Warwick (Formerly Yarwood) v Trustee In Bankruptcy of Clive Graham Yarwood

An agreement reached in negotiations concerning ancillary relief does not transfer a beneficial interest in land merely because it provides for sale of the property and division of the proceeds. The ordinary requirements for a binding contract must be satisfied, including agreement on all material terms. A provision for payment of a lump sum from sale proceeds is distinct from a transfer of ownership or a beneficial interest. Constructive trust and proprietary estoppel likewise require a common intention, promise or understanding relating to the transfer of an interest in the property. Steps taken to implement an agreed monetary division do not, without more, create such an interest.

The appellant appealed against an order made by the Chesterfield County Court requiring her to repay money received from the sale of a jointly owned former matrimonial home. The order was based on Insolvency Act 1986, section 284, because the enhanced payment was made after presentation of the bankruptcy petition.

She argued that her entitlement to 75% of the proceeds had arisen before the petition through a September 2006 settlement agreement, or alternatively through the exchange of sale contracts on 19 March 2007. The central issues were whether the parties had created an enforceable contract, constructive trust or proprietary estoppel before presentation of the petition.

1. Appeal dismissed. The order requiring repayment was upheld, although on different grounds from those relied on by the Deputy District Judge.

2. Section 284 of the Insolvency Act 1986 applies to dispositions made between presentation of the bankruptcy petition and vesting of the bankrupt’s estate. The parties accepted that the payment would not be caught if the appellant had acquired the additional beneficial interest, or a proprietary estoppel, by 19 March 2007.

3. The letter of 28 September 2006 did not record an enforceable contract. The parties were negotiating a package of arrangements, including a pension-sharing annex which remained unsettled. Agreement on the farm proceeds was therefore insufficient to establish a contract for the whole arrangement. The statement that matters were agreed meant only that sufficient agreement existed to make it unnecessary to proceed with the final hearing.

4. The court noted that, if necessary, it would have preferred the analysis in Soulsbury v Soulsbury and would have regarded the relevant conclusion in Xydhias v Xydhias as inconsistent with earlier authority. That issue was not necessary to the decision.

5. The draft consent order contemplated sale of the jointly owned property followed by payment of a defined monetary amount. It did not provide, expressly or by implication, for an immediate transfer of an additional beneficial interest. An order for sale may be ancillary to either a property adjustment order or an order for payment of a lump sum; those orders have different legal effects.

6. No constructive trust or proprietary estoppel arose. The parties’ arrangement concerned payment of money, not transfer of an interest in land. The exchange of contracts and instructions for distributing the proceeds merely implemented that arrangement and disclosed no new common intention, promise or understanding concerning ownership.

• High Court (Chancery Division): appeal from the Chesterfield County Court dismissed and the Deputy District Judge’s order upheld on different grounds.