Haines v Hill & Anor

A spouse’s statutory right to seek financial provision or a property adjustment on divorce constitutes consideration for an order made in satisfaction of that right. The family court’s order ordinarily quantifies that consideration in money or money’s worth.

For Insolvency Act 1986 purposes, the property awarded and the matrimonial claim satisfied are presumed to balance. A trustee may establish an undervalue by proving fraud, collusion, mistake, misrepresentation, concealment or another vitiating factor. The mere fact of a later bankruptcy does not make an honestly contested or court-approved property adjustment vulnerable to automatic avoidance.

Following contested ancillary relief proceedings, the family court ordered a husband to transfer his interest in the matrimonial home to his wife. He was subsequently adjudged bankrupt. His trustees sought to avoid the transfer as a transaction at an undervalue under section 339 of the Insolvency Act 1986.

District Judge Cooke dismissed the trustees’ application, holding that satisfaction of the wife’s ancillary relief claim was consideration equivalent to the property awarded. HH Judge Pelling QC allowed the trustees’ appeal and declared the transfer void, reasoning that the wife had supplied neither consideration nor consideration measurable in money or money’s worth.

The central issue was whether a property adjustment order satisfies section 339(3)(a) or (c), and whether the family court’s assessment supplies the monetary value of the spouse’s statutory claim.

1. Appeal allowed unanimously. The order of District Judge Cooke dismissing the trustees’ application was restored. The Chancellor delivered the leading judgment. Thorpe and Rix LJJ agreed with it and supplied concurring reasons.

2. A spouse’s ability to apply for financial provision and property adjustment orders under Part II of the Matrimonial Causes Act 1973 is a statutory right with value. Although it creates no proprietary interest before an order is made, its exercise commonly results in an award of money or property. The award is prima facie the measure of the right’s value.

3. Consideration need not consist of a pre-existing proprietary or contractual right or a cause of action. The satisfaction, compromise or release of a statutory matrimonial claim can therefore constitute consideration. The contrary reasoning based on the absence of an ordinary cause of action or a contractually binding compromise was erroneous. Re Pope and Re Abbott remained applicable notwithstanding the changed statutory language.

4. The consideration supplied by the recipient spouse is capable of valuation in money or money’s worth. The family court quantifies the claim by the money or property it orders the other spouse to provide. Whether the order follows contested proceedings or an agreement, the claim and award ordinarily balance in the absence of fraud, mistake, misrepresentation, collusion, concealment or another vitiating factor.

5. Section 39 of the Matrimonial Causes Act 1973 preserves the possibility of challenging a matrimonial transfer under section 339 of the Insolvency Act 1986; it does not make every such transfer an undervalue. This construction maintains a fair boundary between creditors and former spouses while permitting intervention against dishonest or otherwise vitiated orders.

6. Section 339(3)(a) was inapplicable because the wife gave consideration. Section 339(3)(c) was inapplicable because that consideration was in money or money’s worth and was not worth less than the bankrupt’s contribution. As the statutory preconditions were absent, no question arose concerning the discretion under section 339(2).

1. Court of Appeal (Civil Division): The wife’s appeal was allowed unanimously and District Judge Cooke’s order dismissing the trustees’ application was restored: [2007] EWCA Civ 1284.
2. High Court, Chancery Division: HH Judge Pelling QC, sitting as a deputy High Court judge, allowed the trustees’ appeal and declared that the matrimonial transfer was a transaction at an undervalue. No neutral citation is stated.
3. Birmingham County Court: District Judge Cooke dismissed the trustees’ application under section 339 of the Insolvency Act 1986. No neutral citation is stated.