Bankruptcy Act 1988

Disclaimer of onerous property.

(1872, ss. 97 and 98; 33/1963, s. 290)


F40 [ 56. (1) Subject to subsection (5) , where any of the property (other than after- acquired property) of a bankrupt consists of

(a) any unprofitable contract, or

(b) any other property which

(i) is unsaleable,

(ii) is not readily saleable for any reason whatsoever (including because the property is subject to any mortgage, charge, lien or other security), or

(iii) gives rise to a liability to pay money or perform any other onerous act,

the Official Assignee, notwithstanding that he has endeavoured to sell or has taken possession of the property or exercised any act of ownership in relation thereto, may, with the leave of the Court and subject to the provisions of this section, by writing signed by him, at any time disclaim the property. ]

(2) F41 [ ]

(3) The disclaimer shall operate to determine, as from the date of disclaimer, the rights, interests and liabilities of the bankrupt and his property in or in respect of the property disclaimed, and shall also discharge the Official Assignee from all personal liability in respect of the property disclaimed as from the date when the property vested in him, but shall not, except so far as is necessary for the purpose of releasing the bankrupt and his property and the Official Assignee from liability, affect the rights or liabilities of any other person.

(4) The Court, before or on granting leave to disclaim, may require the Official Assignee to give such notices to persons interested and impose such terms as a condition of granting leave, and make such other order in the matter as the Court thinks just.

(5) The Official Assignee shall not be entitled to disclaim any property under this section in any case where an application in writing has been made to him by any persons interested in the property requiring him to decide whether he will or will not disclaim, and the Official Assignee has not, within a period of twenty-eight days after the receipt of the application or such further period as may be allowed by the Court, given notice to the applicant that he intends to apply to the Court for leave to disclaim; and, in the case of a contract, if the Official Assignee, after such application as aforesaid, does not within the said period or extended period disclaim the contract, he shall be deemed to have adopted it.

(6) The Court may, on the application of any person who is, as against the Official Assignee, entitled to the benefit or subject to the burden of a contract made with the bankrupt, make an order rescinding the contract on such terms as to payment by or to either party of damages for the non-performance of the contract, or otherwise as the Court thinks just, and any damages payable under the order to any such person shall be deemed to be a debt proved and admitted in the bankruptcy.

(7) Subject to subsection (8), the Court may, on an application by any person who either claims any interest in any disclaimed property or is under any liability not discharged by this Act in respect of any disclaimed property and on hearing any such persons as it thinks fit, make an order for the vesting of the property in or the delivery of the property to any person entitled thereto, or to whom it may seem just that the property should be delivered by way of compensation for such liability as aforesaid, or a trustee for him, and on such terms as the Court may think just, and on any such vesting order being made, the property comprised therein shall vest accordingly in the person therein named in that behalf without any conveyance or assignment for the purpose.

(8) Where the property disclaimed is of a leasehold nature, the Court shall not make a vesting order in favour of any person claiming under the bankrupt, whether as under-lessee or as mortgagee by demise, except upon the terms of making that person—

( a) subject to the same liabilities and obligations as those to which the bankrupt was subject under the lease in respect of the property at the date of the adjudication; or

( b) if the Court thinks fit, subject only to the same liabilities and obligations as if the lease had been assigned to that person at that date;

and in either event (if the case so requires), as if the lease had comprised only the property comprised in the vesting order, and any mortgagee or under-lessee declining to accept a vesting order upon such terms shall be excluded from all interest in and security upon the property and, if there is no person claiming under the bankrupt who is willing to accept an order upon such terms, the Court shall have power to vest the estate and interest of the bankrupt in the property in any person liable either personally or in a representative character, and either alone or jointly with the bankrupt, to perform the lessee’s covenants in the lease, freed and discharged from all estates, encumbrances and interests created therein by the bankrupt.

(9) Any person damaged by the operation of a disclaimer under this section shall be deemed to be a creditor of the bankrupt to the amount of the damages, and may accordingly prove the amount as a debt in the bankruptcy.