Mountney v Treharne
| Jurisdiction | England & Wales |
| Judge | Mr Justice Stanley Burnton |
| Judgment Date | 21 December 2001 |
| Judgment citation (vLex) | [2001] EWHC J1221-5 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 21 December 2001 |
| Docket Number | Appeal Court Ref. No. GLC 358 of 2001 |
[2001] EWHC J1221-5
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM SOUTHEND COUNTY COURT
IN BANKRUPTCY
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Stanley Burnton
Re: Stewart Richard Mountney
Appeal Court Ref. No. GLC 358 of 2001
No. 298 of 2000
William Hansen (instructed by Jefferies) for the Appellant
Raquel Agnello (instructed by Sprecher Grier Halberstam LLP) for the Respondent
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Stanley Burnton
This is an appeal against the order of District Judge Dudley dated 23 August 2001, by which he declared that the property know as 227 Main Road, Hawkwell, Hockley, Essex ("the property") vested in the Respondent by virtue of Section 306 of the Insolvency Act 1986.
The Respondent is the trustee in bankruptcy of Stewart Richard Mountney ("the bankrupt"). The property was owned by the bankrupt. The Appellant is his former wife. The property is the former matrimonial home, where she lives with the three children of the family. In February 2000, the Appellant presented a divorce petition on the grounds of the bankrupt's unreasonable behaviour. On 6 July 2000, District Judge Dudley ordered, pursuant to Section 24(1)(a) of the Matrimonial Causes Act 1973, that:
"2. All (the bankrupt's) interest (both legal and beneficial in the property…(and its content) shall be transferred forthwith by him to (the Appellant) absolutely subject to the mortgage with Cheltenham & Gloucester plc.
3. In the event (bankrupt) fails to sign and return the transfer documents and any relevant documentation in connection with the transfer ordered at paragraph 2 above within 14 days of them being sent by first class post to him…, the said documents may be signed by the District Judge.
6. It is hereby certified that pursuant to the Legal Aid Regulations, the property and monies transferred to or retained by (the Appellants) under this Order are intended to be used to provide a home for (the Appellants) and her dependants."
The bankrupt did not sign any transfer documents. On 14 July 2000, before the expiration of the period of 14 days referred to in paragraph 3 of the order dated 6 July 2000, a bankruptcy order was made against Mr Mountney on his own petition. The Respondent was appointed as trustee on 28 September 2000. The deficit in the bankrupt's estate is approximately £195,000. The only asset that may be available to meet the claims of creditors in the bankruptcy is the former matrimonial home.
Before the District Judge, the only arguments put forward on behalf of the Appellant were that the bankruptcy was an abuse of the process of the Court, having been designed to defeat the matrimonial order; and that in any event by reason of the order of 6 July 2000 the property was subject to a constructive trust in favour of the Appellants which bound the trustee. The District Judge rejected both arguments. So far as the contention that the bankruptcy was an abuse of the process of the Court is concerned, the District Judge held that the remedy of the Appellant, if any, was to apply to annul the bankruptcy. Parenthetically, the Appellant's argument as to abuse of process faces the formidable obstacle of the judgment of the Court of Appeal in re Holliday [1981] 2 WLR 996. With regard to the contention that the order of 6 July 2000 created a constructive trust in favour of the Appellant, he held that the judgment of Jonathan Parker J in Beer v Higham [1997] BPIR 349 was determinative of the issue and was against the Appellant. He therefore held that the property, which at the commencement of the bankruptcy remained vested in the sole name of the bankrupt, passed to the trustee in bankruptcy.
Before me, Mr Hansen, on behalf of the Appellant, has put forward arguments that were not before the District Judge. He also sought to rely on documents that were not before the District Judge. He submitted:
(i) That the District Judge was wrong in holding that the order of 6 July 2000 did not create a constructive trust.
(ii) That the right of the Appellant under the order of 6 July 2000 was effective as against the trustee by virtue of Section 283(5) of the Insolvency Act 1986 and/or the rule in Ex parte James (1874) LR 9 Ch 609.
