We are moving on to Part III of the Bill which deals with the administration of property and the effect of adjudication on bankrupt's property. It goes from sections 44 to 56. Section 44 alters the law regarding the vesting of the bankrupt's property on adjudication in accordance with the committee's recommendation that there should be absolute vesting in the Official Assignee alone and not as at present in the Official Assignee and the creditor's assignee jointly. On adjudication, subject to the provisions of the Act, all the bankrupt's property vests in the Official Assignee for the benefit of his creditors. As under the present law, the property which phases to the Official Assignee is subject to the same rights and equities as attached to it at the date of adjudication. The vesting in the Official assignee is delimited by the provisions in the section relating to certain clauses of property, that is, subsections (3) (b) and (4), and also by other sections of the Bill, namely sections 45, 56 and 65, which deal with excepted articles, onerous property which may be disclaimed and certain salaries and pensions. The section effectively abolishes the doctrine of relation back by providing that the Official Assignee's title will not commence at a date earlier than the date of adjudication. Under the doctrine of relation back, which has no statutory basis in Irish bankruptcy law, the title of the Official Assignee to the bankrupt's property dates from the time of the act of bankruptcy on which the adjudication is based, or, if the debtor is proved to have committed more acts of bankruptcy than one, then from the time of the first of the Acts of bankruptcy proved to have been committed within six months of the petition.
SECTION 44.
Perhaps I could raise a few points here. I would like some clarification as to what the position is in regard to one problem that could arise. Property here includes all the property of someone who is adjudicated bankrupt. If a husband and wife are living in a family home and the home is in the husband's sole name the home can be taken into the bankruptcy and can vest in the Official Assignee. Ultimately, the sale of the home could come about. The problem of someone being adjudicated a bankrupt who owns the family home is mirrored by the problem that is created where, for example, the husband owns the family home and he incurs debts, and a judgment mortgage is lodged against the home which can force its sale. The Official Assignee or the person who is entitled to the benefit of the judgment mortgage are not persons under the Family Home Protection Act who require the consent of the spouse residing in the family home to sell the family home. The Official Assignee can bring about a realisation of the assets without, under section 3 of the Family Home Protection Act, needing the consent of the non-bankrupt spouse.
There are two particular situations that can arise. The first situation is where a wife believes her husband is throwing away the family funds, not operating correctly in his business, gambling, creating a large number of debts and is not paying bills. The husband may, in those circumstances, behave in that way deliberately because the marriage has broken down and he wants to force the situation where there is a sale of the family home and the wife will not consent. The husband behaves in that way, either deliberately or because he has a problem; he may be an alcoholic or a compulsive gambler. If the wife learns of that before there is a bankruptcy adjudication or before a judgment obtained against the husband has been launched as a judgment mortgage, she can bring proceedings under section 5(1) of the Family Home Protection Act, 1976, and ask the court to make a property transfer order to protect her and her children's interests and to have the family home transferred to her. There have been cases in the courts where the husband is incurring large debts in which property transfer orders have been made and the court under the Family Home Protection Act, 1976 has transferred the house into the wife's sole name and in so doing has sought to transfer the beneficial interest in the house into the wife's sole name. If a wife moves quickly, if she knows of the debts, incurred by her husband and if she has efficient, competent lawyers, or sufficient money to pay for competent lawyers, she can bring about a situation whereby the home is transferred to her by the courts which apparently protects her currently in the context of a possible bankruptcy adjudication.
The bankruptcy legislation has not tried to come to terms with the Family Home Protection Act, or how the bankruptcy legislation works in this context and equally is not coping with the judgment mortgage problem. If the wife does not move quickly, if her lawyers are a little bit incompetent or are not familiar with the position and if the creditors move that bit quicker, they will get in with their act of bankruptcy which automatically will produce the situation where the asset — the family home — is gone to the Official Assignee. In those circumstances the courts will not transfer the home to the wife and she and the children can be rendered homeless.
It is the luck of the draw whether you end up losing or retaining your house. This Bill does not say anything about how it is to interact in the context of a family home with the Family Home Protection Act legislation. The courts have been feeling their way around section 5 of the Family Home Protection Act in the last three or four years. It could be argued that the creditors are losing out on an asset where a court makes this type of order. Having had this type of order made, creditors have not yet challenged it. In a sense it is a political or sociological judgment as to whether you give a preference in the context of the family home to the wife and children or whether you give it to the creditors.
