Nicholls v Lan

Nicholls v Lan [2007] 1 FLR 744

Human rights consideration in sales orders.

Facts

A married couple, the Nicholls, jointly owned a property. Mr Nicholls subsequently entered bankruptcy, and later a trustee in bankruptcy was appointed who applied for the property to be repossessed and sold to repay some of Mr Nicholls’s creditors. However, Mrs Nicholls suffered from psychiatric issues which were submitted as amounting to exceptional circumstances that ought merit a delaying order regarding the property’s sale. At first instance, the presumption for the creditors was evaluated and the Court considered whether it was ‘just and reasonable’ to require the sale, and thus suspended the sale for eighteen months. Mrs Nicholl’s subsequently appealed to extend this, suggesting there was little evidence as to the creditors’ interests.

Issues

How should Courts approach the balancing of claims between creditors and beneficiaries in exceptional circumstances. Further, what were the human rights implications of actions under the Insolvency Act 1986, s.335A.

Decision/Outcome

The Court dismissed the appeal, holding that the rights of the creditors and wife should be balanced, despite inherent difficulties given that the rights and interests of these persons were fundamentally different in both character and quality. However, a strong assumption could be made that creditors desired repayment of debts owed, thus a low burden of evidence is required of them to substantiate their interests.

The Court held that s.335A did not contravene the European Convention on Human Rights given the provision that exceptional circumstances may result in s.335A being disregarded. Furthermore, the Court stated that in establishing whether such exceptional circumstances existed, the Court must balance competing rights to justify any ‘proportionate’ restrictions made by the issuing of a sales order due to bankruptcy to the rights guaranteed under Article 8, regarding right to a private life and home.