(iii) That the Appellant's right to the property is protected under Article 8 of the European Convention on Human Rights; and that either Section 283(5) of the Act ought to be construed so as to safeguard that right or the right should be protected by this Court on the hearing of the appeal.
Mr Hansen's new grounds were put forward without opposition from Miss Agnello, who however did object to my considering evidence that was not before the District Judge.
Mr Hansen's object in wishing to put before me documents that were not before the District Judge was to establish that the conduct of the bankrupt had been unconscionable. Since I was prepared to assume, for the purposes of the appeal, that the bankrupt had behaved unconscionably towards his former wife, in seeking to avoid or to defeat her claims for ancillary relief, in the event it was unnecessary for me to look at the documents.
Mr Hansen submitted that the order of 6 July 2000 was to be interpreted, and its effect determined, by reference to the previous unconscionable conduct of the bankrupt. I cannot accept this submission. Whether the order created a constructive trust must depend on the terms of the order itself. Furthermore, I reject the submission that the unconscionable conduct of the bankrupt before 6 July 2000 of itself gave rise to a constructive trust in relation to the property. Unconscionable conduct must relate to specific property if that property is to be subject to a constructive trust. There was and is no evidence of any unconscionable conduct that could have given rise to a constructive trust of the property.
So far as the order of 6 July 2000 itself is concerned, I agree with the District Judge that the decision of Jonathan Parker J in Beer v Higham is determinative of the issue. Beer v Higham, like the present case, concerned an order for the transfer to a wife of her husband's interest in the matrimonial home. In that case, the matrimonial home had been vested in the joint names of the husband and wife. The order for ancillary relief in the matrimonial proceedings in that case required the husband to transfer his interest to the wife within three months of the date of the order. The bankrupt did not comply with the order before a bankruptcy order was made against him. Jonathan Parker J rejected the argument that a constructive trust had been brought into existence by the order made in the matrimonial proceedings on 3 grounds:
(i) The consent order did not of itself effect any transfer of the bankrupt's beneficial interests, rather it required the bankrupt to take the necessary steps to effect such a transfer.
(ii) To hold that the order effected a transfer of the husband's beneficial interest would be inconsistent with section 53(1) of the Law of Property Act 1925.
(iii) A constructive trust required, at the very least, a specifically enforceable contract, and there was none in that case.
He therefore concluded that the making of the order in that case did not effect a transfer of the beneficial interest.
I am bound to follow the decision of Jonathan Parker J in Beer v Higham unless I consider it to be clearly wrong. Not only do I not consider it to be clearly wrong, I consider it to be clearly right. I would add that the concept of a constructive trust in a case such as the present seems to me to be wholly unnecessary. This is a case for wielding Occam's razor. If an order for ancillary relief in matrimonial proceedings such as that made in this case and in Beer v Higham is to be effective as against a trustee in bankruptcy, notwithstanding that the order has not been carried out, it must be because the order creates a right which is valid as against a trustee in bankruptcy within the meaning of section 283(5) of the Insolvency Act 1986. If it does create such a right, a constructive trust is an unnecessary creation. On the other hand, if it is not a right binding the estate for the purposes of section 283(5), to hold that an order in matrimonial proceedings creates a constructive trust would be inconsistent with, and simply a means of circumventing, section 283(5).
This case differs in one relevant respect from Beer v Higham. In Beer v Higham, the time for the carrying out of the matrimonial order had not expired before the making of the bankruptcy order. In the present case, the bankrupt was required to execute the transfer of the property forthwith. He was therefore in default by the date of the bankruptcy order. In my judgement, however, that is not a material distinction. The simple fact remains that in both of these cases, the order made in the matrimonial proceedings was not effective of itself to vest the property in the wife, and the order had not been carried out, either by the husband executing the necessary transfer, or by its being executed on his behalf by a District Judge. The position of the Appellant might have been protected if the Order of 6 July 2000 had provided for the immediate execution of the necessary...
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