We will have to amend this legislation on Report Stage to deal with the problems that are now arising in practice through court decisions making property transfer orders under section 5 of the Family Home Protection Act. My preference would be to guarantee the wife and children preference over creditors. But you could have two different situations: the difference between a court transferring a house worth £30,000 or £40,000 into a wife's own name, thereby protecting the wife and children against creditors because the house is no longer in the beneficial ownership of the husband and cannot be taken into the bankruptcy and a court transferring a house worth £120,000, £130,000 or £140,000 where possibly a wife and children could get quite adequate accommodation in a less expensive house and some of the property could be made available to the creditors. We do not deal with that problem. This was not a problem that existed when the committee reported. But it is a real problem now.
There is also an injustice in the fact that depending on your access to legal advice you may or may not have full protection in this situation. There is another similar problem that can arise in the interaction between the Succession Act and the Family Home Protection Act which I will come to in a moment. But what I have raised is sufficiently complex without throwing the Succession Act into it. I am just wondering if the Minister could comment on this area.
We are having the first bite at a very complicated cherry because it will arise again in sections 52 and 61. I have an amendment down to section 61 which will require that the Official Assignee will have to get the specific consent of the court before he can sell the family home. It is obviously an area in which we can see difficulties.
The Bankruptcy Bill makes no special provision to deal with the family home because the general principle in section 44 and in other provisions is that the Official Assignee steps into the bankrupt's shoes and takes the property, subject to the same equities or charges which would attach to it had the bankrupt not been adjudicated. While in principle the rights of creditors of a bankrupt spouse will be preferred to those of the other spouse where the family home is in the sole ownership of the bankrupt, if the ownership is in dispute it will be a matter for the court to decide what interest, if any, the solvent spouse has and in what circumstances and on what terms the Official Assignee or mortgagee of the family home can sell. As members know, legislation is being considered which if implemented will, inter alia, provide that where one spouse who has a beneficial interest in the family home or acquires such an interest a legal presumption of co-ownership will exist, that he or she holds it for the benefit of himself or herself and the other spouse in equal shares as joint tenants unless the court holds otherwise. The presumption may also be applied to household goods, which would be presumed to be owned equally by the spouses, and the effect of bankruptcy of one spouse on the family home would also be set out. In that legislation which is being considered we will have to deal with the problem of what would occur in bankruptcies. Those proposals are at a very advanced stage at the moment.
The present practice, is I understand, is to allow the mortgagee to apply to the court for permission to sell the family home. The court has power to put a stay on vacating the family home. I am also told that in addition any disputes regarding an interest in it could be resolved under section 12 of the Married Women's Status Act, 1957. Basically our position at the moment is that in section 44 the Official Assignee steps into the bankrupt's shoes and takes the property subject to the same charges or equities as would attach to it if the bankruptcy had not occurred. It does not adversely change the present situation. I appreciate that we are going to discuss this for quite a while.
There are two different situations that arise in this context. The first is the situation where the other spouse had no proprietary or beneficial interest in or claim on the home at all. In effect that spouse is protected by section 3 of the Family Home Protection Act. Normally, the spouse, who is the owner, cannot sell without the consent of the other spouse. There is a situation at the moment where if one knows of debts and proves they may lead to the loss of the family home and goes to court rapidly the home can be transferred to that person. This is happening in practice.
The second situation illustrates a different point. In a sense there is protection where a spouse says although the house is in the sole name of the husband she, as his wife, financially contributed to it and made other contributions of a substantial nature and on the basis of that she can claim a beneficial interest. Then one has the Northern Bank v. Henry situation where there was a Supreme Court decision which made it quite clear that if a spouse had a prior beneficial interest prior to a debt being incurred, even if the spouse in whose title the property was held raised the mortgage, there was nothing in equity, there was nothing to transfer to the Official Assignee. That is where section 12 of the Married Women’s Status Act comes in. If and when we have legislation which creates a presumption of automatic joint ownership we will have to look at that. If there is joint ownership then the act of bankruptcy can only relate effectively to a sum equal to half the value of the property.
The Family Home Protection Act still has a function in all of this. The problem at the moment is that the Official Assignee, in the same way as a judgment mortgagee, is in a position whereby he can sell a property without the consent of the spouse. There are all sorts of anomalies created by this situation, not merely in the context of sale but in the context of the right of the spouse who does lose the family home to claim compensation against the other spouse who may be declared bankrupt under section 5 (2) of the Family Home Protection Act. We have a problem in that the Minister intends to change this area of law in a significant way. I presume that that may not happen for some months. I do not know what the time scale is. Some of the problems will remain with us even after that change. They must do so for a whole series of reasons. It would seem that this is a problem we must deal with.
