Donohoe v Ingram

Under Insolvency Act 1986, section 335A(3), after one year has elapsed the court must assume that creditors’ interests outweigh other considerations unless the circumstances are exceptional. Whether circumstances are exceptional is a value judgment based on all the circumstances. Ordinary hardship caused by losing a family home, difficulties in rehousing and children’s needs will not normally suffice. The prospect that creditors may eventually be paid in full, with interest, is relevant but is not automatically exceptional. The length of any postponement, interest, continuing costs and the margin available to creditors must be assessed. An appellate court should interfere only where the first-instance decision was wrong.

The appellant and the bankrupt jointly owned their former family home. The respondent trustee applied under section 335A of the Insolvency Act 1986 for its sale. The Ipswich County Court ordered a sale with vacant possession. The appellant appealed, seeking postponement until 2017, when the youngest child would reach 16.

The appeal was a true appeal rather than a rehearing. The central issue was whether the District Judge had been wrong to conclude that the circumstances were not exceptional under section 335A(3). The appellant relied on the likely payment of creditors in full and on Article 8 of the Convention.

1. The appeal was dismissed. The order for sale was varied so that the sale was not to take place before 18 April 2006.
2. The appeal court was required to decide whether the District Judge’s decision was wrong, applying paragraph 17.18(3)(a) of the Practice Direction. The assessment under section 335A(3) is a value judgment involving all the circumstances, leaving little scope for appellate interference.
3. In Re Citro [1991] Ch 142 remained the leading authority on exceptional circumstances. Ordinary consequences of bankruptcy, including eviction of a parent with young children, rehousing difficulties and disruption to schooling, are not ordinarily exceptional.
4. In Re Holliday [1981] Ch 405 did not require a different result. The possibility that creditors would be paid in full with statutory interest was a relevant consideration, but the present case was less clear-cut because of the proposed 11-year postponement, the applicable interest rate, continuing costs and the diminishing equity margin.
5. The court did not need finally to decide whether Article 8 required a wider interpretation of section 335A(3). Even on that wider approach, the circumstances were not exceptional. The District Judge had considered the appellant’s circumstances as favourably as possible, and his conclusion was correct.
6. The court granted a short further period before sale as an exercise of its power to vary the order, reflecting the need to allow the appellant to arrange her affairs and make provision for the children.

• High Court (Chancery Division): appeal from the Ipswich County Court dismissed. The order for sale was varied so that the sale could not take place before 18 April 2006.
• Ipswich County Court in bankruptcy: ordered sale of the jointly owned property with vacant possession.