| BANKRUPTCY — Transaction at undervalue — Ancillary relief order — Bankrupt ordered to transfer interest in property to wife — Trustees in bankruptcy applying to set aside transfer on ground that no consideration given by wife — Whether applicant for ancillary relief giving consideration in “money or money’s worth” — Whether transfer of bankrupt’s property made under court order or settlement agreement constituting transaction at undervalue — Matrimonial Causes Act 1973, ss 23–25 — Insolvency Act 1986, s 339(3)
Hill and another v Haines [2007] EWHC 1012 (Ch)
Ch D: Judge Pelling QC, sitting as a High Court judge: 3 May 2007
Since an applicant for ancillary relief under ss 23 to 25 of the Matrimonial Causes Act 1973 did not give consideration in “money or money’s worth” within the meaning of s 339(3)(c) of the Insolvency Act 1986 for relief obtained, any transfer of property made by a bankrupt ex-spouse pursuant to either a court order made in the ancillary proceedings, or a settlement agreement, was a transaction at an undervalue and would be set aside on application by the trustees in bankruptcy.
Judge Pelling QC, sitting as a High Court judge, so held when allowing the appeal by Richard John Hill and John Ivor Bangham, the trustees in bankruptcy of the husband of the respondent, Wendy Pearl Haines, against the order of District Judge Cooke dismissing the trustees’ application under s 339 of the 1986 Act for an order setting aside a transfer of property made pursuant to an order made in ancillary relief proceedings between the respondent and the bankrupt husband.
After their divorce, the wife commenced ancillary relief proceedings in which it was ordered that the husband transfer his interest in a property to her. The husband was made bankrupt and the appellants were appointed his trustees. The trustees applied for an order under s 339 to set aside the transfer on the ground that the property adjustment order did not involve the wife giving consideration in money or money’s worth, and thus it was a transaction at an undervalue. The wife submitted that she was to be regarded as having given consideration, following In re Abbott [1983] Ch 45, a case concerning s 42(1) of the Bankruptcy Act 1914 which established the proposition that ancillary relief claims brought under ss 23 to 25 of the 1973 Act were capable of constituting consideration, and In re Kumar [1993] 1 WLR 224 which applied the reasoning of In re Abbott to s 339 of the 1986 Act. The trustees’ application was dismissed and they appealed.
JUDGE PELLING QC said, allowing the appeal, that the reasoning in In re Abbot was not applicable to the instant case for two reasons. Firstly, since the language of the 1914 Act had been completely changed, cases decided under the old law which referred to “valuable consideration” were of no assistance. Secondly, the court in In re Abbott applied, to ancillary relief compromises, the reasoning of In re Pope [1908] 2 KB 169, which established that the release of a right or the compromise of a claim could suffice to constitute a person as a “purchaser”. In the light of Xydhias v Xydhias [1999] 2 All ER 386, G v G (Financial Provision: Equal Division) [2002] 2 FLR 1143 and McMinn v McMinn [2003] 2 FLR 823, that proposition was not applicable to situations such as the instant. It followed that since an agreement to compromise an ancillary relief claim could not give rise to binding contractual obligations, and an applicant for such relief had no cause of action, an applicant could not give consideration by simply compromising his claims by the settlement agreement which was, by definition, not binding. Moreover, the dicta of Ferris J in In re Kumar, whereby he suggested that what was held to constitute “valuable consideration” for the purpose of s 42 of the 1914 Act in In re Abbott would also constitute consideration in “money or money’s worth” for the purpose of s 339(3)(c) of the 1986 Act, was wrong.
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