Melissa Jackson (as Trustee in Bankruptcy of the Etate of Michael John Sheridan) v Jian Song
| Jurisdiction | England & Wales |
| Judge | Agnello |
| Judgment Date | 24 June 2021 |
| Neutral Citation | [2021] EWHC 1636 (Ch) |
| Docket Number | Case Number: BR-2019-001283 |
| Court | Chancery Division |
[2021] EWHC 1636 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY LIST (Ch D)
IN THE MATTER OF MICHAEL SHERIDAN (A BANKRUPT)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice
7 The Rolls Building
Fetter Lane
London
EC4A 1NL
DEPUTY INSOLVENCY AND COMPANIES COURT JUDGE Agnello QC
Case Number: BR-2019-001283
Mr Rory Brown (instructed by Francis Wilkes & Jones) for the Applicant
Mr Miles Croally (instructed by Mono Law) for the Respondent
Hearing dates: 26,27,28,29 April 2021
Introduction – background facts
In 1999, Mr Michael Sheridan met Ms Jian Song in Shanghai. Ms Song comes from Shanghai. The couple carried on a relationship which continued after June 2001, when Mr Sheridan was posted by his then employer, Astra Zeneca, back to the UK. Their first child, Liam was born in Shanghai in November 2001. Ms Song became extremely ill after the birth and to this day, as set out in her first witness statement dated 3 March 2020, she suffers from Guillain-Barre syndrome which continues to affect her balance and co-ordination. In June 2002, Ms Song and their son moved to England. They were married in September 2003 when their second child, Lily was born. Ms Song developed a brain tumour, the outcome of which is she still suffers from dizziness if she bends or crouches to pick up something. She is also on medication which gives her nausea which also makes her sleepy and tired.
During their marriage and in fact after their separation, Mr Sheridan was the only wage earner. Ms Song did not work outside the house. She looked after the children and also, as I will deal with in more detail below, she supervised renovations and decorations to their home at 53 Hamilton Park West, London N5 1AE (‘the Property’). The Property had been acquired in July 2007 in the sole name of Mr Sheridan although both Ms Song and Mr Sheridan assert that the property was jointly owned. That is an issue for determination in these proceedings. By March 2012, the marriage had broken down. As explained to me by Mr Sheridan, he was then obsessed with a woman, called Sonia, to whom he gave large sums of money. He also had a problem with alcohol and mental illness (depression). He spent large sums of money going out to places to drink.
By this time, Mr Sheridan was working for Care UK Limited with a wage of approximately £80,000 per annum. He and Ms Song agreed that the property needed to be sold, the mortgage repaid and that a substantial sum from the proceeds would provided to Ms Song. She wanted to buy a home for her and the children, who were then 10 and 8 years of age. Although Mr Sheridan stated that he thought originally that Ms Song would be looking to rent a place for her and the children, Ms Song then informed him that she wanted to buy a place for her and the children.
Ms Song went to see a solicitor and explained that she had reached an agreement with Mr Sheridan relating to their separation. The result was the separation agreement dated 27 March 2012 which was executed as a deed by the two of them. The agreement is expressed to be an agreement which will dispose of any financial claims that either of them may have against the other. The agreement did not set out the assets and liabilities of either party. A buyer was found and the property was sold. Thereafter, Ms Song realised that the agreed 80% of the proceeds of sale from the Property were insufficient for her to be able to complete her proposed purchase of 50 Waterside Apartments, London N5 (‘50 Waterside’). She sought further sums from Mr Sheridan to enable her to complete the purchase of 50 Waterside Apartments. He was certainly aware then that she needed further sums to be able to complete the purchase of the property which was to be the home for her and the children. He agreed to provide a further £40,000. She also obtained further sums from her parents and sister in China by way of loans from them and she completed the purchase on 11 May 2012 in her sole name.
Mr Sheridan received the sum of £57,282.21 from the proceeds of sale, being less than the 20% of the proceeds set out in the agreement. He applied those funds to the payments of what he considered were his debts, being his John Lewis credit card debt, his overdraft and he also paid off his Marks and Spencer credit card balance. According to his evidence, that was the totality of the debts he had. He was still earning £80,000 per annum and he moved into a rented flat. He continued his affair with Sonia paying her substantial sums after his separation and he also continued his drinking. He entered a depressive state, stopped opening his post and was off work in November 2012. He got into debt problems and in March 2013 sought help from a debt counselling charity, StepChange. He compiled a list of his creditors with their assistance. HMRC was not on the list.
