A tenancy granted by an insolvent farmer to his wife was set aside because of additional benefits which were granted. The tenancy was held to have been granted at an undervalue, even though the court was unable precisely to measure the value of the benefits granted. ‘In applying section 423(1)(c) to the facts of the present case, one must look at the transaction as a whole; the tenancy agreement cannot be considered in blinkers. Due weight must be given (inter alia) to the facts not only that the agreement was entered into by the first defendant with his wife for the purposes outlined above, but that the land in question was mortgaged and that the wife, through the grant of the tenancy, would be placed in the ‘ransom’ position described above. Accepting that she agreed to pay for her yearly tenancy which was the best rent reasonably obtainable for that tenancy viewed in isolation, and that she undertook the other tenant’s obligations imposed by the tenancy agreement, it seems to me nevertheless clear that, when the transactions are viewed as a whole, the benefits which the first defendant thereby conferred on her were significantly greater in value, far greater in value, in money or money’s worth than the value of the consideration provided by her. To hold otherwise would seem to me to fly in the face of reality and common sense. No further evidence was, in my judgment, required to establish that the transaction was one falling within s.423(1)(c); the agreed facts speak for themselves. On the facts of this case, the substantial detriment incurred by the first defendant under the transaction was largely matched by a substantial benefit conferred on the second defendant beyond the rights specifically conferred on her by the tenancy agreement.’
Neill LJ: ‘The purpose of the grant of the tenancy agreement was to ensure that the plaintiff did not get vacant possession of the property and was for the purpose of prejudicing the interests of the plaintiff. By the grant of the tenancy, Mrs Woodward acquired the benefit of the surrender value which placed her, as counsel for the plaintiff put it, in ‘a ransom position’ in any future dealings with the mortgagee. . . In the circumstances I see no answer to the argument that, quite apart from any value which may be attributed to the securing of the family home and the acquisition of a debt-free business, the surrender value constituted ‘consideration provided by’ Mr Woodward which was significantly greater than the payment made by Mrs Woodward for the grant of the lease.’
Judges:
Sir Christopher Slade, Neill LJ, Saville LJ
Citations:
Times 30-May-1994, [1995] 1 BCLC 1
Statutes:
Jurisdiction:
England and Wales
Cited by:
Cited – Ramlort Ltd v Michael James Meston Reid CA 8-Jul-2004
The company sought to claim under a life policy. The deceased had died in Scotland insolvent. The trustee of the policy had declared that he held it on trust for the claimant, but the defendant, the judicial factor of the estate, said the . .
Cited – Feakins and Another v Department for Environment Food and Rural Affairs (Civ 1513) CA 9-Dec-2005
The department complained that the defendants had entered into a transaction with their farm at an undervalue so as to defeat its claim for recovery of sums due. The transaction used the grant of a tenancy by the first chargee.
Held: The . .
Lists of cited by and citing cases may be incomplete.
Insolvency
Updated: 04 May 2022; Ref: scu.77676
