Gendrot v Chadwick & Anor

A deed declaring a trust over interests in several properties may constitute one transaction at an undervalue where it effects one overall disposition. Informal hopes of continued access to a spouse or child do not amount to consideration in money or money’s worth unless supported by an enforceable obligation. The discretion to decline restorative relief under the Insolvency Act 1986 must be exercised on evidence properly raised at trial and in light of the interests of the bankrupt’s creditors. The fact that a property is a matrimonial home will not ordinarily justify withholding relief. Postponement or a stay of sale requires exceptional circumstances.

The appellant challenged an order made by District Judge Capon in the County Court at Cambridge on an application by trustees in bankruptcy. The trustees sought to set aside a deed by which the appellant’s husband had declared that he held his interests in three properties on trust for her. The District Judge found that the appellant had given no consideration, that the husband was insolvent, and that restorative relief should be granted under section 339 of the Insolvency Act 1986.

On appeal, the appellant argued that the properties should be treated as separate transactions, that her husband’s equity in the matrimonial home was small, and that relief or sale should be postponed. The central issues were whether the deed created one transaction, whether any legally sufficient consideration had been given, and whether the statutory discretion justified withholding or delaying relief.

1. The appeal was dismissed. The new arguments concerning separate transactions, the value of the matrimonial home, the exercise of discretion and postponement of sale had not been advanced at trial. Applying [2000] EWCA Civ 514 and [2008] EWCA Civ 978, they should not be entertained where doing so might have caused the respondents to conduct their case differently.
2. The deed effected one transaction. It declared a trust over the husband’s beneficial interest in the properties as a whole. It did not create three separate agreements, dispositions or gifts for the purposes of section 339.
3. No consideration in money or money’s worth had been provided. The appellant assumed no mortgage liability, made no enforceable promise and had not agreed to refrain from pursuing matrimonial rights. A hope that she would permit continuing access to herself and the parties’ son was legally valueless. Giving up a right may constitute consideration, but only where the surrender is enforceable: [1983] Ch 45, [2008] Ch 412, [1993] 1 WLR 224 and [2011] EWHC 2047 (Ch).
4. The transfer therefore fell within section 339(3)(a), making the comparative value of the transferred assets irrelevant. Although section 339(2) confers a discretion to make such restorative order as justice requires, the appellant had not supplied evidence or advanced an argument capable of justifying its exercise. The matrimonial-home factor alone could not justify withholding relief, since that would undermine creditors’ protection.
5. Immediate sale was also justified. A sale affecting a family home is serious but commonplace in bankruptcy. Without substantially more, it does not constitute the exceptional circumstance required to postpone or stay sale: [1991] Ch 142.

• High Court (Chancery Division): On appeal from an order of District Judge Capon sitting in the County Court at Cambridge, the appeal was dismissed.