ON APPEAL FROM THE SALFORD COUNTY COURT
His Honour Judge Tetlow
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE WILSON
LORD JUSTICE ETHERTON
| CHRISTINA SHARPLES
|- and -
|PLACES FOR PEOPLE HOMES LIMITED
Case No: B5/2010/0725
ON APPEAL FROM THE OXFORD COUNTY COURT
His Honour Judge Charles Harris QC
|- and -
|A2 DOMINION HOMES LIMITED
Mr Edward Bartley Jones QC (instructed by Whiteheads) for the Respondent (Places for People Homes Ltd)
Ms Kerry Bretherton (instructed by Turpin and Miller) for the Appellant (Godfrey)
Mr Jonathan Manning and Ms Victoria Osler (instructed by Owen White) for the Respondent (A2 Dominion Homes Ltd)
Hearing dates : 17th and 18th May 2011
Crown Copyright ©
LORD JUSTICE ETHERTON :
The legal framework
Termination of assured tenancies
Both at the date of the service of the notice under section 8 of this Act relating to the proceedings for possession and at the date of the hearing
(a) if rent is payable weekly or fortnightly, at least eight weeks rent is unpaid;
(b) if rent is payable monthly, at least two months rent is unpaid;
(c) if rent is payable quarterly, at least one quarter's rent is more than three months in arrears; and
(d) if rent is payable yearly, at least three months' rent is more than three months in arrears;
and for the purpose of this ground "rent" means rent lawfully due from the tenant.
Some rent lawfully due from the tenant—
(a) is unpaid on the date on which the proceedings for possession are begun; and
(b) except where subsection (1)(b) of section 8 of this Act applies, was in arrears at the date of the service of the notice under that section relating to those proceedings.
Whether or not any rent is in arrears on the date on which proceedings for possession are begun, the tenant has persistently delayed paying rent which has become lawfully due.
"(1) At any time when proceedings on a bankruptcy petition are pending or an individual has been adjudged bankrupt the court may stay any action, execution or other legal process against the property or person of the debtor or, as the case may be, of the bankrupt.
(2) Any court in which proceedings are pending against any individual may, on proof that a bankruptcy petition has been presented in respect of that individual or that he is an undischarged bankrupt, either stay the proceedings or allow them to continue on such terms as it thinks fit.
(3) After the making of a bankruptcy order no person who is a creditor of the bankrupt in respect of a debt provable in the bankruptcy shall –
(a) have any remedy against the property or person of the bankrupt in respect of that debt, or
(b) before the discharge of the bankrupt, commence any action or other legal proceedings against the bankrupt except with the leave of the court and on such terms as the court may impose.
This is subject to sections 346 (enforcement procedures) and 347 (limited right to distress).
(4) Subject as follows, subsection (3) does not affect the right of a secured creditor of the bankrupt to enforce his security.
(6) References in this section to the property or goods of the bankrupt are to any of his property or goods, whether or not comprised in his estate."
 … [DROs] sit beside and complement bankruptcy. They form part of a legislative programme of debt-solution procedures, such as Debt Repayment Plans, Administration Orders and Individual Voluntary Arrangements, which provide a flexible choice of paths for the relief of those who are unable to pay their debts. The Consultation Paper produced by the Department for Constitutional Affairs in July 2004 ("A Choice of Paths - Better options to manage over-indebtedness and multiple debt") estimated that in 2002 net lending rose by almost £10bn per month and that adults in this country owed an average of £18,000 each. The Paper predicted that if, in the context of "the historically high levels of borrowing", there should be "an economic downturn….a far greater number of people would be at risk of financial difficulties."
 The scheme, structure and purpose of DROs broadly reflect the regime of bankruptcy orders … The main differences are that the DRO process does not require the intervention of the court and it is accessible to people who do not have the financial means to pay the higher fee for access to the bankruptcy procedure i.e. debtors who cannot afford to make themselves bankrupt. It is less elaborate … and on the basis of specified criteria as to assets, income and liabilities. Unlike bankruptcy there is no trustee in whom the assets of the debtor are vested for distribution to creditors. DROs are thus meant for those over-burdened with debt who have relatively low levels of liabilities, no assets in excess of £300 in value and no monthly surplus income over £50 with which to come to an arrangement with creditors …"
"(1) A moratorium commences on the effective date for a debt relief order in relation to each qualifying debt specified in the order ("a specified qualifying debt").
(2) During the moratorium, the creditor to whom a specified qualifying debt is owed—
(a) has no remedy in respect of the debt, and
(b) may not—
(i) commence a creditor's petition in respect of the debt, or
(ii) otherwise commence any action or other legal proceedings against the debtor for the debt,
except with the permission of the court and on such terms as the court may impose.
(3) If on the effective date a creditor to whom a specified qualifying debt is owed has any such petition, action or other proceeding as mentioned in subsection (2)(b) pending in any court, the court may—
(a) stay the proceedings on the petition, action or other proceedings (as the case may be), or
(b) allow them to continue on such terms as the court thinks fit.
(4) In subsection (2)(a) and (b) references to the debt include a reference to any interest, penalty or other sum that becomes payable in relation to that debt after the application date.
(5) Nothing in this section affects the right of a secured creditor of the debtor to enforce his security."
(1) leave is not required under IA s.285(3)(b) for the commencement or continuation of possession proceedings based upon rent arrears accrued before bankruptcy (so long as there is no monetary claim to those rent arrears) ;
(2) possession proceedings in such circumstances should not be stayed under IA s.285(1) or (2) ;
(3) no leave is required to issue a warrant for possession where a bankruptcy order is in existence (whether or not the possession order antedates or postdates the making of the bankruptcy order).