There has been an amount of litigation in the English courts where bankruptcy decisions have been made. There has been a conflict of claims of ownership of the family home arising from the Married Women's Property Act, 1882, which is the equivalent of our 1957 Act, where a claim can be made and also the interaction between that and the Matrimonial Homes Act, 1967 in England. There are a number of court cases on this. Our courts have only got to the stage where they are transferring property. They have not yet got to the stage where creditors have come in and said the court does not have a right here.
The other problem is that where one can prove in court, for example, that a husband has debts of £100,000, the court can be asked to transfer the family home to the wife. If the court believes that the debts will inevitably produce court decisions which may ultimately result in the loss of the family home it can make the transfer of the family home to the wife without any of the creditors having to be parties to the proceedings or even having to be notified of them. In some instances of course they are called as witnesses to prove the debt but they are not party to the proceedings. They have no role in them. If they got proper legal advice and worked quickly they should be running into the neighbouring court and have the person adjudicated bankrupt. There is a real problem here. We will come to the Minister's amendment later. I think that will simply add to the confusion. All that will do is confer discretion on the court without any guidance on how it is supposed to deal with it. This is a very fundamental problem. Some of the problems we have been discussing are lawyers' theory and somewhat academic. This is a real problem which seems to be arising.
Could I add to Deputy Shatter's contribution? I am conscious of the Minister's amendment but Deputy Shatter has put his finger on it when he said without guidance to the court we are only setting up a protection mechanism which gives time. The matter is still being left completely at the discretion of the court. The ministerial amendment is doing that. It is not a simple matter of saying that in no circumstances the family home should be protected from making a contribution towards the creditors. There are family homes and family homes. Family homes could be worth £1 million. It is a problem which is not easily solved. It is obviously inequitable that the creditors should not get an opportunity of participating in some thing as substantial as a family home worth £1 million. I am glad Deputy Shatter has raised this which is the earliest convenient time that it could be raised on the Bill. When we come to the other sections we will have to consider the matter much more deeply and decide on the basis of the existing law. There is not much point in deciding on the basis of the law which the Minister hopes to introduce later what the correct procedures should be. This portion of the discussion would be useful from the point of view of forewarning the Minister that when we do come to section 61 a more fundamental look could be in order.
I will, of course, look at it again before we reach section 61. In the Bill I referred to, the proposed Matrimonial Property Bill concerning the joint ownership of the family home, there will be specific provisions to deal with bankruptcy in the context of that Bill. In the work we have done already we have gone far enough to be able to say that reasonably categorically.
I agree with the comments made by Deputy Shatter. Very simply my own view on it would be that where existing legislation, such as the Family Home Portection Act, gives as it does certain protective rights to a wife, which is the more usual situation, it protects her and her children against the house being sold under them by a creditor. The very least we should do at this stage would be that when her husband's property would vest in an Official Assignee in bankruptcy the same protection should be accorded to her in that situation. The wife's rights should not be reduced in any way by reason of that operation of law of the transferring of ownership of that property. There should be a saver there for her rights. The family home position should be recognised in the bankruptcy legislation at present as a special situation; it used not to be years ago. This Bill has been hanging about from before the time the Family Home Protection Act was introduced. That is probably the reason it does not advert to that situation. It is now a concept of our law, a very worthwhile progress, a modernisation that we have made in our law under which the family home is regarded as an exceptional situation that is different from any other asset. That fact should be recognised in some format in our bankruptcy legislation now that we have come to accept the special position of the family home. It should not be made subject to bankruptcy procedures and we should not find ourselves in a situation under which a spouse and family could be evicted by an Official Assignee.
Could I raise another issue on this because this is something the Minister is going to have to consider in some detail for Report Stage? None of us has put down formal amendments to it because it is particularly technical and complicated. The Minister is obviously privy to what is being done in the matter regarding the matrimonial property legislation and I presume some of the work done is of direct relevance to this. We have to do a bit more than simply retain for the wife, as Deputy Taylor suggested, the rights that she has under the Family Home Protection Act following upon the transfer of a family home or property to the Official Assignee.
