Feakins & Anor v Department for Environment Food & Rural Affairs [2005] EWCA Civ 1513

“2. [DEFRA] is the government department which sues (and is sued) as successor to the rights (and liabilities) of the Ministry of Food Agriculture and Fisheries (“MAFF”) and the Intervention Board for Agricultural Produce (“IBAP”). It is unnecessary to set out the steps by which this succession took place. For much of the period with which I am concerned the relevant body was MAFF rather than DEFRA. For convenience I refer to DEFRA as the relevant body throughout. 3. [KF] is a farmer. In 1986 he and his first wife (“Sarah”) moved from Wiltshire and together bought Hill Farm, comprising a sizeable Georgian farmhouse with various agricultural buildings and farm land of approximately 250 acres in Herefordshire. Their business, conducted at first in partnership, and later through the medium of a limited company KA and SBM Feakins Ltd (“the company”) in which their eldest child Matthew was a 10% shareholder, prospered. By 1997 its turnover approached £6m per annum. In 1997, however, the first in what were to be a series of hammer blows of misfortune struck. One of the company’s major customers, the UK Halal Meat Company (“Halal”) failed leaving huge debts owing to the company. Thereafter, the company ceased to trade, remaining in existence solely for the purpose of seeking to realise the security which it enjoyed in respect of Halal’s indebtedness. The business was thereafter carried on either by KF and Sarah in partnership, by a new limited company KA & S Feakins & Sons Limited and, as from February 1998, by a further limited company, Garron Livestock Limited (“Garron”) which had an outside shareholder Mr S. W. Watkins. 4. From 1992 onwards KF and Sarah had been engaged in litigation in the High Court, along with others, against IBAP relating to the validity of payments received pursuant to what was known as the sheep premium clawback scheme. A reference to the European Court of Justice was one amongst other causes of that litigation becoming protracted. Eventually, however, on 23 June 2000 Mr Justice Kennedy gave judgment for IBAP against KF in the sum of £650,654. 5. In the meantime the relationship between KF and Sarah had broken down. Sarah commenced divorce proceedings against KF in the autumn of 1999. The financial negotiations between them eventually resulted in a Consent Order dated 25th May 2000 pursuant to which KF agreed to pay Sarah £50,000 and to indemnify her against any adverse judgment in the IBAP litigation. In return, Sarah gave up her interest in Hill Farm, in the company and in KA & S Feakins & Sons Ltd. The mortgage liabilities in respect of Hill Farm in favour of National Westminster Bank plc (“NatWest”) were transferred into the sole name of KF. 6. By September 2000 Hill Farm with vacant possession seems to have been worth some £1.03m, subject to NatWest’s charge of in excess of £400,000. KF was hoping that an appeal against the judgment of Kennedy J would either extinguish or substantially reduce his liability thereunder. His plan, however, at this stage seems to have been to sell Hill Farm. He found potential purchasers at a price of £1.03m in the persons of a married couple, Mr Nechvatal and Ms Cloud (“the Nechvatals”), who were looking to retire from their respective careers in the financial sector and take up organic farming. They were able to agree terms subject to contract. KF was not, however, in a position to enter into a contract with the Nechvatals. On 22nd September 2000 IBAP obtained a charging order nisi against Hill Farm in respect of its judgment debt and interest. Thereafter KF’s hopes of realising anything for himself from a sale rested either on his appeal being successful, or on his reaching some compromise with IBAP, or on finding a way of selling the farm free from the IBAP charge while leaving the net proceeds in friendly hands. 