Sladen v Lee

On a second appeal, permission requires both a real prospect of success and an important point of principle or practice, or another compelling reason. Under section 335A(3) of the Insolvency Act 1986, once a trustee’s application concerning the bankrupt’s home is made more than one year after vesting, the court must assume that creditors’ interests outweigh all other considerations unless the circumstances are exceptional. A public-benefit hostel, the bankrupt’s lifetime’s work, and the interests of persons without a property interest do not, without more, constitute exceptional circumstances sufficient to prevent sale. Issues concerning the validity of the petition debt belonged to the annulment or set-aside proceedings. Proposed directions for sale could be raised later under liberty to apply.

Mr Sladen applied for permission to bring a second appeal against an order of His Honour Judge Howarth dated 15 October 2001. The judge had dismissed his appeal from District Judge Forrester’s possession order concerning premises occupied by Mr Sladen, while allowing enforcement to await the outcome of a possible bankruptcy-annulment application.

The bankruptcy order had been made in 1997. Mr Sladen disputed the petition debt and argued that the premises housed a hostel serving a public benefit and representing his life’s work. The central issues were whether those matters gave the proposed appeal a real prospect of success under section 335A of the Insolvency Act 1986, and whether the second-appeal threshold was met.

1. Permission refused. The application was a second appeal. It therefore required a real prospect of success and an important point of principle or practice, or another compelling reason.
2. The court proceeded on the basis that the applications challenging the judgment underlying the bankruptcy petition would fail. The validity of the alleged tax and national-insurance debt was to be investigated in those proceedings and did not arise on this application.
3. Section 335A of the Insolvency Act 1986 governs the balance on a trustee’s application for an order for sale under section 14 of the Trusts of Land and Appointment of Trustees Act 1996. After one year from vesting, section 335A(3) requires the court to assume that creditors’ interests outweigh all other considerations unless the circumstances are exceptional.
4. The unpaid creditors were entitled to the benefit of the statutory assumption. The hostel’s public purpose and its importance to Mr Sladen did not provide a real prospect that the court would refuse an order for sale, particularly where the other affected persons had no property interest.
5. Any application for directions governing the sale, including a tender process, could be made at the appropriate time under liberty to apply. The judge was entitled to require attention to be drawn to relevant parts of voluminous documents and was not required to address points that had not been properly raised.
6. The application was refused. A transcript of the ruling was to be provided to Mr Sladen at public expense.

• Court of Appeal (Civil Division): On 17 June 2002, refused permission for a second appeal. The application concerned the order for possession and its enforcement pending the bankruptcy-annulment application.
• High Court, Chancery Division, Manchester District Registry: On 15 October 2001, His Honour Judge Howarth dismissed Mr Sladen’s appeal against the possession order and varied the order to restrict enforcement pending disposal of the annulment application.
• District Judge Forrester: Made an order for possession of the relevant part of the property.