The only rights that a wife has under that Act at the moment is a right to withhold her consent to a sale of the family home. If she withholds her consent to a sale of the family home the husband, or in this case it would be the Official Assignee if we took up this approach, could bring court proceedings under section 4 of the Family Home Protection Act seeking to dispense with the wife's consent on the grounds that she is unreasonably withholding consent to a sale of the family home having regard to the overall family circumstances, as a paraphrase of section 4, or on the basis that she is in desertion or mentally ill and unable to give consent. Leaving aside the second and third of those the main one is that the wife is being unreasonable in light of the circumstances in refusing to grant consent. That would mean the Official Assignee could say he has X number of creditors owed so much money, the wife will not allow the family home to be sold, she is being unreasonable because she made no financial contribution to its acquisition and these people's debts must be paid. It would be leaving a gigantic judicial discretion as to who you prefer and we would create a social minefield and a legal paradise. Lawyers would have a field day in trying to unravel the implications of how the judicial discretion should be exercised.
One can think of all sorts of situations where debts incurred before the marriage should have some sort of priority and the wife's consent should be dispensed with or does it relate, as Senator O'Leary mentioned, to the cost of the family home? For example, would the Official Assignee have the power to say this home is worth £100,000, that he will allow it to be sold but he will give £50,000 to the wife because under the Family Home Protection Act the court could order compensation, or could the court order that the wife get a specific proportion of the sale price realised from the family home? These are all the imponderables. Policy decisions are going to have to be made on this.
There is one additional complication that applies in the case of a husband owning a house and the wife having no proprietary interest. That does not necessarily apply where the wife is the person who goes bankrupt and she owns the house because it appears that as a result of the decision of the High Court — Judge Barron in June 1984, in the case Dennehy v. The Minister for Social Welfare— for the first time the importance of Article 41.2 of the Constitution was in a sense spelled out as suggesting that wives in the home have entitlement to greater constitutional protection than husbands have in the home, which is questionable and which might be at some time changed by the Supreme Court. Unfortunately that case was never appealed to the Supreme Court because the husband involved in it died before judgment was delivered. There was no way of appealing it.
It appears that there could be a constitutional objection to forcing a wife and children out of her house and an Official Assignee taking in the family home to pay off debts owing to creditors. It is arguable under the general family provisions in the Constitution, under Article 41.2 in the light of this judgment that there are additional constitutional protections the State envisages extending to wives and children or to the constitutional family that are not extended to creditors. The creditors could come in and have a constitutional argument about Article 43 of the Constitution — the property rights provisions.
We are going to have to unravel legislatively the implications of all of this. It is very complicated and there are constitutional questions involved. If we do not spell it out this is the one area of bankruptcy law that is likely to be rapidly litigated following upon the enactment of this legislation. We have to do more than simply say we are leaving the wife in the same position as she would have been in if there had not been an act of bankruptcy, in a sense supplanting the husband with the Official Assignee. We are asking the court to bring into consideration all sorts of different problems in dealing with the Family Home Protection Act contest between a wife and Official Assignee than between wife and husband in the situation of an act of bankruptcy.
I would agree with Deputy Shatter to this extent that certainly all these complexities that could arise and are arising from the decisions under the Family Home Protection Act situation will have to be examined, revised, considered and amended at some stage. There is no doubt about that. We can all see the need for it. The time and place for dealing with all that complexity and variation would be in the context of amendments to the family home protection legislation. It may well need protection in the light of the decisions, but it would be in the context of an amending Bill at that level rather than in the Bankruptcy Bill. Amendments as wide-ranging as Deputy Shatter was talking about would not be relevant to the Bankruptcy Bill.
There is one narrow aspect of it which is relevant to the Bankruptcy Bill and which I would ask the Minister to look at very carefully. That is the one net point that when the official assignee following on an adjudication stands in the position of the husband that thereby the same rights that the wife had when it was her husband who was there should persist and carry on for the benefit of the wife when it is the Official Assignee. In other words that her rights should be saved in that respect. The Official Assignee can bring an application to the court and he will have to decide whether she is reasonable or not in refusing her consent. That would be a matter for the court. The court could weigh up all the circumstances of the creditors, the house and its value etc., and make an informed decision on that at the end of the day. If we confined ourselves here, which would be the extent of our position on a Bankruptcy Bill, it would be a major improvement of the Bill. The other questions which are more wide-ranging — and I do not say that they are not important — can be considered in the Minister's Bill that will be brought in at a later stage.
I want to make one or two points of clarification. The first point is that section 44 is the vesting section. It does not fundamentally alter the law particularly with regard to the cardinal principle of bankruptcy law that the bankrupt's property vests in the official assignee subject to all the equities and interests attaching to it.
