Introduction
The number of people making themselves bankrupt has increased enormously in recent years. Bankruptcy will stop your creditor coming after you but will it stop the landlord from enforcing an order for possession? The answer is obvious: of course not. However, the full reasoning depends upon the relationship between s82 of the Housing Act 1985 and s285 of the Insolvency Act 1985.
Facts
In Harlow District Council v Hall [2006] EWCA Civ 156 the council obtained a suspended possession order against the tenant for non-payment of rent. He was subsequently made bankrupt on his own petition. Some key dates were as follows:Possession order made – 12 January 2005
The date for the giving up of possession – 9 February
Bankruptcy order made – 10 February
Defendant applies for discharge of the possession order on the grounds that the order for possession was precluded by s2853(a) of the Insolvency Act 1986 - 28 May. Although 9 February was the date for possession, the order was suspended so long as the arrears were paid off at the rate of £10 per week. The effect of that order was that the tenancy came to an end on the date given for possession but the execution of the order was prevented by the suspension (Burrows v London Borough of Brent [1996] 1 WLR 1448). The tenant made payments in accordance with the order so it remained suspended.
Insolvency legislation
Section 285(3)(a) of the Insolvency Act 1986 provides as follows:After the making of a bankruptcy order no person who is a creditor of the bankrupt in respect of the debt provable in the bankruptcy shall – (a) have any remedy against the property or person of the bankrupt in respect of that debt Tenant's argument
The tenant argued that the section precluded the enforcement of the order for possession.
Decision
The CA disagreed. The tenant had no tenancy after 9 February. The Chancellor of the High Court:13. In my view the Possession Order and its effect is clear. Paragraph 1 of the order required Mr Hall to give possession on 9th February 2005. As the order was made on 12th January 2005 it was suspended in the sense that it was to take effect on a specified future date, but the obligation to give possession on or before 9th February was not qualified by the postponement of its enforcement in the event of compliance with paragraph 5. The distinction between suspending the execution of the order and postponing the date for possession is also made in s.85(2). Accordingly it is, in my view, plain that the date on which the tenant "is to give up possession [of the dwelling house] in pursuance of the order" for the purposes of s.82(2) was 9th February 2005 whether or not the conditions prescribed by paragraph 5 for the postponement of its enforcement were observed. It follows that the secure tenancy had ended before the bankruptcy order was made on 10th February 2005.
14. It follows that the principal submission of counsel for Mr Hall that the maintenance of the Possession Order constituted a remedy against the property of Mr Hall in the form of the benefit of the secure tenancy precluded by s.285(3) must also be rejected. While it subsisted the benefit of the secure tenancy was property of Mr Hall but it did not subsist at the time the bankruptcy order was made and does not subsist now. This conclusion is consistent with the decision of this court in Ezekiel v Orakpo [1977] QB 260 …." Bankruptcy order before possession order takes effect
But what if the bankruptcy order had been made before the possession order took effect to terminate the tenancy, ie on or before 9 February 2005? Would s285(3) then have prevented enforcement of the order for possession? The answer was still no. The court held that Ezekiel v Orakpo would apply. In that case the court held that a claim for forfeiture against a bankrupt tenant is not the claim for a “remedy against the property or person of the bankrupt in respect of that debt”. The Chancellor:"Plainly there are differences in the case of a secure tenancy because an order of the court is necessary to terminate it. But assuming an order to have been made sufficient to terminate the secure tenancy for the purposes of s82(2), then, as it seems to be, the subsequent continuance or enforcement of the order is to have the same effect as a possession action following forfeiture of a lease.” Bankruptcy order before possession order
Finally, what if the bankruptcy order was made before the possession order. The analysis of this position is not so fully explored in the case but it certainly seems that Chadwick LJ thought that in those circumstances the order would still not prevent the order being made:”Although the analogy between proceedings for forfeiture under the general law and proceedings for possession under Part IV of the Housing Act 1986 is not exact, the reasoning in Ezekiel is, to my mind, equally applicable to a case where possession of premises held under a secure tenancy is sought under the statute. I think it would be unfortunate if the outcome in cases of this nature turned on whether the bankruptcy order was made just before or just after the possession order ..” (paras 27 and 28).
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