Re Citro [1991]
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Re Citro [1991] Ch 142 concerned the enforceability of a trust of sale when a collateral purpose, specifically the use of the property as a matrimonial home, was affected due to the bankruptcy of two brothers.
Two brothers were declared bankrupt, and their beneficial interest in their respective matrimonial homes was vested in their trustee in bankruptcy. The trustee ordered the sale of the houses, and the trial judge had initially ordered a postponement of the sale until the youngest child of each brother attained the age of 16.
The Court of Appeal allowed the appeal, shortening the postponement period to 6 months. Nourse LJ, delivering the judgment, emphasised that the interests of creditors should prevail over the family in such circumstances. He stated that, typically, creditors prevail over the family when a spouse with a beneficial interest in property is declared bankrupt. The fact that the wives and children of the brothers would suffer as a result of the sale was not considered exceptional.
Nourse LJ further explained that the collateral purpose of using the property as a matrimonial home ended with the vesting of one brother's interest in a trustee for creditors. The basis for joint occupation by the spouses, which is essential for the property to be enjoyed as a matrimonial home, was removed by the vesting of one party's interest in the trustee. Nourse LJ referred to the reasoning in Jones v Challenger [1961], highlighting that a collateral purpose of using the property as a matrimonial home can only exist when spouses are not only joint occupiers but also joint owners.
The case suggests that under the circumstances of bankruptcy, the rights of creditors typically take precedence over the interests of the family. However, it is worth noting that the case might be decided differently today under the Trusts of Land and Appointment of Trustees Act 1996 (TLATA). The statement by Neuberger J in Mortgage Corporation v Shaire [2001] suggests that the legislative changes in TLATA may tip the balance more in favour of families against creditors in cases similar to Re Citro.
Two brothers were declared bankrupt, and their beneficial interest in their respective matrimonial homes was vested in their trustee in bankruptcy. The trustee ordered the sale of the houses, and the trial judge had initially ordered a postponement of the sale until the youngest child of each brother attained the age of 16.
The Court of Appeal allowed the appeal, shortening the postponement period to 6 months. Nourse LJ, delivering the judgment, emphasised that the interests of creditors should prevail over the family in such circumstances. He stated that, typically, creditors prevail over the family when a spouse with a beneficial interest in property is declared bankrupt. The fact that the wives and children of the brothers would suffer as a result of the sale was not considered exceptional.
Nourse LJ further explained that the collateral purpose of using the property as a matrimonial home ended with the vesting of one brother's interest in a trustee for creditors. The basis for joint occupation by the spouses, which is essential for the property to be enjoyed as a matrimonial home, was removed by the vesting of one party's interest in the trustee. Nourse LJ referred to the reasoning in Jones v Challenger [1961], highlighting that a collateral purpose of using the property as a matrimonial home can only exist when spouses are not only joint occupiers but also joint owners.
The case suggests that under the circumstances of bankruptcy, the rights of creditors typically take precedence over the interests of the family. However, it is worth noting that the case might be decided differently today under the Trusts of Land and Appointment of Trustees Act 1996 (TLATA). The statement by Neuberger J in Mortgage Corporation v Shaire [2001] suggests that the legislative changes in TLATA may tip the balance more in favour of families against creditors in cases similar to Re Citro.