There is no question of section 44, in case there may be any doubts about it, affecting in any way the provisions of the Family Home Protection Act. Take, for example, the family home which vests in the Official Assignee, or any property which is subject to rights or interests of other parties, whether it be husband or mortgagees or so on, then the Official Assignee takes the property subject to those equities and charges, mortgages or rights or interests. As those members who have spoken correctly pointed out, the Family Home Protection Act is an Act for the protection of the family home. The interest given to the non-owning spouse is not a proprietorial interest. I think case law has indicated that.
When we were examining this section of vesting we were very much aware of the position of the family home. We were also aware of the proposed legislation regarding matrimonial property. It seemed that an appropriate way to deal with bankruptcy provisions would be in the context of a Matrimonial Property Act. It is very difficult to conceive of dealing with the enormous complexities which arise in the field of the family home and ownership of matrimonial property in a Bankrupty Act in isolation.
With regard to section 61 to which reference has been made, an amendment is being put down because under section 61 the Official Assignee is given power to sell property in realising the bankrupt's estate without the consent of the court. Under existing bankruptcy law the court's consent is required and, as indicated in the committee's report, this is a very radical change, but an amendment has been put down to ensure that if the occasion should arise where the Official Assignee might be selling a family home under this act it will be possible only with the sanction of the court. Just to come back to the basic principle of this Bill, it is that the vesting in the Official Assignee is not absolute in the sense that any property he takes will be subject to whatever interest attached to it, irrespective of whether it is family property or any other property.
Having regard to the intention to bring in a special measure with regard to matrimonial property, as I mentioned already, that is the appropriate vehicle for changing the bankruptcy provisions. It would seem quite inappropriate to provide for this in this Bill. What this Bill does is to seek to reform the bankruptcy law in the background of property law as it stands at the moment, subject to whatever changes are made here and there throughout the Bill, but, there is no question of it changing the law with regard to the existing protective rights or interests of spouses or anybody else concerned. Section 44 vests the property subject to equities and interests.
Just to take up some of those points. The problem here is that the Family Home Protection Act does not give an equity or an interest. What it does is give a right of residence and it has been judicially described as giving a spouse an entitlement to have a roof over his or her head. It is not an interest in land; it is not a beneficial interest. I accept that this Bill in not catering for this problem is not doing anything unusual in the sense that the previous Bankruptcy Bill did not cater for this problem. This is a new problem and it represents a lacuna in the current law. It is a lacuna that has not yet been judicially exploited or pursued by creditors. It is only in the last three years that the courts have started making property transfer orders pursuant to section 5 of the Family Home Protection Act. Lawyers practising in the area of family law did not realise that that power was there and some judges did not realise they could do it. Some of them expressed extreme reluctance to do it. It is now happening. There was an unreported High Court judgment in a case called ED v. FD which was one of the first decisions — a decision in December 1981 — when a property transfer order was made. That was the first one which happened in a written judgment. There was at least one High Court one prior to that.
There have been a number of property transfer orders made by the Circuit Court and in circumstances where in real terms the wife and family benefited, which is something I would not complain about. You were talking about a property worth £40,000 or £45,000. But looking at it from the other side for the moment, creditors, overnight, found what would have been a property available to meet their debts disappear, without having any right of audience in court at all when the thing took place. I really do think it is something we will have to deal with in the bankruptcy legislation. If one looks at section 57 and the following sections which deal with fraudulent and voluntary conveyances, they are designed to deal with the problem where a creditor's property or a debtor's property that could be looked to by creditors after the act of bankruptcy to meet debts is being fraudulently conveyed. You are dealing with the situation of trying to ensure that property that should be kept available is available. In a sense, here we have a new example of how property can go — not through fraudulent conveyance to the spouse, the husband wishing to defeat automatically creditors, but through judicial protection being extended to the family. There is, of course, one other thing that can happen where you could in fact have an artificial position in this situation. No doubt a wife who learns her husband has incurred large debts and the family home might be lost would want genuinely to secure it and to try to get it into her name and to provide a future roof over her head. There is nothing to say that that has to happen in a marital breakdown situation. It can happen in a situation where the husband and wife are happily married to each other, where the husband has been involved in a business venture that has clearly failed and has incurred large debts. The creditors are starting to move and the husband says to his wife, "I am going to get judgments registered against me. A judgment motion should be obtained or I am going to be adjudicated a bankrupt. Go off and see a lawyer, bring Family Home Protection Act proceedings against me and get the home transferred into your name." There is an example of how the legislation could be used. I am sure the wife will say, "Thank you very much I want to get it transferred into my name". Here is an example of using a protective mechanism in what could become in a sense a judicial fraudulent conveyance to defeat creditors without the courts realising it. You have a whole problem here and you have a policy problem here. In the same way that we deal in bankruptcy