Lloyds Bank Plc v Byrne & Byrne
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE PARKER,LORD JUSTICE TAYLOR,SIR ROUALEYN CUMMING-BRUCE |
| Judgment Date | 17 May 1991 |
| Judgment citation (vLex) | [1991] EWCA Civ J0517-3 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 91/0499 |
| Date | 17 May 1991 |
[1991] EWCA Civ J0517-3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE LIVERPOOL COUNTY COURT
(MR. RECORDER HOWARTH
Royal Courts of Justice
Lord Justice Parker
Lord Justice Taylor
and
Sir Roualeyn Cumming-Bruce
91/0499
and
MR. R. COX (instructed by Messrs Cameron Markby Hewitt) appeared on behalf of the Respondent (Plaintiff.)
MR. R. D. OUGHTON (instructed by Messrs Louis Berkson & Globe, Liverpool) appeared on behalf of the Appellant (Second Defendant).
The facts of this case are very simple. Mr. Byrne is the legal owner of a property known as 8 Grange Park, Maghull, Merseyside. He holds it as trustee for sale for himself and his wife in equal shares.
The property was purchased in March 1976. It is their matrimonial home. They have three children. Two over 18 do not live at home. The third, who is about 18, still does live in the house.
At the date of the decision under appeal both the husband and the wife were employed, but the husband has since lost his job. In October 1983 he signed a joint and several guarantee with a Mr. Thomas for the debts of a company of which he and Mr. Thomas were directors, the guarantee being to Lloyds Bank. The guarantee was up to a maximum of £25,000. It provided that interest should be payable from date of demand. Demand was made on the 1st April 1985. On March 26th 1986 the bank obtained a default judgment against Mr. Byrne for the principal and interest then due and costs. On 1st June 1989 the bank obtained a charging order absolute against Mr. Byrne's interest in the property. On 28th July 1989 the bank applied for an order for the sale of the property under section 30 of the Law of Property Act 1925 as amended. Mrs. Byrne unsuccessfully opposed and on the 23rd November Mr. Recorder Howarth Q.C. ordered a sale by June 1990 if Mr. Byrne had not by then paid £44,601 and interest at 15 percent until payment.
Mrs. Byrne appeals, seeking an order that the bank's application be dismissed, or an order that there be a sale only on certain conditions. The amount now owing is some £50,000. Prior to the Recorder's order the bank had obtained a consent judgment against the co-guarantor for some £20,000. That sum has since been paid in full. The order for sale is presently stayed. The present position is therefore that the bank has still to recover some £30,000.
It is common ground that if the property is sold the proceeds, after discharge of costs and prior charges, will be some £80,000. Each of Mr. and Mrs. Byrne will therefore be entitled to £40,000. Of Mr. Byrne's share some £30,000 will be payable to the bank. The proceeds left available to Mr. and Mrs. Byrne will thus be about £50,000. That amount, together with a mortgage, will enable them to purchase a three bedroom house in Maghull.
Section 30 of the Law of Property Act 1925 as amended reads:
"If the trustees for sale refuse to sell or to exercise any of the powers conferred by either of the last two sections, or any requisite consent cannot be obtained, any person interested may apply to the court for a vesting or other order for giving effect to the proposed transaction or for an order directing the trustees for sale to give effect thereto, and the court may make such order as it thinks fit."
The bank, it is common ground, is "a person interested" within section 30 and entitled to apply under the section. It was so held in Midland Bank v. Pike [1988] 2 AER 434. The discretion conferred by the section is in terms unfettered. Section 3(4) of the Charging Orders Act 1979 provides:
"Subject to the provisions of this Act a charge imposed by a charging order shall have the like effect and shall be enforceable in the same courts and in the same manner as an equitable charge created by the debtor by writing under his hand."
The effect of section 30 was considered at length in In re Citro [1990] 3 WLR 880, judgment in which was given after the decision of the learned Recorder. In that case two brothers were adjudicated bankrupt. The only asset of each brother was a half share in the beneficial interest in his matrimonial home. One brother was judicially separated from his wife, who lived in the house with their children, the youngest of whom was 12. The other brother lived in the house with his wife and three children, the youngest of whom was ten. The debts of each exceeded the value of his half share in the beneficial interest. The trustee in bankruptcy of the joint and several estates applied inter alia for an order for sale under section 30. In that case Lord Justice Nourse, giving the leading judgment, said this:
"In the leading case of Jones v. Challenger [1961] 1 QB 176 it was held by this court that on an application under section 30 of the Law of Property Act 1925 in relation to property acquired jointly as a matrimonial home neither spouse has a right to demand a sale while that purpose still exists. That is now a settled rule of law, applicable to property owned jointly by joint occupants, whether married or unmarried. But its application depends on the whole of the beneficial interest being vested in the occupants. If one of them has become bankrupt, so that part of the beneficial interest is vested in his or her trustee, there arises a conflict between the interests of the occupants and the statutory obligation of the trustee to realise the bankrupt's assets for the benefit of the creditors."
Thus it is clear that neither Mr. or Mrs. Byrne could have obtained an order under section 30, for they were still married and still living in the matrimonial home. Lord Justice Nourse then considered at length the previous authorities and at page 892 said this:
"The broad effect of these authorities can be summarised as follows. Where a spouse who has a beneficial interest in the matrimonial home has become bankrupt under debts which cannot be paid without the realisation of that interest, the voice of the creditors will usually prevail over the voice of the other spouse and a sale of the property ordered within a short period. The voice of the other spouse will only prevail in exceptional circumstances. No distinction is to be made between a case where the property is still being enjoyed as the matrimonial home and one where it is not."
He then concluded that the personal circumstances of the two wives and their children, although distressing, were not themselves exceptional, that the judge who had postponed sale had erred in making orders which might have been appropriate in orders in matrimonial matters, and in failing to address himself to the question whether a further postponement would cause hardship to the creditors.
Mr. Oughton, for Mrs. Byrne, concedes, as I think he was bound to, that unless different principles apply between the case where the applicant is a trustee in bankruptcy of the debtor and the case where, as here, the applicant is a chargee, his appeal must fail subject only to the question whether he could establish that there are here exceptional circumstances. On this point he freely acknowledged that he was faced with considerable difficulties. In his skeleton argument he sets out what he contends are the significant differences between the position of a trustee in bankruptcy and a chargee:
"…under a bankruptcy a creditor will be unsecured, ranking after preferential creditors whereas under a charging order a creditor will be secured and will have priority over unsecured preferential creditors;
under a bankruptcy a debtor obtains a release from his debts whether they are paid in full or not;
the enforcement costs of a judgment are much higher with a bankruptcy than with a charging order, since allowance has to be made for the costs of the bankruptcy, the remuneration of the trustee in bankruptcy, fees to the Department of Trade and Industry, etc.;
Under a bankruptcy decisions are taken by the trustee in bankruptcy and by a committee of creditors, whereas under a charging order decisions are taken...
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