“Whilst the law is almost always on the side of the creditors of the bankrupt, the court has the right to postpone a sale for as much time as it deems fit if the court finds the circumstances to be exceptional.”
So said Marilyn Stowe, in an excellent post here in July last year, describing a then-recent decision concerning an application for the sale of a matrimonial home, following the bankruptcy of one of the owners. Another High Court case, decided earlier this month, confirms the accuracy of Marilyn’s words.
Just to explain in a little more detail, we are talking here of the situation in which the home is jointly owned, usually by a husband and a wife. One of them is made bankrupt, and their trustee in bankruptcy applies to the court for an order that the property be sold, so that the bankrupt spouse’s share of the net proceeds of sale (usually 50 per cent) can be used to pay the bankrupt’s creditors. Where one year has elapsed since the bankruptcy the court is to assume, unless the circumstances of the case are exceptional, that the interests of the bankrupt’s creditors outweigh all other considerations, and that the sale should therefore go ahead.
The new case is Pickard & Another v Constable. The facts were that the property was owned by Mr and Mrs Constable, in equal shares. Mrs Constable was made bankrupt in October 2014. Her only significant asset was her share in the property, now worth some £71,000. In February 2016 her trustees applied to the court for possession of the property, so that it could be sold.
The application was opposed, primarily on the basis that Mr Constable’s medical condition was an exceptional circumstance that warranted the postponement of the sale. He suffers from myasthenia gravis, an autoimmune condition which affects his muscles, causing him to be weak and tired and which affects his breathing. It was argued that he would suffer hardship if he were forced to leave his home. The trustees accepted that the circumstances of the case were exceptional, and therefore the court had to make “such order as it thinks just and reasonable”, having regard to all of the circumstances of the case, including the interests of the creditors and the needs of Mr Constable, but not the needs of Mrs Constable, the bankrupt.
The case went before the district judge in March 2017. Having found that Mr Constable could not afford to rehouse himself, was unlikely to find accommodation in the private sector and that the local authority would be under no duty to rehouse him as Mr and Mrs Constable were deliberately homeless, he ordered that the sale of the property be postponed until the death of or earlier permanent vacation of the property by Mr Constable. The trustees appealed.
The appeal was heard by Mr Justice Warren, in the Chancery Division of the High Court. He found that the decision of the district judge could not stand. The evidence, he said, did not justify such a postponement of the sale. The judge in Grant v Baker, the case to which Marilyn Stowe referred in her post, stated that:
“…an indefinite suspension of the order for sale, for a period that could be measured in decades, is incompatible with the underlying purpose of the bankruptcy code. In all save the most truly exceptional circumstances, that purpose must require realisation within a much shorter time frame, normally to be measured in months rather than years.”
This obviously places the bar very high if the bankrupt and their spouse are seeking a long postponement of the sale. Here, the bar had not been met. For example, if the house were to be sold then the local authority would be obliged to find some temporary accommodation for Mr Constable, as he had clearly not made himself deliberately homeless. This might not be ideal for him, and might present difficulties for someone with his condition, but would not leave him in an impossible position.
The appeal was therefore allowed. Instead of the original order Mr Justice Warren made an order that the property should be sold within 12 months, with permission for Mr Constable to apply for a further postponement should his condition worsen. However, he warned Mr Constable that if he is to have any hope of succeeding in such an application, he will have to produce far more cogent evidence from medical experts who have examined him than he had done so far about his condition and its effects and potential effects on him. He will also need to produce far more cogent evidence about the non-availability of private sector accommodation; he will need to engage with the local authority and give evidence about that; and he will need to give full details of his and his wife’s financial positions.
As Marilyn Stowe stated, the law is almost always on the side of the creditors. Preventing a sale (or, more accurately, postponing it for a long period) is a very difficult thing to do.
The full report of the case can be read here. Please note that, for the sake of brevity and clarity, I have purposely been a little ‘loose’ with the law and the factual detail of the case in this post. If the reader wishes to have full details of the case, then they should read the report.
Photo by Ian Muttoo via Flickr under a Creative Commons licence.