy file, and concluded that all the land was part of Walker’s estate on bankruptcy. She sold the land to the purchaser for £20,000, based on two valuations provided by the purchaser. Neither Walker nor his parents were notified. The money was given to Walker’s credits. Five years later the plot was sold on for £175,000, the judgment said. Walker has been attempting to sue the OR since at least 2020. He argues that the land was sold at a significant undervalue and, as he only owned one-third of it, should not have been sold at all. He alleges that the land was worth £325,000 as, unknown to the official receiver, it previously had planning permission attached to it. In addition, the OR has since found the original bankruptcy file, confirming Walker only had a one-third interest in the plot. In today’s ruling, Judge Eason Rajah QC agreed that the official receiver acted without proper authority. “She is therefore liable… to reconstitute the trust fund by replacing the land or its value to put the trust back into the position it would be if the land had not been sold,” he said. “In circumstances where these proceedings may continue it is not appropriate for me to ventilate my views on the issues any more than absolutely necessary to explain my decision,” he said in the ruling. “I will simply say this. On the face of it something has gone wrong here. The OR had in her possession the original bankruptcy file. She failed to appreciate that she had that file. That file contained documents which showed that the correct legal analysis was that the land was not vested in the OR, the OR had no power to sell, two-thirds of the land was vested in third parties and an order for sale would be required for a sale of the land. “The reasons why the OR did not inspect that file before sale have not been fully explained… and Mr Walker has not had a chance to challenge those reasons. At this stage I cannot conclude that the OR will show that she has acted honestly and reasonably and ought fairly to be excused or that she had reasonable grounds for believing that she was entitled to dispose of the property or that she did so without negligence.” The judge ruled in favour of Walker and said he should be allowed to continue his claim against the OR. He said that, should he choose to, Walker could make a formal application to add a claim on behalf of his parents, who are now deceased. Martin Walker Appellant v The Official Receiver (as Trustee in Bankruptcy of Martin Walker) Chancery Appeals (Eason Rajah QC) 26 October 2021