Paul Allen (as Trustee in Bankruptcy of Ann Stephanie Hurst) v Ann Stephanie Hurst (in Bankruptcy)
| Jurisdiction | England & Wales |
| Judge | Barber |
| Judgment Date | 26 October 2022 |
| Neutral Citation | [2022] EWHC 2649 (Ch) |
| Docket Number | BR 2018 000655 |
| Court | Chancery Division |
[2022] EWHC 2649 (Ch)
ICC JUDGE Barber
BR 2018 000655
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF ANN STEPHANIE HURST
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice
7 The Rolls Building
Fetter Lane
London
EC4A 1NL
Mr. Andrew Mace (instructed by Kingsley Napley LLP) for the Applicant
The First and Second Respondents appeared in person
Mr. Daniel Warents (instructed by Longmores Solicitors) for the Third, Fourth and Fifth Respondents
Hearing date: 23 September 2022
Approved Judgment
This judgment was handed down remotely by circulation to the parties' representatives by email. It will also be sent to The National Archives for publication. The date and time for hand-down is 9.30am on 26 October 2022.
ICC Judge Barber
Introduction
This is the Applicant's application, brought in his capacity as Trustee in Bankruptcy of the First Respondent, for an order under s.423 of the Insolvency Act 1986 setting aside a declaration of trust entered into on 19 June 2009 (‘the Declaration of Trust’) by the First and Second Respondents (‘Mr and Mrs Hurst’) in favour of their three adult children, the Third, Fourth and Fifth Respondents (‘the Beneficiaries’) in respect of the beneficial interest in a four bedroomed semi-detached freehold property known as 73 Southway London NW11 6SB registered in the names of Mr and Mrs Hurst at HM Land Registry under Title Number NGL369279 (‘the Property’) on the grounds that it was a transaction defrauding creditors within the meaning of s.423 IA 1986.
The background to this matter is fully addressed in my earlier judgment dated 26 August 2022 ( Allen v Hurst [2022] EWHC 2204 (Ch)).
At a hearing on 17 June 2022, I granted a declaration that the Declaration of Trust constituted a transaction at an undervalue which was entered into by Mr and Mrs Hurst for the purpose of (a) putting assets beyond the reach of a person who was making or might at some time make a claim against them, or (b) otherwise prejudicing the interests of such a person in relation to the claim which he was making or might make, within the meaning of s.423 of the Insolvency Act 1986, with written reasons to follow. Judgment was handed down on that aspect on 26 August 2022.
As there was insufficient time to deal with consequential relief at the hearing of 17 June 2022, the Order of 17 June 2022 made provision for a further hearing. The consequentials hearing was listed on an expedited basis before me on 23 September 2022. All parties were notified of the hearing date in June 2022.
By the time of the hearing before me on 23 September 2022, the parties' respective positions, as presented to me, were as follows:
(1) All parties remained agreed that the Property had to be sold.
(2) Mr and Mrs Hurst, who live in the Property, wished to retain conduct of the sale until 31 December 2022. The Applicant and the Beneficiaries opposed this and sought an order providing for the Applicant to have immediate conduct of the sale.
(3) The Beneficiaries and the Applicant were agreed on an asking price of £2.05m, with a minimum price of £1.8m (subject to downwards adjustment with the consent of the Beneficiaries or by further order of the Court). Mr and Mrs Hurst contended for a minimum price of £2.028m, subject only to downward adjustment by further order of the Court.
(4) The Applicant sought an order that Mr and Mrs Hurst deliver up vacant possession of the Property by 23 November 2022. The Beneficiaries adopted no position on the date of possession, save for inviting the Court to make a ‘humane’ order. Mr and Mrs Hurst each offered to deliver up possession by 23 January 2023 but resisted any earlier date.
(5) The Beneficiaries and the Applicant were agreed that the Declaration of Trust should be set aside but invited the Court to order that any surplus proceeds be paid in equal shares to the three Beneficiaries rather than to Mrs Hurst. Mr and Mrs Hurst did not oppose an order setting aside the Declaration of Trust but contended that any surplus proceeds should be paid to Mrs Hurst.
(6) Half-way through the hearing on 23 September, Mrs Hurst, encouraged by Mr Hurst, sought an adjournment of the hearing in order to seek legal advice/representation. The Beneficiaries and the Applicant each opposed the adjournment application.
