Grant v Baker

Bankruptcy – orders for sale – postponement – appeals – exercise of discretion – s. 335A Insolvency Act 1986

The joint trustees in bankruptcy of Mr Baker appealed a District Judge’s order postponing the sale of the matrimonial home until such a time as the bankrupt’s daughter no longer resided at the property. The exceptional circumstances justifying the postponement of the sale were the daughter’s medical condition. She was born with global developmental delay and also suffered from dyspraxia and obsessive compulsive disorder. The District Judge had refused to impose a time limit on the postponement of the sale of the property.

On appeal, the court held the District Judge correct to categorise the case as exceptional. However, having done so, she had failed to exercise her discretion under section 335A of the Insolvency Act 1986 correctly. She had weighed the interests of the only creditor against the interests of Mrs Baker and his daughter, but had paid insufficient regard to the requirement in section 335A(2)(c) to have regard to “all the circumstances of the case”.

Those circumstances included the statutory scheme of the bankruptcy legislation, at the heart of which is the realisation of the bankrupt’s property and the distribution of the proceeds to creditors. The judge criticised the District Judge’s view that moving to private rental property would not give the daughter a settled home for the rest of her life on the basis that millions of people live in the private rental sector. He also disagreed with the District Judge’s rejection of the suggestion that Mrs Baker’s share of the proceeds of the sale of the property could be used to pay the rent on a rental property.

The Judge concluded that postponing the sale for a further year would strike a reasonable balance between the interests of the creditor and the reasonable needs of the daughter and her mother to find a suitable rental property.

This is a reasoned note of caution to Judges considering postponing the sale of the bankrupt’s property for significant periods, even where there might appear to be exceptional circumstances justifying the postponement.