Ford & Anor v Alexander

After the statutory period has expired, Insolvency Act 1986, section 335A requires the court, unless circumstances are exceptional, to assume that creditors’ interests outweigh other considerations when deciding whether to order sale of a bankrupt’s home. The provision is compatible with Article 8 because it incorporates a structured balancing exercise and gives proper weight to the interests of both creditors and occupiers. Exceptional circumstances are fact-sensitive and cannot be exhaustively defined. Ordinary hardship, medical difficulties, age, loss of the only home and difficulty obtaining alternative accommodation will not necessarily be exceptional. Even if proportionality is assessed independently, an order may be made where the evidence shows that creditors would otherwise be permanently deprived of any realistic recovery.

The bankrupt appellants occupied a converted garage as their only home. Their trustee sought possession and sale under rule 6.237 of the Insolvency Rules 1986 and sections 283A and 335A of the Insolvency Act 1986. A District Judge ordered possession and sale, suspending enforcement for six weeks.

The appellants sought permission to appeal, arguing that section 335A had to be read under sections 3 and 6 of the Human Rights Act 1998 so as to require an express proportionality assessment under Article 8. The High Court reviewed the permission decision, considered the statutory and Convention arguments, and determined whether the appeal had any realistic prospect of success.

1. Permission and appeal. The court revoked its earlier grant of permission to appeal and determined that any appeal had no prospect of success. The District Judge’s factual findings were not challenged and her review of the evidence was comprehensive.
2. Statutory scheme. Section 283A of the Insolvency Act 1986 gives a trustee three years to realise a bankrupt’s interest in a dwelling-house, subject to specified protective steps. Section 335A requires the bankruptcy court, on an application for sale under section 14 of the Trusts of Land and Appointment of Trustees Act 1996, to make the order it considers just and reasonable. After one year from the first vesting, the court must assume, unless the circumstances are exceptional, that creditors’ interests outweigh all other considerations.
3. Exceptional circumstances. The expression is not exhaustively defined. It concerns unusual personal circumstances, such as a serious medical or mental condition, and requires a value judgment on all the circumstances. The ordinary melancholy consequences of debt and improvidence are insufficient. The appellants’ medical conditions, ages, loss of their home and difficulties in finding alternative accommodation did not meet the threshold. Their failure to investigate alternative accommodation was also relevant.
4. Human rights and proportionality. The pre-existing authorities correctly treated section 335A as compatible with Article 8. The statutory requirements provide a necessary balance between creditors’ rights and respect for the debtor’s home. The decision in Manchester City Council v Pinnock did not assist because it concerned possession proceedings by a public authority and expressly reserved the position of private owners. Zehentner v Austria involved highly unusual facts and did not require a different interpretation of section 335A. In any event, the District Judge had separately reconsidered proportionality and reached the same result.
5. Application. Creditors had a substantial unpaid debt and the property represented the only realistic source of recovery. A permanent suspension would deprive them of any prospect of realisation. Although a case might exist in which proportionality justified permanently depriving a trustee of realisation, this was not such a case.
6. Possession. The court noted the apparent application of section 89 of the Housing Act 1980, but invited further submissions on whether Article 8 could affect the statutory maximum suspension period. That issue was not finally determined in this judgment.

The judgment arose from a decision of District Judge Lambert in the Central London County Court in Bankruptcy dated 19 May 2011, ordering possession and sale of the property and suspending enforcement for six weeks. On 5 July 2011 the High Court granted permission to appeal, later reviewing that decision after further procedural matters came to light. The High Court revoked permission and held that the proposed appeal had no prospect of success.