I should like to put on record some further information of a general nature that I have. The property of a bankrupt vests in the Official Assignee subject to any rights or liabilities attaching to it. In the case of leasehold property the Official Assignee stands in the bankrupt's shoes and is therefore subject to whatever obligations attach to it, such as to pay rent and to comply with covenants to repair, etc. The effect of section 49 will be that a forfeiture clause in a lease which would otherwise operate to give the Official Assignee a year in which to decide what to do with the lease will no longer operate. Therefore, the lease will vest in the Official Assignee subject to whatever conditions attach to it.
To protect the Official Assignee from personal liability under a bankrupt's lease the doctrine of disclaimer was created. This is now provided for in section 56 of the Bill, to which Deputy Taylor referred. It displaces the old doctrine of election whereby the Official Assignee might become liable if he had elected to take the property and it brings disclaimer in bankruptcy and company law into line. The disclaimer provisions will be dealt with when we come to section 56 and we can discuss them in detail at that point. It is not necessary to do so here.
Briefly, section 56 contains provisions for the release of the Official Assignee personally and also for the alleviation of the position of a landlord or other person who by virtue of the disclaimer may be deprived of their rights in contract against the bankrupt. The section imposes strict conditions on the Official Assignee and mitigates any hardship which its operation might cause to the other party to the lease, or to other persons having an interest.
The effect of section 49 will not permit the Official Assignee to avoid obligations which would otherwise have belonged to the bankrupt had he not been adjudicated. Whatever benefits the bankrupt would have enjoyed will pass to the Official Assignee. Whatever burdens fall on the bankrupt will now fall on the Official Assignee. In regard to a lease, the Official Assignee will be able to decide whether to adopt it or dispose of it for the benefit of the creditors or to disclaim it if it is burdened with onerous covenants. He will not be able to do nothing. The new section places a time limit on the exercise of the right to disclaim. It also gives the court much wider powers as to the imposition of conditions on granting leave to disclaim, and disentitles the Official Assignee from disclaiming in circumstances where he is required to decide whether he will disclaim or not and he neglects to do so.
The question of the position of a hirer under the Hire Purchase Acts is that the effects of section 49 will be that his interest will vest in the Official Assignee who will be subject to whatever obligations arise under the contract if it is a hire purchase agreement. The owner will retain his rights under the contract in the event of non-performance. If the Official Assignee disclaims, the respective rights of the parties will be governed by section 56 of the Bill. That is the general position.
With regard to these two provisions, the committee felt that forfeiture clauses in leases, and terms which terminated hire purchase agreements on the bankruptcy of the lessee or the hirer, were inequitable vis-�-vis other creditors. The effect of the section, as mentioned already, is that this is another example of the property which will vest in the Official Assignee subject to equities. Leasehold property creates complex situations. It is dealt with under section 56 in more detail because the committee decided to abolish the doctrine of election whereby the Official Assignee could elect to take or not to take leasehold property. They pointed out in the report that the fact that the property will now vest automatically in the official assignee on the date of adjudication made the election and disclaimer doctrines incompatible. Some would argue that they are incompatible under the present law because when 19th century legislation in another jurisdiction was updated the disclaimer provisions were intended to replace the doctrine of election.
In the cases mentioned by the members there would be no question of the owner or lessor being prejudiced by the disclaimer provisions because as we will see when we come to section 56 the disclaimer is subject to a long list of conditions, the most important one being that court consent must be obtained. The court can decide whether or not in a particular case the lessor is entitled to compensation for non-payment of rent. For example, it will not interfere with the remedies which the lessor might have in the case of other covenants. The ordinary law of landlord and tenant would still apply.