Law Report: Wife unable to prevent sale of home by bank

LAW REPORT: 3 November 1995; Barclays Bank v Hendricks and another; 19 October 1995,Chancery Division

Barclays Bank v Hendricks and another; Chancery Division (Mr Justice Laddie); 19 October 1995

A wife with young children is unable to prevent the sale of the former matrimonial home by her husband's creditor if the husband's interest in the home has been charged to the creditor and she is unable to show exceptional circumstances.

Mr Justice Laddie dismissed an appeal by the second defendant, Kathy Joyce Hendricks, from deputy Master Powell's order that the defendants' former matrimonial home be sold for not less than pounds 200,000 and that the defendants deliver to the bank possession of the property.

The bank was owed sums of money by the first defendant who was married to but separated from the second defendant. The first defendant had moved out of the matrimonial home into another house owned by the second defendant. A charging order absolute had been made and the bank obtained the deputy Master's order under section 30 of the Law of Property Act 1925 for the sale of the home. On a sale and after discharging sums due under a mortgage and other costs, the bank would recover pounds 20,000 or 20 per cent of the first defendant's debt.

The second defendant, who did not wish to move to the other house, appealed against the order on the ground that the court should exercise its discretion to defer sale until the two children of the marriage reached 18 or finished full-time education.

Michael Sullivan (Harry I. Alkin & Co) for the bank; Nicholas Yell (Steven Fisher & Co) for the second defendant.

Mr Justice Laddie said that it followed from Lloyds Bank v Byrne (1991) 23 HLR 472, which referred extensively to Re Citro [1990] 3 WLR 880, that the interests of the chargee would prevail over those of the spouse save in exceptional circumstances. Re Halliday (a bankrupt) [1980] 3 All ER 384 could be distinguished as a case where there were exceptional circumstances which justified the innocent spouse's interests prevailing over those of the trustee in bankruptcy.

In Re Citro and Lloyds Bank v Byrne the courts held that the houses were held by the spouses on trust for sale subject to a collateral purpose that it should be their matrimonial home. In order to be so enjoyed it must be occupied by the spouses jointly. The purpose could only exist while the spouses were not only joint occupiers of the home but joint owners of it as well. Once that collateral purpose had disappeared, there was nothing left to prevent the interests of the trustee in bankruptcy or the chargee from being pre-eminent.

It was apparent that the only collateral purpose on which the second defendant could rely, namely that the house was to be retained as the matrimonial home, had ceased to exist both because the first defendant was no longer living there and, more importantly, because the first defendant's interest as co-owner had been charged to the bank. He had therefore alienated his interest in the home. It followed that the second defendant must show the existence of exceptional circumstances if her desire to remain in the house was to prevail over the bank's wish to sell.

The second defendant was in a comparatively favourable position. She had another house which she owned and moving would not even involve the children in changing schools. There were no exceptional circumstances here. The recovery by the bank of some 20 per cent of its debt could not be dismissed as trivial. The bank was entitled to an order which would allow it to sell the house.

The period before the innocent spouse had to give up possession should be such as to allow sufficient time to facilitate departure without adding unnecessarily to the distress and dislocation which would be suffered. However, any such period should be as short as possible and any period more than a few weeks should be avoided if it was likely to cause significant hardship to the chargee. The order would require the second defendant to vacate the house by the end of the second week in January 1996 so as to enable a move over the school holidays.

There was no doubt that the court had power to remove the restriction on the sale price if it felt that that was appropriate. It would not be appropriate to remove the limit on the sale price now. However if a sale at or above the limit could not be achieved the property would be sold for such other figure as was agreed between the bank and the second defendant.

Ying Hui Tan, Barrister