Warwick (Andrea) v Trustee in Bankruptcy of Clive Graham Yarwood
| Jurisdiction | England & Wales |
| Judge | HHJ David Cooke |
| Judgment Date | 13 September 2010 |
| Neutral Citation | [2010] EWHC 2272 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CH/AP/393 |
| Date | 13 September 2010 |
[2010] EWHC 2272 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
On Appeal from Chesterfield County Court
Deputy District Judge Apthorpe
Birmingham Civil Justice Centre
Bull Street, Birmingham B4 6DS
Before: Hhj David Cooke
Case No: CH/AP/393
Andrew Charman (instructed by Chubb & Co) for the Appellant
Lisa Walmisley (instructed by DLA Piper) for the Respondent
Hearing dates: 4 August 2010
HHJ David Cooke:
On 30 April 2010 DDJ Apthorpe sitting in the Chesterfield County Court made an order on the application of the respondent Trustee in Bankruptcy that the payment on 26 March 2007 of 75% of the net proceeds of sale of the former matrimonial home registered in the joint names of the bankrupt, Mr Clive Yarwood, and his then wife Andrea Yarwood (since remarried and known as Andrea Warwick) to Mrs Warwick constituted a disposition by Mr Yarwood which was void under s 284 Insolvency Act 1986 as having been made after presentation of a bankruptcy petition against Mr Yarwood. The petition had been presented 6 days earlier, on 20 March 2007. The amount of the disposition was alleged to be £128,321.29, being the difference between half the net proceeds (which it was accepted Mrs Warwick was entitled to as a joint owner) and the 75% she received. The DDJ ordered Mrs Warwick to pay that amount to the Trustee.
Mrs Warwick appeals against that order, pursuant to permission which I gave on 14 June 2010. She contends that any relevant disposition occurred before the presentation of the petition, by virtue of either (a) an agreement reached between solicitors in compromise of ancillary relief proceedings on 28 September 2006, the contention being that this amounted to a legally enforceable contract for immediate transfer to Mrs Warwick of an additional 25% of the beneficial interest in the property, or was otherwise sufficient to give rise to a constructive trust to the same effect, or to give rise to a proprietary estoppel, or (b) the exchange of contracts for sale of the property on 19 March 2007, the day before presentation of the petition, on the basis of instructions given by Mr Yarwood to the solicitor dealing with the sale that the proceeds on completion were to be paid as to 75% to Mrs Warwick. This too is said to give rise to a constructive trust or proprietary estoppel.
Unfortunately, there is no transcript of the DDJ's judgment as it appears the court recording equipment was not operating for most of the relevant time. Counsel (who both appeared below) are agreed however that the DDJ gave a clear judgment holding that an agreement had been made between the parties on 28 September 2006 but that on the authority of Xydhias v Xydhias [1999] 2 All ER 386 it was not an enforceable agreement and so could not operate to vary the beneficial interests of the parties in the former matrimonial home. Further, for the same reason no binding agreement had been made between the parties on the alternative date canvassed, 19 March 2007. Mr Charman's primary case on behalf of the Appellant is that this conclusion was wrong in law, the passages relied on from the decision in Xydhias being, he submits, obiter and contrary to previous Court of Appeal authority, particularly Smallman v Smallman [1972] Fam 25.
For the respondent Ms Walmisley supports the DDJ's reasoning, but in the alternative argues a point taken in her respondent's notice, that on the facts (which are not in dispute) no agreement was reached in any event for variation of the parties' beneficial interests on either of the dates relied on.
Factual background
Those facts are as follows: Mrs Warwick and Mr Yarwood were married in 1984, and separated in April 2004. Mrs Warwick issued a divorce petition the following month, and a decree nisi was pronounced in September 2004. In the same month she issued an application for ancillary relief. The decree absolute was pronounced in December 2004, but the ancillary relief application continued. Mr Yarwood was a director and shareholder of what appears to have been a relatively substantial group of companies headed by Food Services Solutions Group Limited (“FSG”). Apart from his shareholding and some pension funds in each name, the only other substantial asset appears to have been the matrimonial home, Teapot Farm which is near Alfreton in Derbyshire, with an estimated value of about £500,000 net of mortgage. The property was registered in the joint names of the parties and it is not in dispute that the beneficial interest in the property was held equally between them.
