I have followed advice:
"to fix it run 'gksudo synaptic'"
and chose to reinstall the package - it did solve the problem  - I can now 
upgrade the system & install other packages.

However - I still need to investigate if and how I can recover access to
my old encrypted home partition

-- 
package ecryptfs-utils 81-0ubuntu3 failed to install/upgrade: 
https://bugs.launchpad.net/bugs/534720
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