When someone is made bankrupt, their interest in the family home vests automatically in their Trustee in Bankruptcy, upon his or her appointment. The Trustee has 3 years from the date of the bankruptcy order to realise this interest. The Trustee will first of all ask if a third party is willing and able to purchase the Trustee’s share, usually 50% of the available equity. If that is not possible, then the Trustee will request that the property is put on the market for sale. As a last resort, the Trustee can apply to the Court for an order for possession and sale of the property.
When a Trustee applies for an order for possession and sale after 12 months from the date of his or her appointment, the Court shall assume that the interest of the bankruptcy creditors will outweigh all other considerations, unless there are exceptional circumstances.
What constitutes exceptional circumstances is not defined, but they typically relate to the personal circumstances of the bankrupt’s spouse, such as a medical or mental condition. In the recent the decision of Grant and Another –v- Baker  EWHC1782 (Ch), the exceptional circumstances involved the bankrupt’s adult daughter, who had a mental age of 8 or 9 and mobility difficulties and was incapable of living on her own. The bankrupt and his wife had purchased a bungalow to limit her mobility issues as she had difficulty walking stairs. The property was also near a day centre attended by the daughter. A letter from the family doctor said that a move from the family home would have a real negative impact on the daughter’s well-being.
Decision at first instance
The Judge at first instance found that the circumstances of the case were exceptional. She made an order for possession and sale, but postponed this indefinitely, namely until such time as the daughter no longer resided at the property. The Trustee appealed against this decision arguing that a longstop date should have been set and that he should have been given permission to apply for further directions in circumstances changed.
Decision on appeal
The High Court Judge who heard the appeal found that the view of the first instance Judge, that the circumstances of the case constituted exceptional circumstances, was an entirely legitimate one. However, he found that the Judge had incorrectly exercised her discretion by ordering an indefinite postponement of the sale of the property whilst the daughter who had a normal life expectancy continued to live there.
The first instance Judge had paid insufficient attention to purpose of the statutory framework, under which a Trustee must within a limited time period realise the interest for the benefit of creditors and to pay the Trustee’s reasonable costs. The appeal Judge held that in all save the most truly exceptional circumstances, that purpose requires realisation within a short timeframe, to be measured in months rather than years.
The appeal Judge also found that the first instance Judge had reached an incorrect conclusion, when considering available alternative accommodation and that far more detailed and cogent medical evidence in relation to the impact of a move on the daughter would have been needed to justify a postponement of the sale of the property for a more than a relatively short period.
The High Court Judge ordered a further postponement of the sale for twelve months.
This case shows that even in cases of exceptional circumstances, Trustees in Bankruptcy should be permitted to realise their interest within a relatively short time frame. The Judge did not explain what truly exceptional circumstances are, but left the door open for further arguments as to what those might be. One wonders if the decision would have been different if the property had been especially adapted for the daughter’s needs or if she had a severely reduced life expectancy.