Pickard & Anor v Constable

Under Insolvency Act 1986, exceptional circumstances may displace the statutory assumption that creditors’ interests outweigh other considerations, but they do not necessarily prevent an order for sale. The court must still give proper weight to the bankruptcy scheme and the need to realise the bankrupt’s interest within a reasonable period. Indefinite postponement is compatible with that scheme only in the most exceptional cases. Medical, housing and financial assertions must be supported by cogent evidence. A judge must consider whether a shorter postponement would adequately protect the non-bankrupt spouse or other affected person. An appellate court may intervene where the first-instance judge has erred in principle, relied on speculation, reversed the burden of proof or failed to consider a material alternative.

Pauline Constable was adjudicated bankrupt, leaving her 50% interest in the matrimonial home as the principal remaining asset. Her trustees sought an order for sale and possession. The District Judge accepted that the circumstances were exceptional and postponed sale and possession until Derek Constable’s death or permanent departure from the property.

The trustees appealed. They argued that the District Judge had relied on speculation about Mr Constable’s medical condition, homelessness and the availability of alternative accommodation, and had failed to consider a limited postponement. The central issues were whether the discretion under section 335A of the Insolvency Act 1986 had been properly exercised and what order should replace the indefinite postponement.

1. Appeal allowed. The District Judge’s order postponing sale and possession until Mr Constable’s death or permanent vacation could not stand.
2. Once exceptional circumstances were established, section 335A(2) required a balancing exercise. The court had to consider the creditors’ interests, the relevant needs and resources of the non-bankrupt spouse, and all the circumstances of the case other than the bankrupt’s needs. The bankruptcy scheme, including the vesting and realisation of the bankrupt’s property, was itself part of those circumstances.
3. The authorities, including Grant v Baker [2016] EWHC 1782 and the principles summarised from Dean v Stout [2005] EWHC 3315 (Ch), showed that exceptional circumstances do not prevent an order for sale. In all but the most truly exceptional cases, realisation should occur within months rather than years. The judge must consider whether a shorter postponement would allow suitable accommodation to be found and a move to be planned.
4. The District Judge had made findings unsupported by the evidence. There was no proper basis for concluding that temporary accommodation would be intolerable or unsafe, that no private landlord would accommodate Mr Constable, or that a move was physically impossible. The burden remained on Mr Constable to establish the circumstances relied on. The District Judge also failed adequately to consider a shorter fixed period.
5. The appropriate order was to postpone sale and possession until 6 October 2018, with liberty for Mr Constable to apply to the bankruptcy court to extend the period and adduce further evidence. Any application would require cogent medical evidence, evidence concerning private accommodation and engagement with the local authority, and full financial information.

The District Judge in the Eastbourne County Court ordered sale and possession, later postponing both until Mr Constable’s death or permanent vacation of the property. The High Court allowed the trustees’ appeal and substituted a 12-month postponement with liberty to apply.