Hill and another v Haines
| Jurisdiction | England & Wales |
| Judgment Date | 2007 |
| Date | 2007 |
| Year | 2007 |
| Court | Chancery Court |
Ancillary relief – Insolvency – Transfer of property orders – Appeal from district judge – Transaction at an undervalue – Order to transfer property to respondent pursuant to ancillary relief proceedings – District judge dismissing application to set aside order – Whether respondent to be regarded as having given consideration for property – Insolvency Act 1986, s 339.
The respondent wife and the bankrupt husband were the joint legal and beneficial owners of a property. The wife presented a petition for divorce and then commenced ancillary relief proceedings in which she sought various types of relief pursuant to ss 23–25 of the Matrimonial Causes Act 1973. In the result, the matrimonial court ordered, inter alia, that the bankrupt transfer to the wife all his interest in the property. Following the bankrupt’s bankruptcy petition, the applicants were appointed trustees of the bankrupt. On a later date, a district judge executed a transfer of the property on behalf of the bankrupt. The applicants unsuccessfully applied for an order to set aside the transfer of property pursuant to s 339 of the Insolvency Act 1986. The applicants appealed. The applicants submitted, inter alia, that the transfer was a transaction at an undervalue either under s 339(3)(a) or (c) of the 1986 Act in view of the fact that the property adjustment order had not involved the wife giving consideration and certainly not such that could be measured in money or money’s worth within the meaning of s 339(3)(c). The wife submitted, inter alia, that a transferee under a transfer made pursuant to a property transfer order was to be regarded as having given consideration equivalent to the value of the property being transferred, unless the case was an exceptional one where it could be demonstrated that the property transferred was obtained by fraud or some broadly similar exceptional circumstance.
Held – If a compromise agreement could not give rise to binding contractual obligations, and if an applicant for ancillary relief did not have a cause of action, then it followed that an applicant could not give consideration by purporting to compromise his or her claims for such relief by entering into a settlement agreement that was by definition not binding. A party who succeeded in obtaining a property adjustment order following a contested application could be in no stronger position than a person whose claim for such relief was resolved by approval following settlement. For the purposes of s 339, the position was the same whether the matrimonial court made an order following a contested hearing or following a compromise agreement: in neither case did the receiving party give, nor the paying party receive, consideration. In the instant case, the judge had been wrong to conclude that the transfer of the property pursuant to the order made in favour of the respondent by the matrimonial court was not a transaction at an undervalue. The transaction had been at an undervalue by application of s 339(3)(a) of the 1986 Act and in any event on an application of s 339(3)(c). Accordingly, the appeal would be allowed.
Cases referred to in judgmentAbbott (a bankrupt), Re, ex p the trustee of the property of the bankrupt v Abbott [1982] 3 All ER 181, [1983] Ch 45, [1982] 3 WLR 86, DC.
Albert v Albert[1998] 1 FCR 331, [1997] 2 FLR 791, CA.
Bacon (MC) Ltd, Re [1990] BCLC 324.
G v G (financial provision: equal division) [2002] EWHC 1339 (Fam), [2002] 2 FLR 1143.
Kumar (a bankrupt), Re, ex p Lewis v Kumar[1994] 2 FCR 373, [1993] 2 All ER 700, [1993] 1 WLR 224, [1993] 2 FLR 382.
McMinn v McMinn (ancillary relief: death of party to proceedings) [2002] EWHC 1194 (Fam), [2003] 2 FLR 823.
Paramount Airways Ltd (in administration), Re [1992] 3 All ER 1, [1993] Ch 223, [1992] 3 WLR 690, CA.
Pope, Re, ex p Dicksee [1908] 2 KB 169, CA.
Singla v Brown [2007] EWHC 405 (Ch), [2007] All ER (D) 05 (Mar).
Thoars (decd), Re, Reid v Ramlort Ltd [2002] EWHC 2416 (Ch), [2003] 1 BCLC 499; affd[2004] EWCA Civ 800, [2005] 1 BCLC 331.
Xydhias v Xydhias[1999] 1 FCR 289, [1999] 2 All ER 386, [1999] 1 FLR 683, CA.
