Member Article

The Family Home in Bankruptcy

With Watson Burton LLP Law Firm

The recent case of Official Receiver for Northern Ireland v Rooney; same v Paulson [2008] NICh 22 considered the possession and sale of the matrimonial homes of two families in circumstances where, in each case, prior to the husband’s bankruptcy in 1990, the bankrupt and his wife had been joint owners of the property.

In both applications the Official Receiver for Northern Ireland (“the applicant”) applied pursuant to the Partition Acts 1868-1876 seeking, primarily an Order for sale of a dwelling house which was formerly owned by the respective respondents (who in each case are husband and wife) as joint tenants but which became jointly owned by the applicant and the respondent wife in each case consequent upon the adjudicated bankruptcy of their respective husbands on dates in 1990.

The applicant also sought Orders for possession for the purposes of the sales and that investigations were undertaken regarding the alleged monies spent in improving the houses and in making mortgage payments since the date of the bankruptcies. The court dismissed the applications primarily due to the implications under the Human Rights Act 1998; the respondents relied principally upon the rights contained in Articles 6 (1) and Article 8 to Schedule 1 of the Act and also referred to Article 1 of the First Protocol. In short, their argument was that the applicant waited for an extensive period before deciding to sell their homes, having caused them to believe that they could remain in situ, subject only to the proviso that in the long run they would not be able to sell them, without recourse to the applicant as joint owner.

Secondly, both families had been left undisturbed in their respective homes for almost 12 years during which time they had variously maintained and improved the properties. If they had vacated the properties in 1990 at a time when there was negative equity and acquired new properties, they would not now be facing possession proceedings. Instead, they had relied on implicit indications that they would be left undisturbed in their properties.

It was also decided that in the events which had happened, dispossession would be a disproportionate interference with the rights of the spouses to respect for their home and family life under Article 8.

Further, a delay of almost 12 years was “outside the parameters of a reasonable time for deciding whether to take these properties” such that, to allow the application to succeed, would be to infringe rights to a fair and expeditious hearing under Article 6.

The Court has set down markers in this case in limiting the time in which a Trustee in Bankruptcy can realise their interest in the bankrupt’s principal residence. However, in dismissing the applications, Mr Justice Weir concluded that the circumstances of these cases are exceptional and therefore there is “good reason to the contrary” for not making the orders for sale sought by the applicant.

If you have any comments or questions about this article or any corporate recovery matters, please contact Clare Fegan of Watson Burton LLP at clare.fegan@wastonburton.com.

This was posted in Bdaily's Members' News section by Ruth Mitchell .