legislation with fraudulent and voluntary conveyances, we are going to have to deal with this family home protection problem. The Minister's amendment says the Official Assignee cannot sell without the consent of the court. If the thing reaches that stage, which we will be coming to later on, it really does not deal with the problem. It is saying to the Official Assignee, "OK, you cannot sell without the consent of the court". Should the court automatically withhold consent if the wife says, "No, I do not want it sold"? Should the court consent if the wife says, "I want it sold but give me £30,000 out of the sale price"? All the criteria under section 4 of the Family Home Protection Act to dispense with the wife's consent are not really being taken into account and are not relevant. I think in dealing with this, even in the context of the new legislation the Minister is suggesting, we will have to make a policy decision under this legislation. First of all, in regard to whether a family home should be exempt — and I would argue it should not be exempt because, as Senator O'Leary says, you can have family homes of varying values — or do you say, family homes up to a particular value are exempt and how do you calculate that? Where does the priority lie?
Somebody will have to look at the possible constitutional problem here. This is going to be a great area for future litigation and it is in everyone's interest that litigation be avoided because all that will happen then is that assets that could either assist creditors or assist the family will end up going into the pockets of lawyers. I have no objection to lawyers getting paid the odd legal fee but we have a duty to try to unravel this.
In the context of the matriminial property legislation the Minister is introducing there could be a whole series of amending provisions, or a whole series of provisions dealing with this, but what those provisions would end up doing would be to amend the Bankruptcy Bill. They would have to do that. They would have to relate back to the Bankruptcy Bill. As we are processing the Bankruptcy Bill, that would seem to be a rather odd way of dealing with it, to say we will not deal with it now but having processed it through the two Houses we will then introduce an amended Bankruptcy Bill under the guise of the Matrimonial Property Bill. So, inevitably we are going to have to deal with this on Report Stage.
Could I just get clarification on one point? If an adjudication takes place does the Official Assignee stand in the same position as the husband or is he in a different position?
The problem here is that under the Family Home Protection Act the Official Assignee does not stand in any position in relation to the husband. He is another person. He is not a spouse. My understanding is that when the Family Home Protection Act was being debated nobody ever thought of this problem. There was a great deal of debate about how to phrase sections 3 and 4. There was a last minute amendment in the Seanad that radically changed the Bill.
The wife would not have protection against the Official Assignee.
You have protection only against a conveyance by the spouse, not by a third party.
I agree with Deputy Taylor. A lot of the points can be covered at the later stage that the Minister is talking about, but we are going to have to tackle the point of whether the Official Assignee should or should not acquire additional rights. The best simple solution to that problem is to put the Official Assignee into precisely the same situation relative to the family home as the husband was previously, which will not forbid him from going to court and getting an appropriate order.
That would do for the moment.
Yes, that would do for the moment and the rest can then be considered in the other context, but that is the very minimum that we should do.
As I understand it members are saying we should save the wife's position so that she should have the same right against the Official Assignee as against her husband.
I do not think that will deal with it. Her husband could come into court and say his wife in being unreasonable in refusing to sell the family home and at the moment a wife in court proceedings could say, "I would agree to sell the family home if my husband made £50,000 available to me. This house is worth £90,000 and that £50,000 could provide a roof for me and my children. My husband simply wanted to sell it and retain the proceeds." As things stand, the court could say it is unreasonable for a husband simply to sell up and leave his wife homeless. There is no problem of creditors hanging around in the background with any claim. It is a question of the home being sold, the husband retaining the proceeds of the sale, or the home not being sold, or the courts taking the view as they have done that it is quite reasonable where, for example, a marriage has broken down that a husband should not be allowed to sell the home unless sufficient funds are made available to the wife to provide a roof over ther head. If you simply supplant the husband with the Official Assignee you have brought a new set of problems into play. If an Official Assignee says, "I want to sell a home, a home worth £90,000, and there are creditors for £120,000," and the wife says, "I withhold my consent to sale because I want a roof over myself and my children but I would agree to a sale if I received £50,000." The Family Home Protection Act does not provide criteria: there is a different set of problems — there is the Official Assignee, there are creditors, — and it is different from the straight husband and wife situation and the type of dispute that can arise. That is why you can, in a sense, say the Official Assignee to some extent should be placed in the same role as the husband. But he cannot be put fully into it. There are other problems, for example, the husband might say that it is quite reasonable for the home to be sold, because while his wife still lives in the home she was committing adultery twice a week and he did not want to live there with her any more. At the moment, in those circumstances, the court could say yes, the home should be sold. Are we suggesting, under this Bankruptcy Bill that the Official Assignee should come in and say, "There are also these creditors, but I am told by the bankrupt that his wife is committing adultery and this is a reason why the home should be sold as well"? What I am saying is that we will have to spell this out. You are giving far too great a judicial discretion by simply saying, in effect what Deputy Taylor is suggesting, that the Official Assignee cannot sell without the wife's consent.
