Bataillon & Anor v Shone & Anor

Where a court has made discretionary relief under Insolvency Act 1986, section 423, it may revisit the order where a material change in the assumptions underlying it has occurred. The court must then exercise the discretion afresh, having regard to the purpose and structure of the original order, the parties’ respective losses, subsequent costs, conduct and any innocent third-party interests. A provision made for an innocent child need not be preserved at its original level where the financial landscape has materially worsened, particularly where the recipient’s conduct has increased the liabilities. The court may make a limited, purpose-specific carve-out from sale proceeds to meet identified educational and relocation needs.

The claimants had obtained relief against Mrs Shone under section 423 of the Insolvency Act 1986 following findings that assets had been transferred at an undervalue. An order made on 27 June 2016 provided for the claimants to receive specified shares of the net proceeds of property sales, payment of a residual debt and a £100,000 reduction intended to provide for Camille, Mrs Shone’s daughter.

The properties sold for materially less than anticipated. Mortgage default interest and other costs further reduced the sums available. The application concerned whether the court had jurisdiction to vary the order and, if so, how the provision for Camille should be recalculated.

1. The court had jurisdiction to reconsider the order because the property sale values had radically changed the assumptions on which the original discretionary relief had been based. The question was therefore whether discretion should be exercised afresh in relation to the £100,000 provision.
2. The original order did not ring-fence £100,000 from the claimants’ entitlement to their 50 per cent share of the property equity. The provision had been possible because the expected proceeds left Mrs Shone with a financial cushion after payment of the residual debt. That assumption no longer held.
3. The court took account of the substantial reduction in the proceeds available to both sides, the further liabilities caused by mortgage default and Mrs Shone’s failure to deal properly with the High Trees default. It was not prepared to make any provision for Mrs Shone herself.
4. Nevertheless, Camille remained an innocent victim and some provision for her was appropriate. The court reduced the carve-out to £30,000, to meet the balance of her school fees, relocation expenses and educational needs. The money was to be held through a suitable arrangement by her godfather and used, including for school fees, against appropriate invoices.
5. The remaining proceeds were to be distributed in accordance with the original order: the claimants were to receive their 50 per cent entitlement and the balance, apart from the £30,000, was to be applied towards the residual debt.

Not stated in the judgment.