I refused the adjournment application and, at the conclusion of the hearing of 23 September, I ordered pursuant to s.423(2) of the Insolvency Act 1986 (in summary) that:
(1) the Declaration of Trust be set aside;
(2) the Property be sold, with attendant directions (a) that the Applicant's solicitor shall have conduct of the sale and be appointed under s50 of the Trustee Act 1925 to convey the Property on behalf of Mr and Mrs Hurst and (b) that the Property be marketed for a price of not less than £2.05m, subject to downwards adjustment (i) at a price of not less than £1.8m without reference to the Court on the advice of any reputable estate agent instructed by the Applicant's solicitor and (ii) at a price of less than £1.8m with the consent of all the Applicant and the Beneficiaries or pursuant to further order of the Court;
(3) Mr and Mrs Hurst shall cooperate in the process of selling the Property;
(4) Mr and Mrs Hurst shall vacate the Property on or by the earlier of (i) 23 January 2023 and (ii) completion of the sale;
(5) Upon a sale of the Property, the proceeds shall be distributed as follows:
(a) in payment of any sum required to be paid to satisfy or obtain the discharge of the charge registered to Mr Treppass dated 15 March 2001 at HM Land Registry;
(b) in payment of the reasonable costs of sale;
(c) in payment to the Applicant of all of the bankruptcy debts, remuneration, costs, fees, expenses, disbursements and liabilities (without prejudice to any challenge under rule 10.134 IR 2016 in the event of an application for an annulment of Mrs Hurst's bankruptcy);
(d) after payment of all sums required to be paid under paragraphs (a) to (c), any remaining proceeds shall be paid in equal shares to the Beneficiaries;
(6) that the Applicant and the Beneficiaries shall have liberty to apply for further directions in relation to the conduct of the sale of the Property.
I made the Order of 23 September 2022 on the footing that written reasons would follow. This judgment sets out those reasons.
The adjournment application
I shall address the adjournment application first. Mrs Hurst was made bankrupt as long ago as 2018. But for the Declaration of Trust, the Applicant would have been in a position to seek a simple order for possession and sale of the Property in 2019. Immediately prior to execution of the Declaration of Trust, Mrs Hurst had been sole beneficial owner of the Property.
The s.423 proceedings themselves have been on foot since February 2021. Mr and Mrs Hurst contested the same until June 2022, filing evidence in opposition in which they denied that the Declaration of Trust was a transaction defrauding creditors within the meaning of s.423.
There have been numerous interlocutory hearings. Mrs Hurst has had ample opportunity to arrange legal representation and has been encouraged on several occasions to do so. Notwithstanding such encouragement, she has remained a litigant in person throughout the proceedings, speaking on her own behalf or adopting positions put forward by Mr Hurst.
The s.423 claim was initially listed for final hearing on 17 June 2022 with a time estimate of one day. Mr and Mrs Hurst had notice of the hearing of 17 June 2022 in November 2021; that is to say, over six months prior to the hearing date itself. Mrs Hurst did not arrange legal representation for the hearing of 17 June.
Shortly before the hearing on 17 June 2022, Mr and Mrs Hurst formally withdrew their evidence in opposition to the s.423 claim.
A full summary of the various positions adopted at the hearing of 17 June 2022 may be found in my earlier judgment dated 26 August 2022 ( [2022] EWHC 2204). At the outset of the June hearing, Mrs Hurst told me that she planned to apply for an annulment under s282(1)(b) IA 1986. When I asked her if she was seeking an adjournment, she confirmed that she was not and that she would ‘seek an annulment in due course’.
The Beneficiaries made clear at the hearing on 17 June 2022 that they would be inviting the Court, when granting consequential relief, to ensure that the Beneficiaries retained the benefit of any surplus proceeds of sale of the Property which were not required to cover the bankruptcy debts and expenses in full. Whilst the mechanics proposed by the Beneficiaries in June to achieve this outcome differed from those proposed in September (in June, they were inviting the court not to set aside the Declaration of Trust, but instead to order that the Beneficiaries pay a sum of money sufficient to cover the bankruptcy debts and expenses, such money judgment to be secured on the Property pending its sale; whilst in September, they were seeking an order setting aside the trust coupled with an order that the surplus proceeds of sale of the Property be paid to the Beneficiaries in equal shares), the underlying stance remained the same.
The hearing of 17 June 2022 went part-heard due to lack of time. Whilst a declaration was granted, a further hearing, to consider consequential relief, was listed for 23 September 2022 with a time estimate of one day.
The parties have been on notice of the hearing date of 23 September 2022 since June 2022.
It is against that backdrop that I consider the...
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