She should be in exactly the same position as the assignee.
The place to deal with these amendments is in the amendment to the family home legislation, not in the Bankruptcy Bill. There are a number of very complex points in relation to the family home. Everybody admits that. We were aware of the difficulty when preparing the Bill. With regard to the property of a bankrupt in one or two of the examples already given, the family home had been transferred and an alienation had taken place. It is important to remember that what vests under section 44 is the bankrupt's property. What we mean by the bankrupt's property is what is left of his property when all mortgages, interests, and rights have been separated from it. If a residence has already been alientated in accordance with a court order, or in accordance with a bona fide transaction, on the adjudication that will not vest in the Official Assignee.
With regard to the question of whether or not bankruptcy provisions dealing with the matrimonial home should be dealt with in a Bankruptcy Bill in isolation, or in a matrimonial property Bill, the approach that was adopted in preparing this Bill was that the Family Home Protection Act has been in operation since 1976, and, if my understanding is correct, that in very many cases of bankruptcy the family home is an important factor and it is a matter for the court to decide whether or not it should be sold, what interest there may be in it and so on. As members have pointed out there have been a number of court decisions on this. This Bill will not change the law in that respect. To put it simply, the Bill is leaving these very difficult complex issues to be decided by case law rather than by statute. It would be premature to deal with or to try to give statutory effect to some of the judicial decisions or allied matters in this Bill prior to a matrimonial property Bill that would include radical changes with regard to the ownership of the matrimonial home and consequential changes in regard to the bankruptcy of one or other of the spouses. With regard to section 44, as I mentioned earlier, it would be very difficult to conceive of altering the provisions of the Family Home Protection Act. As one of the members pointed out, the appropriate place to deal with that sort of thing would be in legislation to amend the Family Home Protection Act, and the proposed Matrimonial Property Bill will be dealing with all facets of ownership of the family home and the consequential bankruptcy provisions. There is no question of section 44 interfering with the present legal position in regard to the protection afforded to the spouse in the family home. There is no question of interfering with judicial discretion under existing family law legislation, and the proposed amendment to section 61 merely maintains the existing position pending whatever changes the matrimonial property legislation may make in relation to the family home.
I do not want to curtail discussion on this but we have been discussing it for a very long time.
Obviously at the end of the discussion on this section I will have to leave it on the basis of asking the Minister to consider substantial amendments to the Bill to deal with this problem. I do not think the points which have been made deal adequately with it. It is not something we can simply leave over. I am presuming, on the basis of what the Minister has outlined as the probable contents of the Matrimonial Property Bill, that the Family Home Protection Act will still have a significant role because the Matrimonial Property Bill is not going to produce a situation where there is automatic joint ownership. It is going to create a presumption of joint ownership, and you can rebut a presumption in court proceedings. I do not know yet whether the Bill will have a retrospective effect or whether it is only going to be prospective. If it has no retrospective effect there will be many family homes in the country for many years that will not be affected by it. If it does attempt to be retrospective there may be constitutional constraints on the extent to which it can be, so there is a whole series of problems here. I am presuming that the Family Home Protection Act, in its current or slightly amended form, will be with us for a long time and that even when this legislation is enacted, many family homes will be owned by one spouse or the courts will hold them to be owned by one spouse.
