Feakins & Anor v Department for Environment Food & Rural Affairs

An informal plan or understanding may constitute an “arrangement”, and therefore a transaction, under Insolvency Act 1986 section 423. Linked dealings must be assessed according to their practical substance. A transaction is at an undervalue where the debtor provides a benefit substantially exceeding the consideration received, including through a controlled company or collateral agreement.

Statutory authority for permanent interference with land requires clear words or necessary implication. Under the Animal Health Act 1981, section 34(4) was the sole authority for permanently burying slaughtered animals’ remains on private land. Breach of another statutory regime defeats that immunity only where it affects the nature or extent of the interference.

The appeals arose from Hart J’s decision, [2004] EWHC 2735 (Ch), concerning the sale of Hill Farm and DEFRA’s disease-control operations there during the 2001 foot-and-mouth outbreak.

DEFRA claimed that a concealed arrangement enabled Miss Hawkins to acquire the farm for £450,000 subject to an agricultural tenancy, procure its surrender and obtain an unencumbered asset worth about £1 million. Hart J granted relief under section 423 of the Insolvency Act 1986.

By counterclaim, the appellants alleged trespass arising from the burial of carcass ash, cleansing material and farmyard waste. The principal questions concerned the scope of DEFRA’s statutory authority under the Animal Health Act 1981, the effect of animal-waste and groundwater measures, and the appropriate remedies for continuing and temporary trespasses.

1. Disposition. The appeal against DEFRA’s section 423 claim was dismissed, subject to reinstatement of the agricultural tenancy. DEFRA’s two grounds of appeal on the counterclaim were dismissed. The appellants succeeded only on their ground concerning the Raised Area, for which £1,000 user damages were awarded. Jonathan Parker, Moses and Waller LJJ agreed in the result.

2. An “arrangement” within section 436 of the Insolvency Act 1986 includes a formal or informal, oral or written agreement or understanding. The concealed plan between the debtor and Miss Hawkins was therefore a transaction under section 423. It used the mortgagee’s sale at a tenanted value and the debtor’s advance commitment to procure surrender of the tenancy to transfer an unencumbered asset worth about £1 million.

3. The debtor provided that benefit notwithstanding that the company formally surrendered the tenancy. His control made his commitment practically equivalent to the company’s commitment. The consideration he received was discharge of approximately £450,000 owed to the mortgagee. The disparity satisfied section 423(1)(c). The arrangement was intended to place the asset beyond DEFRA’s reach, and DEFRA was plainly capable of being prejudiced and was therefore a victim under sections 423(5) and 424(1)(c).

4. Relief under section 423 had to restore the position while protecting the victim. Because the tenancy was genuine and the tenant company was insolvent, leaving it surrendered improved DEFRA’s former secured position. The tenancy was therefore reinstated.

5. Per Moses LJ, statutory authority for interference with private land must be express or arise by necessary implication. Permanent interference required clear and unambiguous authority. Section 34(4) of the Animal Health Act 1981 supplied the only authority for permanent burial on private land. Neither sections 34(2) and 35 nor the 1993 Seizure Order supplied a general power to bury material permanently.

6. Animal-waste, TSE and groundwater measures affected the statutory-authority defence only where a breach changed the nature or extent of the interference with the land. No proved breach did so. Nevertheless, section 34(4) did not authorise burial of animals’ remains on land not possessed or occupied by their owners. Nor was there authority for the C and D pit or Raised Area. Selection of the Raised Area’s location did not amount to consent to burial there.

7. Removal of the buried material would have been oppressive because the injury was small and compensable in money. Damages could reflect the modest sum that reasonable parties would have negotiated, rather than the full cost saved by avoiding removal. The existing awards were upheld and £1,000 was awarded for the Raised Area.

1. Court of Appeal (Civil Division): By [2005] EWCA Civ 1513, dismissed the appeal against the section 423 decision subject to reinstating the tenancy; dismissed DEFRA’s counterclaim appeal; and allowed the appellants’ counterclaim appeal only in relation to the Raised Area.
2. High Court, Chancery Division: Hart J, [2004] EWHC 2735 (Ch), upheld DEFRA’s section 423 claim, charged Miss Hawkins’s beneficial interest with the judgment debt, declined to reinstate the tenancy, and determined the trespass counterclaim and damages.