Ms Song issued a judicial separation petition on 21 May 2012 and she and Mr Sheridan were divorced on 14 January 2015. No ancillary relief application was made by her.
Some time later, on 29 August 2013, HMRC presented a bankruptcy petition against Mr Sheridan. The debt related to assessments, penalties and interest raised by HMRC for the periods 2008/9 and 2009/10 and totalled £65,717.52. Mr Sheridan explained to me that he was unaware of these liabilities and also that he was not convinced that they were correct. However, he did not seek to defend the petition and a bankruptcy order was made on 10 December 2013. The Applicant was appointed as Trustee in Bankruptcy of Mr Sheridan on 19 March 2014.
I will need to expand on what I have set out above relating to the facts as I go through this judgment.
The Application and summary of the position of the parties
On 7 November 2019, the Trustee issued the current proceedings, seeking the following declarations:-
(1) that the payment of £429,128.82 from the net proceeds of sale of the Property made to Ms Song on 26 April 2012 pursuant to the separation agreement dated 27 March 2012, including the payment of £40,000 constituted a transaction at an undervalue;
(2) as to the nature and extent of the interests of Mr Sheridan and Ms Song in the property and in 50 Waterside.
The balance of the application notice relates to the specific remedies sought in the event that certain declarations sought by the Trustee are made by me. I will return to these remedies in so far as necessary. At this stage, it is important to set out the case that the Trustee seeks to establish which appears from the witness statement of the Trustee dated 7 November 2019 as well as from the replies to the Request for Further Information (‘RFI’) dated 24 July 2020. The Trustee asserts:-
(1) that no consideration was provided for the transaction, being the payment to Ms Song of the sums pursuant to the separation agreement in accordance with section 339(3)(a); or
(2) that the consideration provided by Ms Song in money and money's worth was significantly less than the consideration provided by Mr Sheridan pursuant to section 339(3)(c);
(3) that Mr Sheridan was the beneficial owner of the Property. This is what was argued on behalf of the Trustee before me. Alternatively, it was argued that if Ms Song had a beneficial interest in the property, this should be valued as at 1/4 of the entire beneficial interest.
The Trustee has not set out what she asserts was the value of the consideration provided by Ms Song pursuant to her alternative section 339(3) (c) case. The Replies to the RFI assert that in the event that the Court determines that Ms Song has provided consideration, then the Trustee will invite the Court to determine the value of that consideration. Mr Brown submitted on behalf of the Trustee that until there is a determination of the beneficial interest, if any, of Ms Song in relation to the Property, then the Trustee is unable to determine the consideration provided. I will deal with this below. However, I note that the Trustee does not provide any evidence as to the value of the consideration for the purposes of section 339(3)(c). It would have been possible to set out her case on the alternative basis of (1) Ms Song having a beneficial interest of 50%; (2) Ms Song having a beneficial interest of 25%; or (3) Ms Song having no beneficial interest at all. However, the Trustee has not provided any such valuations or any evidence as to what the Trustee asserts was the value of Ms Song's financial claims arising under the Matrimonial Causes Act 1973 as at the time of the separation agreement.
Mr Croally, on behalf of Ms Song, submitted as follows:-
(a) that Ms Song did have a 50% beneficial interest in the Property;
(b) that the separation agreement entered into by Ms Song and Mr Sheridan did provide for valuable consideration from Ms Song to Mr Sheridan in accordance with section 34 of the Matrimonial Causes Act 1973 and relevant case law, being the settlement of her potential claim in ancillary relief proceedings; and
(c) that the Trustee has failed to provide evidence that the consideration provided by Ms Song, in money or money's worth, was significantly less than the consideration provided by Mr Sheridan as at the date of the transaction, but that on its face, the separation agreement and the transfer of the majority of the net proceeds of sale to Ms Song provides a level of financial provision very much in line with the value of her financial claim.
Both parties also addressed me in relation to the discretion in section 339. I will deal with those aspects alongside any other remaining aspects once I have dealt with the three main claims set out above. For the purposes of this judgment, reference to sections in an Act will relate to the ...
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Separation Agreements And TUVs
...339. This case is a salient lesson to Trustees to consider 'valuable consideration' in the circumstances of the case. Jackson v Song [2021] EWHC 1636 (Ch) The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your ......
-
Separation Agreements And TUVs
...339. This case is a salient lesson to Trustees to consider 'valuable consideration' in the circumstances of the case. Jackson v Song [2021] EWHC 1636 (Ch) The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your ......