Brittain v Haghighat & Anor

The Court of Appeal dismissed two appeals against a Chancery judge's order that the trustee in bankruptcy be given possession of 82 Eamont Court and that the property be sold, but that possession and sale be deferred for a substantial period (three years) or until the eldest child ceases permanently to reside at the property, whichever is sooner. The judge exercised the discretion under the Insolvency Act provisions governing sale by a trustee in bankruptcy (referred to in the judgment as Section 336(4) and (5)) and concluded there were exceptional circumstances: the eldest child is severely disabled and requires continuous care provided at the property. The respondents were precluded from relitigating the ownership point decided in earlier proceedings and their grounds of appeal did not engage the discretionary balancing that led to the deferred-sale order. Applications to adjourn the hearing were refused because the appeals had no real prospect of success and further delay would frustrate implementation of the carefully reasoned order.

This was an appeal from a Chancery Division judge (Mr Bompas QC) who, on an application by the trustee in bankruptcy, ordered the sale of 82 Eamont Court and possession for that purpose, but deferred possession and sale for a substantial period (three years) or until the eldest child, Mani, ceased permanently to reside at the property. The trustee sought sale as the property appeared to be the sole asset of the bankrupt.

Background and parties: The trustee in bankruptcy (Louise Brittain) applied for sale of the property formerly subject to a charging order obtained by mortgage assignees. The respondents were the bankrupt, Mr Haghighat, and his wife, Nasrin Darabadi (who asserted beneficial ownership). Historical proceedings included a 2000 hearing before HHJ Cowell in which a declaration of trust dated 5 November 1999 was set aside under the Insolvency Act as a transaction at undervalue. Bankruptcy was later made and the trustee sought sale in 2006; the judge heard preliminary and substantive issues and made the deferred-sale order on 12 January 2009.

Nature of the claim/application: The trustee sought an order for sale of the property and possession so that the trustee could realise the asset for creditors.

Issues framed:

• Whether the respondents could reopen or relitigate the ownership/beneficial interest point decided earlier.
• Whether the judge erred in the exercise of his discretion under the Insolvency Act provisions applicable to sale by the trustee (the balance between creditors' interests and other considerations and whether exceptional circumstances existed).
• Whether the appeals should be adjourned given the appellants' medical and caregiving circumstances.

Court's reasoning: The Court of Appeal held the respondents were precluded from relying on arguments that had been decided or for which permission to appeal had been refused. The judge had applied the correct statutory framework, identified exceptional circumstances (the need for continuous care of a severely disabled child), and reached a reasoned compromise by deferring possession for three years to allow the local authority an opportunity to provide suitable alternative accommodation and to permit orderly changes to care arrangements. The appellants' grounds of appeal did not address the judge's discretionary rationale and therefore had no realistic prospect of success. The court refused further adjournment because continued delay would be prejudicial and unnecessary in the face of unarguable appeals and the forthcoming expiry of the three-year deferment. The appeals were dismissed.

Appeals dismissed. The Court of Appeal held there was no arguable basis to challenge the Chancery judge's careful exercise of discretion under the Insolvency Act to grant a deferred order for possession and sale; the respondents were precluded from relitigating ownership points previously decided and their grounds of appeal did not engage the substance of the discretionary decision. Applications to adjourn were refused as the appeals lacked prospects and further delay would be inappropriate.

On appeal from the Chancery Division (judgment and order for sale and deferred possession given by Mr Bompas QC on 12 January 2009). The trustee's application to set aside was considered by Mr Bompas and determined by reserved judgment on 28 May 2009. Permission to appeal against the 12 January 2009 order was given by the judge; both respondents lodged appeals to the Court of Appeal (A2/2009/0477 and A2/2009/2160). Extensions of time for the appeals were granted by Etherton LJ. The Court of Appeal dismissed the appeals on 2 December 2010 ([2010] EWCA Civ 1521).