Nicholls v Lan & Anor (Ch)
- Date: 25/05/2006
Citation: [2006] EWHC 1255 (Ch)
Related Barrister: Max Thorowgood
This was an appeal to the High Court from the decision of a District Judge under s. 335A Insolvency Act 1986 to make an order for possession and sale of a bankrupt’s wife’s home.
Mrs Nicholls was a chronic schizophrenic who was incapable of managing her own affairs, Max Thorowgood was instructed by the Official Solicitor on her behalf.
The District Judge held that Mrs Nicholls' chronic schizophrenia was a “special circumstance”, and that he was not, therefore, obliged by s. 335A(3) to assume that the “interests of the bankrupt's creditors” outweighed all other considerations. He nevertheless made an order for possession suspended for 18 months on the basis that Mrs Nicholls had a half share in a property which she owned jointly with her brother in which he lived which it would be unjust to the creditors not to require her to realise. In reaching that conclusion he declined, on grounds of want of jurisdiction, to suspend his order for possession of the subject property indefinitely on the terms of an open offer that the balance of the bankruptcy debt (which on the evidence would not be recovered upon a sale of the subject property), plus interest, be secured on the property owned jointly with Mrs Nicholls' brother until such time as it might be realised voluntarily.
On appeal, Paul Morgan QC held:
1. That the District Judge was wrong to hold that he had no jurisdiction to make an order in the terms of the open offer but that it had been open to him to do so on the basis that it would have required the creditors to wait for an indefinite and probably lengthy period for their money
2. That the District Judge had not erred in law in failing to examine in detail the particular interests of the creditors against the background of Mrs Nicholls’ offer.
3. Despite the fact that the trustee would ordinarily speak for the interests of the creditors, the particular circumstance of each were relevant to the exercise of the discretion and it would have been open to the District Judge to consider each creditor’s interests specifically had he been so invited at first instance but he had not.
4. That the exercise to be carried out upon a finding of “special circumstances” exactly captures the requirements of Article 8 and Article 1 of the First Protocol.
5. Since those interests were matters of fact going to the exercise of the discretion rather than matters of law, the rule in Pittalis v Grant [1989] 1 QB 605 regarding the appeal Court’s discretion to hear arguments not advanced below did not assist.