Sharples: Respondent's Notice
Godfrey: Respondent's notice
Ms Sharples' appeal
"On the making of a receiving order an official receiver shall be constituted receiver of the property of the debtor, and thereafter, except as directed by this Act, no creditor to whom the debtor is indebted in respect of any debt provable in bankruptcy shall have any remedy against the property or person of the debtor in respect of the debt, or shall commence any action or other legal proceedings, unless with the leave of the court and on such terms as the court may impose."
That wording is similar to, although not identical to, the provisions now contained in IA s.285(3).
"It is clear that the section intends to inhibit any form of remedy or action which is directly designed to enforce payment of the debt which is owed. What has first to be considered is whether an action in which an order for possession is sought where a lease has been forfeited for default in payment of rent, comes within the terms of section 7 (1) at all. If it does not, it is not necessary to get leave of the court under section 7 before commencing such an action. In our view, an action for possession following the forfeiture of a lease is not within the terms of the section, and this is so whatever the ground of forfeiture to which the lessor has recourse under the covenants in the lease. The nature of the action is the same in every case, namely, that the right and interest of the lessee to possession has been terminated before its natural expiry in pursuance of a contractual provision in his lease so that he becomes a trespasser if he continues in occupation of the premises. The obverse of this situation is that the lessor becomes entitled to possession on forfeiture of the lessee's interest. The action for re-entry is in the nature of an action in trespass. It is not a remedy against the property of the debtor in respect of a debt, notwithstanding that the occasion of the forfeiture is default in payment of the rent reserved by the lease. The consequence of forfeiture (subject to the power of the court to grant relief) is to determine the lessee's interest. It is not a remedy enforcing payment of the rent due and it is not within the ambit of section 7 (1)."
"The right of re-entry is often colloquially referred to as a remedy of the landlord: see e.g., In re A Debtor (No. 13A-10-1995)  1 WLR 1127, 1133. But the Court of Appeal in Ezekiel v Orakpo  QB 260 held, with reference to a provision to like effect in section 7(1) of the Bankruptcy Act 1914, that the right of re-entry, whether exercised by service of a writ claiming possession or by peaceable entry, does not constitute a remedy against the property or person of the bankrupt. The reasoning is that the exercise of the right of forfeiture does not remedy any preceding breach of covenant: it merely prevents its recurrence and affords relief to the landlord from being saddled with a defaulting tenant. If this is so, it is anomalous that under section 285(3) a landlord requires the leave of the court before he can commence proceedings for forfeiture, but is immune from any restraint on exercising his right of peaceable re-entry. This is the more so when regard is had to the disfavour with which the law looks upon peaceable re-entry: see Billson v Residential Apartments Ltd  1 AC 494, 536E. But that is not a sufficient basis on which I am free to give the word "remedy" a wider meaning than afforded in Ezekiel v Orakpo  QB 260."
" 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 section 82(2) of the 1985 Act, then, as it seems to me, the subsequent continuance or enforcement of the order is to the same effect as a possession action following forfeiture of a lease, and, as in Exekiel v Orakpo, does not constitute a remedy enforcing the payment of the arrears of rent. And that is so, in my view, whether the bankruptcy order is made before or after the date on which possession of the dwelling house is to be given pursuant to the order."
"  … I share his [viz. the Chancellor's] view that the outcome would have been the same if the bankruptcy order had been made, say, on 8 February 2005. And I would take the same view if the possession order had been made in the Thompson form – so that the secure tenancy was to be treated as continuing under the possession order at the date when the bankruptcy order was in fact made (on 10 February 2005). The basis for that view is the decision of this Court in Ezekiel v Orakpo  QB 260 that proceedings for forfeiture on the grounds of non-payment of rent are not to be treated as "a remedy against the property of the debtor in respect of a debt" for the purposes of the provisions for the protection of the bankrupt and his estate now enacted in section 285 of the Insolvency Act 1986. 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.
 It would, I think, 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; and equally unfortunate if the outcome turned on whether the possession order was made in the Thompson form or in the form in the present case. I am satisfied that that is not the position. "
Mr Godfrey's appeal
Additional questions on IA s.285
(1) an order for possession of property subject to a tenancy, including an assured tenancy, on the ground of arrears of rent, which are provable in the bankruptcy of the tenant, is not a "remedy ... in respect of that debt" within IA s. 285(3)(a);
(2) that is so, whether the order is an outright order for possession or is a conditional suspended possession order;
(3) IA s.285(3)(b) is implicitly limited to legal proceedings against the bankrupt "in respect of that debt"; that is to say, it is qualified in the same way as IA s.285(3)(a);
(4) accordingly, proceedings for an order for possession of property subject to a tenancy, including an assured tenancy, on the ground of rent arrears, in which no claim is made for arrears provable in the tenant's bankruptcy, are not subject to the automatic stay in IA s.285(3)(b);
(5) an order for possession of property subject to a tenancy, including an assured tenancy, on the ground of arrears of rent, which are the subject of the tenant's DRO, is not a "remedy in respect of the debt" within IA s. 251G(2)(a), whether the order is an outright order for possession or is a conditional suspended possession order;
(6) proceedings for possession of property subject to an assured tenancy on the ground of rent arrears, which are provable in the tenant's bankruptcy or are the subject of the tenant's DRO, should not normally be stayed under IA s. 285(1) or (2) or IA s. 251G(3);
(7) on the hearing of such proceedings, no order can be made for payment of such arrears; nor should a suspended order for possession be made conditional on payment of such arrears, but it should be made conditional on payment of any other arrears (i.e. those not provable in the bankruptcy or subject to the DRO) and current rent.
LORD JUSTICE WILSON
LORD JUSTICE MUMMERY