Donohoe v Ingram [2006] EWHC 282 (Ch)

Donohoe v Ingram [2006] EWHC 282 (Ch); [2006] 2 FLR 1084

Court: High Court, Chancery Division | Judgment: 20 January 2006

Teresa Donohoe failed to obtain an eleven-year postponement of the sale of the home she jointly owned with her bankrupt former partner. The court upheld the finding that the circumstances were not exceptional under section 335A(3) of the Insolvency Act 1986. It left the broader Article 8 argument undecided but varied the order to allow a short further delay: the sale could not take place before 18 April 2006.

The home and the proposed sale

Donohoe and Iain Kirkup bought their home in Ipswich in 1996 and were registered as joint proprietors. They had four children, aged ten, eight, six and four by the time of the appeal. Kirkup was made bankrupt in March 2000. The couple eventually separated in July 2001.

David Ingram, the trustee in bankruptcy, applied for an order for sale in June 2005. District Judge Bazley White ordered a sale with vacant possession in October 2005. Kirkup took no part in the proceedings.

Donohoe appealed, asking that the sale be postponed until 2017, when the youngest child would reach sixteen. She emphasised her difficulty obtaining alternative accommodation in the short term and the loss of the family support network on which she depended. The appeal was a review of whether the district judge’s decision was wrong, rather than a fresh hearing of the application.

What counted as exceptional circumstances?

Section 335A required the court to make a just and reasonable order, taking account of the creditors’ interests and the other relevant circumstances. Under subsection (3), once the specified one-year period had passed, the creditors’ interests were presumed to outweigh all other considerations unless the circumstances were exceptional. Donohoe accepted that the one-year rule applied. The appeal therefore concerned whether the district judge had been wrong to find no exceptional circumstances.

The court treated that assessment as a value judgment based on the circumstances as a whole, leaving limited scope for appellate interference. In Re Citro explained that the ordinary hardship of losing a family home, including difficulty buying another home and disruption to children’s schooling, did not by itself amount to exceptional circumstances.

Donohoe relied particularly on In Re Holliday, where a sale had been postponed and creditors were expected to recover their debts with statutory interest in full. She argued that her case shared that feature. The creditors were commercial creditors, and she maintained that allowing the children to remain longer would not prevent repayment.

Why the repayment argument did not decide the appeal

The trustee disputed the comparison with Holliday. The proposed postponement here was substantially longer, the statutory interest rate was higher, and continuing costs and fees could erode the available equity. He argued that the margin protecting repayment was much less secure.

Mr Stuart Isaacs QC, sitting as a deputy High Court judge, rejected the suggestion that the district judge had misunderstood Citro or overlooked its discussion of Holliday. The district judge had taken into account the prospect that creditors would be paid in full and nevertheless concluded that the circumstances, taken together, were not exceptional. Holliday did not compel the opposite result.

The district judge had mistakenly referred to a claim of about £39,000 rather than about £29,000. That error was immaterial because he had already considered full repayment reasonably likely even on the higher figure. The error therefore did not show that his overall conclusion was wrong.

Importantly, the deputy judge did not accept the trustee’s assertion that repayment with statutory interest after the proposed postponement was arithmetically impossible. He regarded the position as less clear-cut than Holliday, especially because of the length of the delay, but found it unnecessary to decide the calculation conclusively. The appeal failed on the assessment of all the circumstances, rather than on a finding that creditors could never be repaid.

The Article 8 argument

Donohoe also relied on the right to respect for private and family life under Article 8 of the European Convention on Human Rights. She argued that section 335A should be read more broadly to give greater weight to the needs of the bankrupt’s partner and children. Barca v Mears had tentatively questioned whether exceptional circumstances should be confined to consequences going beyond the usual effects of bankruptcy.

The trustee relied on Harrow LBC v Qazi, concerning proprietary or contractual rights to possession. The deputy judge was inclined to accept that Qazi did not make Article 8 irrelevant here. Neither Kirkup nor the trustee had an automatic proprietary or contractual entitlement to possession against Donohoe: obtaining an order depended on a successful statutory application.

However, the court did not finally resolve whether Article 8 required a wider interpretation of exceptional circumstances. Even adopting the wider approach argued for, the deputy judge considered the result correct. The district judge appeared to have assessed the family’s circumstances as favourably as possible; reviewing those circumstances himself, the deputy judge would still uphold the order.

The judgment therefore did not decide that Article 8 could never affect an application of this kind. It decided that the argument did not change the outcome on these facts.

Outcome and the limited postponement

The appeal was dismissed and the order for sale remained. Nevertheless, the court gave Donohoe further time to arrange her affairs and make provision for the children. It varied the order so that the property could not be sold before 18 April 2006. This was a short practical extension, rather than the requested postponement until 2017.

Source: Full High Court judgment on BAILII.