AppealThe applicants, who were trustees of the bankrupt husband, appealed against an order of District Judge Cooke given on 14 December 2006 by which he dismissed an application by the appellants under s 339 of the Insolvency Act 1986 for an order setting aside a transfer of property made pursuant to an order made by a district judge at Worcester County Court in ancillary relief proceedings brought pursuant to ss 23–25 of the Matrimonial Causes Act 1973 by the respondent wife against her husband, the bankrupt. The appellants are the trustees of the bankrupt. The facts are set out in the judgment.
Peter Arden QC and Niall McCulloch (instructed by Clarke Wilmott) for the applicants.
Avtar Khangure QC and Angus Burden (instructed by Harrison Clark) for the respondent.
JUDGE PELLING QC. INTRODUCTION[1] This is an appeal from an order of District Judge Cooke given on 14 December 2006 by which he dismissed an application by the appellants under s 339 of the Insolvency Act 1986 (IA) for an order setting aside a transfer of property made pursuant to an order (the MCA order) made by a district judge at Worcester County Court in ancillary relief proceedings brought pursuant to ss 23–25 of the Matrimonial Causes Act 1973 (MCA) by the respondent against her husband, the bankrupt. The appellants are the trustees of the bankrupt.
[2] The relevant background is not in dispute. The respondent and the bankrupt were married and were the joint legal and beneficial owners of a property called Strudges Farm, Dunhampton, Stourport-On-Severn, Worcestershire (the property). On 25 April 2003, the respondent presented a petition for divorce. On 15 May 2003, the respondent commenced ancillary relief proceedings in which she sought all the types of relief available under MCA, ss 23–25 including property adjustment, lump sum and maintenance orders. In the result, the Matrimonial Court ordered that (a) the bankrupt transfer to the respondent all his interest in the property (b) the bankrupt pay the respondent periodical payments of £0.05 per annum and (c) the application for lump sum provision be adjourned.
[3] It is clear from the judgment of the Matrimonial Court judge that on the bankrupt’s case before him the bankrupt was hopelessly insolvent and that although the bankrupt had not given proper or satisfactory disclosure, there was a substantial risk that the bankrupt would be made the subject of a bankruptcy order and that if he was that might have an effect on the order made by the Matrimonial Court. The Matrimonial Court judge also concluded that both parties had ‘been extravagant in the acquisition of the house, horses and cars’ and had lived beyond their means although he also accepted that it was difficult to think of a case where the husband had done more to raise serious suspicion. The Matrimonial Court judge adjourned the application for a lump sum order specifically because of the risk that the bankrupt might become bankrupt—he said in his judgment: ‘There remains … the risk that the husband will go bankrupt in the near future and bankrupt as a result of his own deliberate actions. Merely to guard against that eventuality and the possible consequences to the wife of the trustee in bankruptcy seeking, as he may, to impugn the transfer of the Mercedes and the house to the wife, I believe that the lump sum claim should be kept alive. It should only be kept alive in those extreme circumstances but because of that it would be wrong to dismiss it.’ On 31 March 2005 the bankrupt was made bankrupt by virtue of an order made on his own petition. On 24 May 2005, the appellants were appointed trustees at a creditors’ meeting and on 22 September 2005, a district judge executed a transfer of the property on behalf of the bankrupt.
[4] The bankrupt’s total liabilities are estimated by the appellants to be approximately £132,000 odd. The property (other than a small parcel of land) has been sold and the respondent has preserved half the net proceeds of sale (£120,000 odd) in a fund that is available for transfer to the appellants if they succeed on this appeal. The land that has not been sold is held by the respondent in her sole name. It is agreed between the parties that at the date the property transfer order was made (the date relevant for present purposes—see Re Thoars (decd), Reid v Ramlort Ltd [2002] EWHC 2416 (Ch), [2003] 1 BCLC 499) the property had a value of approximately £500,000. It was subject to a loan secured by a mortgage or charge of approximately £300,000. The property was sold some time after the date when the property adjustment order was made, when its value had increased.
THE STATUTORY CONTEXT[5] By IA, s 339:
‘(1) … where an individual is adjudged bankrupt and he has at the relevant time (defined in section 341) entered into a transaction with any person at an under value, the trustee of the bankrupt’s estate may apply to the court for an order under this section.
(2) The court shall, on such an application, make such order as it thinks fit for restoring the position to what it would have been if the individual had not entered into that transaction
(3) … an individual enters into a transaction with a person at an under value if:
(a) He makes a gift to that person or he otherwise enters into a transaction with that person on terms that provide for him to receive no consideration.
(b) He enters into a...
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