Brittain v Haghighat & Anor

Where an application is made under sections 336 or 337 of the Insolvency Act 1986 for possession of a bankrupt’s matrimonial home, the court must identify whether the circumstances are exceptional. Exceptional circumstances require more than the ordinary hardship caused by loss of the home; they require unusual or compelling features outside the ordinary run of cases.

After the trustee’s appointment has continued for more than a year, the creditors’ interests are presumed to outweigh other considerations unless the circumstances are exceptional. That presumption does not require the court to disregard the statutory factors. Where exceptional circumstances exist, the court must make the order that is just and reasonable after balancing all relevant interests. A deferred possession order may properly balance the creditors’ need for realisation against serious medical and care needs.

Louise Brittain, the trustee in bankruptcy of Hamid Haghighat, sought possession and sale of the leasehold family home. The property had vested in the trustee and was the bankrupt’s only known asset, but Hamid Haghighat, his wife Nasrin, and their adult children occupied it. Their eldest child, Mani, had severe disabilities and required continuous care, principally provided by his mother.

The application was made under section 33 of the Family Law Act 1996, as applied by sections 336 and 337 of the Insolvency Act 1986. The central questions were whether the circumstances were exceptional and, if so, what order was just and reasonable having regard to the creditors’ interests, the family’s needs, medical evidence, and the availability of alternative accommodation.

1. Exceptional circumstances. The court held that the needs arising from Mani’s severe disability, and the resulting needs of his mother as his principal carer, made the circumstances exceptional for the purposes of sections 336(5) and 337(6) of the Insolvency Act 1986. Ordinary distress caused by losing a matrimonial home is insufficient. There must be unusual medical circumstances or compelling reasons outside the ordinary run of cases, as illustrated by Re Citro (Domenico) (A Bankrupt) [1991] Ch 142.
2. Although the application was made more than one year after the trustee’s appointment, the statutory presumption in favour of creditors did not require the court to ignore the other matters identified in section 336(4). It made the creditors’ interests preponderant unless the circumstances were exceptional. Once exceptional circumstances were established, the court had to decide the weight of each relevant consideration and make an order that was just and reasonable.
3. The creditors had a substantial and immediate interest in possession and sale because the property was the only known asset and was subject to continuing liabilities. Against that stood the serious risk that a forced move would disrupt Mani’s care at home, increase the burden on his mother, and potentially lead to residential care. The property was not wholly adequate, and the existing care arrangements were themselves vulnerable, but alternative accommodation was uncertain and likely to take considerable time.
4. The court therefore ordered possession to be given to the trustee, but deferred possession for three years or until, if earlier, three months after Mani had permanently ceased to reside at the property. This was intended to allow suitable rehousing and an orderly transition in Mani’s care. The precise form of the order and costs were left for further argument.