7- Transaction at an undervalue s.339- new

Question 1

339 facts?

Answer 1

For bankruptcy. Easier to prove than 423 because no need for debtor to intend to prejudice creditor’s rights.

Question 2

Order in PQ?

Answer 2

1. State 339(1) definition, easier than 423;
2. Can X seek an order- 339(1), Re Dent;
3. Had debtor been adjudicated bankrupt?
   - 284(1-4);
4. Is trans at an undervalue?
   - 339(3)(a)(b)(c)
   - Hill v Haines
   - Re Kumar
   - Official Receiver for NI
5. Was trans made at relevant time?
   - s.340(1) and (2)
   - 435
6. What order should be made?
   - 339(2)
   - 342(1)
7. Any reason order cannot be made?
   - 342(2) and (3)

Question 3

339(1)

Answer 3

Where an individual is adjudicated bankrupt and he had at a relevant time entered a trans at an UV, the trustee in bankruptcy may apply to the court for a 339 order.

Question 4

Who may apply for a 339 order?

Answer 4

Trustee in bankruptcy

Question 5

Re Dent

Answer 5

Trustee can still apply for 339 order after discharge of bankruptcy.

Question 6

284(1)-(3)

Answer 6

If debtor makes any disposition of property between presentation of petition and vesting of estate in trustee it is void unless court consented, and it is held by that transferee for the bankrupt.

so in these cases D would not have been adjudicated bankrupt so 339 won’t apply.

Question 7

284(4)

Answer 7

284(1)-(3) do not apply to goods/funds received during this time in good faith, for value and without notice that the petition had been presented.

Question 8

339(3)

Answer 8

Trans at an UV if:

(a) No consideration
(b) marriage
(c) D received consideration significantly less in money or moneys worth than D provided.

Question 9

Hill v Haines 2007 (CoA)

Answer 9

Case: In divorce proceedings in May 2003 debtor ordered to transfer his share of a house to his wife under an ancillary order.

Debtor made bankrupt in March 2005 and trustee sought to set aside transfer as a transaction at an undervalue under s.339.

1. For the purpose of 339, surrender of the right to apply for an order for ancillary relief in divorce proceedings can constitute consideration.
2. The right of a spouse to apply for an ancillary relief order has value because it might lead to an order entitling one spouse to property or money at the expense of the other spouse.
3. The value of that right is the value of the money or property that she has and opens up to the order.
4. There is no reason why some dealing with a statutory right cannot constitute consideration

Question 10

The Official Receiver for Northern Ireland v Stranaghan [2010]

Answer 10

Case: In November 2000 S lent his nephew £75K to purchase premises which were acquired in January 2001.

In April 2004 nephew granted mortgage to S to secure the loan made in 2000.

When nephew later adjudicated bankrupt official receiver sought to set aside the mortgage as a transaction at an undervalue under 339(3)(a).

Decision:
1. This is a transaction at an undervalue because the mortgage was not supported by consideration because the loan which it was intended to secure it represented past consideration.

2. This ignores Bacon rule that providing a charge to secure an existing debt can be good consideration. Nothing has left the estate so Millet would say this is a case for preferences.
3. This follows Hill v Spread- the steps taken by S to protect his loan did not amount to forbearance, because he didn’t take any step which showed he was pressing or intending to press for repayment or sue, so transaction could be set aside under 339.

Question 11

Re Kumar 1993

Answer 11

Case: H transferred to W of half his share in the matrimonial home worth £110,000 when they divorced. In consideration for this she took sole responsibility for the mortgage, which was significantly less than the value of his share in the house.

H was bankrupted, and his trustee applied under Section 339(3)(c).
BUT
Wife argued that she had provided more consideration than just her payment of the mortgage because she had released claims that she had under the 1973 MCA, sections 23-25 to claim further capital from him in the divorce.

1. A compromise on a claim in matrimonial proceedings is capable of being consideration in money or moneys worth (Re Abbot), but this was not such a case.
2. At the time the transfer of property occurred the divorce had not yet happened and there was no evidence to support the argument that W agreed not to apply for capital under the MCA.
3. So, the case fell under (c).

Question 12

341

Answer 12

(1)(a) RT if trans is entered into up to 5 years prior to the adjudication of bankruptcy.

BUT

(2) RT cannot be more than 2 years before the adjudication of bankruptcy unless:
(a) debtor was insolvent at the time, or
(b) became insolvent as consequence of the tran.

(2) is presumed unless otherwise proven to contrary in cases where the transferee is an associate (other than an employee) of the debtor.

Question 13

s.435

Answer 13

Definition of associate. Just read.

Question 14

s.339(2)

Answer 14

Court should make order as thinks fit for restoring position to if trans hadn’t been made.

Question 15

s.342(1)

Answer 15

List of what court may order.

Question 16

s.342(2)(3)

Answer 16

Interests which the court cannot prejudice.