The ancillary relief application had still not been resolved when on 2 June 2006 administrative receivers were appointed to the companies in the Food Services Solutions group. The receivers fairly promptly demanded payment by Mr Yarwood of some £936,000 owing by him on directors loan account, which he was unable to pay. He was advised that if he did not repay this loan account, he would become liable for an additional amount of tax of £374,000. In addition at that time he had credit card debts of some £23,000, and a bank overdraft of £29,000. He had given a personal guarantee to a supplier, which led to a statutory demand being made on him on 6 September 2006 for some £49,000. By that date, therefore, he had debts of approximately £1.4 million and was on the face of it deeply insolvent. Mrs Warwick was aware of this, all the relevant facts having been set out in a letter to her matrimonial solicitors on 12 July 2006.
The ancillary relief application was listed for final hearing in October 2006. On 26 July her matrimonial solicitors put two proposals for settlement. The first, described as “Option A” provided for a pension sharing order and for the farm to be sold, with an equal division of assets save that Mr Yarwood would retain certain vehicles and Mrs Warwick would receive an adjustment from the proceeds of sale of the farm. Given the values of those vehicles estimated in the ancillary relief proceedings, it would seem that the adjustment in her favour would have been about £15,000. Her solicitors proposed that her claims for capital provision would remain open, but to be revived only if Mr Yarwood eventually received any distribution in respect of his interest in the companies in receivership. The alternative, “Option B” was identical except that it would have provided for a clean break and “the net proceeds of sale of Teapot Farm be divided as to 75% to Mrs Yarwood and 25% to Mr Yarwood.” There would be no adjustment in respect of the vehicles, but the additional payment to Mrs Yarwood from the increased share of the proceeds of sale would have been around £125,000.
Mr Yarwood's solicitors did not immediately either accept or reject these proposals and a certain amount of correspondence followed, dealing in part with what appeared to be a reluctance by Mrs Warwick's solicitors to accept that the receivership of the companies meant that Mr Yarwood's interest in them was worthless. On 7 September Mr Yarwood's solicitors sent a copy of the statutory demand which had been served on him, pointing out that if he were made bankrupt the family court could no longer transfer any assets to Mrs Warwick. It is also clear from the documents that by that date Mrs Warwick's solicitors had obtained a copy of FSG's statement of affairs filed by the receivers, which showed an estimated deficiency of assets of just under £2 million. If these figures were correct (and there seems no reason to doubt them, since they came from receivers appointed by the company's bank and were not therefore in any real sense under the control or influence of Mr Yarwood) by that stage any hope that Mr Yarwood would somehow emerge with anything from the receivership, let alone a sizeable distribution, ought to have evaporated. Nevertheless Mrs Warwick's solicitors wrote to her on 8 September saying that they were “unsure whether this means that all of the companies within the group are insolvent and Clive's shares worthless as a result” (solvency of any of them would have made no difference if, as it appears, all the other companies were wholly owned subsidiaries of FSG) and that they were “concerned that true assets of the group (including the land on which the …sites are based) are not reflected in the figures.” They proposed a further accountants report and told her that “if you wish to settle matters now, you will be doing so without getting to the bottom of his affairs.” Clearly the solicitors were still concerned that the insolvency was in some way a ruse by which Mr Yarwood might be concealing assets. Whether there was anything substantive to these concerns, or they were being excessively cautious, is not something I have to determine.
Plainly there had been some telephone discussion between the respective solicitors in the previous few days, because the letter goes on to say “you [ie Mrs Warwick] have indicated to me on the telephone that you would be willing to agree the proposal put forward to me verbally by [Mr Yarwood's solicitors] within the last few days. Although I have not received written confirmation of the offer, I understand that it will be a broad acceptance of Option B in my letter … of 26 July 2006”. The letter went on to advise that Mrs Warwick should “obtain full and frank disclosure before settling” and enclosed a form of disclaimer for Mrs Warwick to sign if she nevertheless wished to settle on the terms offered. The letter said nothing about the consequences if Mr Yarwood was in fact made bankrupt.
Mrs Warwick instructed her solicitors to agree the terms offered and a further telephone conversation between the solicitors took place on 15 September 2006, after which her solicitor made a file note saying ...
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