Wife’s interest in bankrupt’s home

Nichols v Lam and another ChD TLR 4 August

Mr and Mrs Nichols jointly owned their family home when a bankruptcy petition was brought against Mr Nichols, upon which his share was vested in the Official Receiver. Some years after Mr Nichols had been discharged from bankruptcy, Mr Lam was appointed trustee in bankruptcy of his estate and he applied for an order for sale under s14 of the Trusts of Land and Appointment of Trustees Act 1996. Section 335A of the Insolvency Act 1986 provides that on an application by a trustee for sale, the court should have regard to the factors listed in subsection (2) including: (a) the interests of the bankrupt’s creditors; (b) the needs and financial resources of the bankrupt’s spouse; and (c) all the circumstances of the case except the needs of the bankrupt. However, subsection (3) provides that in the absence of exceptional circumstances, the interests of the bankrupt’s creditors outweigh all other considerations. The district judge held that the circumstances were exceptional and accordingly disapplied s335A(3) and considered what was just and reasonable having regard to the matters in s335A(2). He balanced the interest of the creditors against the needs and financial resources of Mrs Nichols, declared that Mrs Nichols and the trustee held the then beneficial interest in the property in equal shares, and ordered the sale of the property. Mrs Nichols appealed on the grounds of the breach of her right to respect for her home under article 8 of the European Convention on Human Rights and breach of her right to peaceful enjoyment of her possessions under article 1. In particular she complained that the judge had attached too much weight to the interests of the creditors in the absence of any evidence as to their identity or the amounts of their individual debts.