There was quite an amount of discussion about this section which arose from difficulty in distinguishing between disclaimer and election. I want to say a brief word about the distinction between the doctrines of election and disclaimer and the committee's decision to abolish the former and to amend the latter. Basically, under the doctrine of election — section 271 of the 1857 Act — when the property of a bankrupt consist of leasehold, or is held under a fee farm grant, it does not vest in the assignees on the bankruptcy of the grantee or lessee unless or until they elect to take it. Until election, therefore, it remains vested in the bankrupt who is liable for the rent and other covenants. On electing the assignees become liable for payment of rent unless they subsequently disclaim. When they occupy property without electing or disclaiming they are liable to pay an occupation rent from the date of adjudication to the date of delivery of possession. If the assignees elect not to take, the bankrupt remains liable for rent due after the date of adjudication. As regards arrears, a landlord also has power to distrain on the tenant's property but this procedure, I understand, is not availed of.
The assignees can be required to make a decision whether to accept or decline such property. If they do not decide within a reasonable time of being required to do so the person entitled to the rent or the lessor may apply to the court and it may order the assignees to elect. if the assignees decline the lease or the land the court may order the bankrupt to deliver up possession or may make such order as it thinks fit. Election need not be expressed in any particular form and it may be inferred from conduct. I understand that in practice if the Official Assignee elects to take a lease and if he sells the lease, arrears of rent due up to the date of the sale would be paid. But there would be no question of the Official Assignee being liable for the rent until the property vested in him, that is, until he elected to take it.
The doctrine of election was abolished in England in 1869 and replaced by the doctrine of disclaimer because in the Act of that year provision was made for the vesting of the bankrupt's property in the trustee in bankruptcy. However, in Ireland the 1872 Act introduced disclaimer but retained election so that the dual system remains in the law today. The basic difference between the doctrines is that election applies to property which does not vest on adjudication while disclaimer is concerned with property which has vested but which the assignees wish to disown. As Members are aware, the Bankruptcy Law Committee felt that since under the Bill all the property of a bankrupt, with certain exceptions, would vest on adjudication automatically in the Official Assignee alone, there was no further need for election. The disclaimer provisions were therefore up-dated in line with company law. In principle, the Official Assignee's power to disclaim onerous property remains. However "after-acquired" property is excluded because this does not vest unless and until he claims it. The consent of the court to disclaim is made statutory and a 12 month time limit is imposed.
It might be helpful also to summarise the section. It is obvious that each subsection inter-links and one arises from the other. Section 56 is divided into nine subsections which are designed to balance the rights and liabilities of the Official Assignee, the bankrupt and his property, and persons affected by the disclaimer. Briefly, subsection (1) enables the official assignee to disclaim, indicates the kind of property comtemplated and imposes conditions as to court sanction, the form disclaimer must take, that is, it must be in writing, and the time allowed for exercising the right to disclaim. Subsection (2) qualifies subsection (1) as regards property which does not come to the Official Assignee's knowledge within a month of the adjudication. In such a case the right to disclaim may be exercised within 12 months of his becoming aware. Subsection (3) sets out the respective rights and liabilities of the bankrupt and his estate and of other persons in the disclaimed property and the position of the Official Assignee. Subsection (4) deals with pre-conditions the court may attach to the granting of leave to disclaim. Subsection (5) sets out the circumstances in which the Official Assignee may disentitle himself from disclaiming. Subsection (6) empowers the court to rescind contracts made with the bankrupt. Subsection (7) is concerned with vesting orders made by the court in favour of parties interested in disclaimed property. Subsection (8) deals with leasehold property and vesting orders. Subsection (9) continues the existing provision in favour of a person who is damaged by a disclaimer. I think that clarifies all the points that were raised at the last meeting on the issue.
