Grant & Anor v Baker

Where a trustee in bankruptcy applies for sale of a bankrupt’s home after the statutory period, exceptional circumstances may displace the presumption favouring creditors. The court must then balance all relevant circumstances, consistently with the purpose of the bankruptcy legislation. An indefinite postponement is generally incompatible with that purpose, save in truly exceptional cases. The needs of an adult disabled child may qualify as exceptional circumstances, but the evidence must justify the length of postponement sought. The court should consider practical alternative accommodation and the use of sale proceeds to meet any rental shortfall.

Joint trustees in bankruptcy appealed against an order of the County Court at Chelmsford postponing sale of a jointly owned home until the bankrupt’s adult disabled daughter ceased to reside there. The daughter had global developmental delay, dyspraxia and obsessive compulsive disorder, and depended on her parents for care. The trustees argued that the district judge had erred in finding exceptional circumstances and, alternatively, in ordering an indefinite postponement rather than imposing a longstop date.

The central issues were whether the circumstances were exceptional under section 335A of the Insolvency Act 1986, and whether the discretion had been properly exercised.

1. Appeal allowed. The district judge was entitled to find that the circumstances were exceptional. The evidence concerning Samantha’s disability, need for routine, dependence on her parents and the likely adverse effect of moving home provided a sufficient basis for that value judgment.
2. The needs of children under section 335A(2)(b)(iii) are not confined to children under 18. They may include the broadly defined needs of an adult child who remains dependent on the bankrupt and the bankrupt’s spouse.
3. After exceptional circumstances are established, the court must exercise its discretion having regard to all the circumstances under section 335A(2), including the statutory purpose of vesting the bankrupt’s property in the trustee and realising it for creditors. The trustee’s reasonable costs remain relevant even where the proceeds may be exhausted before any dividend is paid.
4. An indefinite postponement lasting potentially for decades was incompatible with the statutory scheme on these facts. The district judge had placed excessive weight on the technical insecurity of private rented accommodation, failed properly to consider using Mrs Baker’s equity to meet a rental shortfall, and failed to consider a shorter postponement.
5. The appeal court therefore exercised the discretion afresh. A further postponement to the end of July 2017, approximately 12 months, was the longest reasonable period. It allowed time to secure suitable rented accommodation and prepare a move sensitively, while preserving the statutory objective of realisation.

• High Court (Chancery Division): appeal allowed from the order of District Judge Foss made in the County Court at Chelmsford on 8 October 2015. The indefinite postponement of sale was replaced by a postponement to the end of July 2017.
• County Court at Chelmsford: sale of the jointly owned property was postponed until Samantha Baker no longer resided there or no longer required it as a home.