How to Deal with Cracked Paint in Corner?

[radderfire]

I need to repaint my bathroom. Please see the image below. The corner has cracked paint running down it. The wall on the left I believe is wood which is to block in the soil pipe. The wall on the right is normal wall. How should I tackle this corner when redecorating?

Should I chip out the existing flaky paint? Should I use a product to give the corner a smooth finish? Would this be a silicone? Do I need a special type of silicone?

Thanks

 

[radderfire]

I've just discovered that the "cracked paint" in the corner is more like a hard slightly rubbery substance. I am now wondering whether it's ok to scrape it out, or whether it might have a structural purpose and is holding the left wall in place? I'm thinking probably not and it's ok to scrape out, any thoughts?

 

[radderfire]

I've scraped out what was there, which I am guessing was some kind of rubbery adhesive. There is now a gap running down the corner, which is typically 3mm but goes up to 5mm. How would I bridge this gap? I'm now thinking maybe I shouldn't have taken the existing stuff out, but it would have been hard to cover it nicely. I need a way of covering without having to use too much filler. Any ideas?