As a legislator, I do not like the idea of saying, this is very complicated we are not going to deal with it, we are going to leave it to case law. What we are really saying, if one moves away from the code words, is that we are legislatively abdicating our role in this and we will leave it to the judiciary to try to fiddle through and work out a solution to a problem that we cannot deal with in legislation. One must in many areas of law leave judges with discretion as to how to deal with different predicaments. But one cannot have in this case, a totally open ended discretion with no guidelines of any nature as to how you operate it and leave it as something to be litigated because we are then creating what I would describe as bad law. Bad law is law which creates a situation where someone seeks legal advice or assistance and the lawyer has to say "I do not know what will happen. I do not know what view the courts will take because the legislation does not spell it out; it depends on judicial discretion and there is no guidance as to how that judicial discretion could be exercised." One then suggests six or seven possible outcomes of court preceedings. That I would describe as bad law. Even taking into account the amendment which the Minister is proposing we are leaving a far too wide, unguided judicial discretion and we must fulfil our legislative function in dealing with that. That is the first point.
My second point is that I am just not happy with the idea that we approach this on the basis that we are not really doing anything here by changing the Family Home Protection Act. I would make the point as strongly as I can that the Family Home Protection Act never came to terms with this problem. It was never a problem that was fully considered at the time that that Act was passed. For three or four years after that Act came into being, one could have argued that what I am saying now was an academic problem because the courts were not making property transfer orders, but it has now become a real problem because they are, and the fact that we are not changing the Family Home Protection Act in what we are doing, is not a valid excuse for not dealing with this. The reality is that the bankruptcy legislation and the Family Home Protection Act as they exist do not deal properly with this situation because it was never fully envisaged or taken into account when the Family Home Protection Act was enacted. It is a lacuna we have to fill and we have to provide real legislative guidelines as to how it is to be dealt with.
As against that, the Family Home Protection Act does not deal with ownership and the proposed Matrimonial Property Bill will deal with ownership. What we are saying is that it is an enormously complex area where there is a lacuna but in the interval until we have the Matrimonial Property Bill we depend on case law. We are not abrogating our responsibility to the Judiciary years into the future or anything like that. There is a Bill in the course of preparation which will deal with these matters and that is the Bill that deals with ownership and with the distribution of the assets that are owned then. That is the approach we are taking.
Perhaps we could move away from this now. Can the Minister clarify section 44 (4) (b)? What are the circumstances of the exception of the Auctioneers Act and the Central Bank Act?
Section 44 (3) (a), which vests all powers vested in the bankrupt which he might legally exercise in relation to his property in the official assignee on the date of adjudication, is simply a restatement in modern form of the 1857 Act, section 273, and this would include, for example, powers of appointment. If the bankrupt has such a power, it is another case where the official assignee might stand in the bankrupt's shoes. Subsection (4) relates basically to property which is not included in the vesting section. It deals with property held in trust and that is excluded. As to the references to the Auctioneers and House Agents Act and the Central Bank Act Section 5 of the Auctioneers and House Agents Act, 1967, provides for the keeping of client accounts by an auctioneer or house agent into which he has to pay any money received by him for a client. On the adjudication of the auctioneer or house agent the sum to credit of every client account kept by him vests, by virtue of section 7 of that Act, in the Official Assignee. This section also extends to arranging debtors who vest their property in the Official Assignee. In either of these vestings the rights of the creditors against the deposit held in the High Court under the earlier Auctioneers Act vest in the Official Assignee, and any bank maintaining a client's account must pay the amount to credit to the Official Assignee, who must distribute it in accordance with the law of bankruptcy and pay the clients proportionately.
Section 7 of the Central Bank Act, 1971, amongst other things provides that a person shall not carry on banking business as a banker unless he is a holder of a licence and he maintains a deposit in the Central Bank of an amount determined in accordance with the provisions of the Act.
Section 30 of that Act provides that where an individual is the holder of a licence and is adjudicated bankrupt, the amount deposited by him with the Bank, together with any interest, vest in the Official Assignee for payment to persons maintaining deposits with the holder.
These are special provisions in those Acts for dealing with specific sums of money and creditors. They would not vest under section 44 because the vesting under that section would be for the benefit of the creditors generally.
Does it mean money that the auctioneer would have in his client accounts that he has been paid for a house, or is it the deposit that he gives to the court or to the Central Bank? If it is a client account situation it seems that the same thing might apply to a solicitor who also operates a client account. It may be that the Solicitors Act should be included. It is a similar situation?
The account in regard to the Auctioneers Act is an account kept as a client account. With regard to the Solicitors Act, there is provision in the Solicitor's (Amendment) Act, 1960 in relation to accounts kept by a solicitor.
It may be covered?
It is actually. The chapter in the report deals with solicitors also.