7. We do not know what advice KF had received as to his prospects on appeal. If the position had in fact appeared to him as bad as it turned out to be (the appeal was dismissed in October of the following year) his position was indeed bleak. On 14th November 2000 Nat West made formal demand for the £202,832.51 owed to it by KF and for the £230,000 owed by the company and guaranteed by KF. The only potential string to his bow lay in the fact that KF and Sarah had, on 6th March 1995, granted the company an agricultural tenancy of the land at Hill Farm, and had done so with the consent of NatWest. Through a recently instructed firm of solicitors The Robert Davies Partnership (“RDP”) he invited IBAP, by a letter dated 15th November 2000, to consider the consequences if the bank were to sell subject to the tenancy (which would leave IBAP with nothing), and to interest them in the proposition that, if he were to procure a sale with vacant possession, the net proceeds might be split between IBAP and KF. Nothing came of this. 8. On 26th February 2001 a case of foot and mouth disease (“FMD”) was diagnosed at Hill Farm. This was one of the earliest cases diagnosed in what was to prove to be the catastrophic epidemic which engulfed much of the country in the following months. One amongst many consequences which flowed from this was to throw KF into a closer association with the second defendant, Georgina Hawkins (“Miss Hawkins”). Miss Hawkins had rented stabling and grazing at the farm for her horses (it is not clear from whom, whether Garron, KF or the company) from late 1999, and rooms in the farmhouse for herself from January 2000. By May 2001 they had become engaged, and they married on July 25th that year. 9. Another consequence was that Hill Farm was declared to be an “Infected Place” (“IP”) by DEFRA, and was thereafter subjected to a lengthy, and invasive, series of measures undertaken by DEFRA with a view to the eradication of FMD at the farm. This involved, inter alia, the slaughter and disposal of all the cattle and sheep at the farm and a consequent cleansing and disinfecting (C&D) operation at the farm. 10. By the end of July 2001 a plan was in place for the realisation of Hill Farm. NatWest was to sell as mortgagee to Miss Hawkins subject to the tenancy for a price of £450,000.00. That sale would overreach IBAP’s charge, and NatWest would swallow the proceeds under its charge. The company would then surrender the tenancy, leaving Miss Hawkins free to sell with vacant possession to the Nechvatals for £1.03m. This plan was then implemented. On 2nd October 2001 NatWest exchanged contracts to sell the property subject to the tenancy to Miss Hawkins for £450,000.00. That contract was completed the following day with money borrowed by Miss Hawkins from KF’s brother Robin Feakins. Miss Hawkins then entered into a contract to sell to the Nechvatals for £1.03m, a deposit of £103,000 being paid, with completion fixed for 30th November 2001. KF and Miss Hawkins then left the country for a four week holiday in Australia. 11. While the couple were still in Australia, DEFRA learned of the cancellation of its charge. On their return the couple had to face three unpleasant developments. The first was the receipt of a report (“the Fieldfare report”) into the environmental consequences of the operations undertaken by DEFRA on Hill Farm consequent on the FMD outbreak. The second was that the appeal against IBAP’s judgment had been dismissed. The third was a freezing injunction granted on DEFRA’s application by Gross J on 21st November 2001 (and continued by Penry Davey J on 4th December 2001). 12. Disclosure of the Fieldfare report to the Nechvatals led to the latter refusing to complete and claiming a return of their deposit. Proceedings have subsequently been started by the Nechvatals which are due to be heard later this year.”

“The financial state of the company … meant that it was in no position to insist that it be kept alive for any appreciable period should the freeholder for the time being desire its termination. The only circumstance in which the tenancy potentially had an exploitable value as an asset of the company was one where the freeholder was contemplating a sale with vacant possession, and needed to be able to secure a surrender for the purpose of being able to give vacant possession. …. Maintaining the existence of the tenancy in the context of the subsequent sale by NatWest was not done with a view to preserving an asset of the company but solely with a view to enticing NatWest to dispose of the property to Miss Hawkins at an undervalue.”

“29. …. On 21st February 2001 KF had retained the services of a Mr Lovell, of Charles Lovell & Co, chartered accountants. In March 2001 he had a meeting with Mr Lovell at RDP’s offices at which Mr Lovell suggested that he seek the advice of insolvency specialists Poppleton & Appleby. It appears to have been Mr Terry Gumbley of the latter firm who suggested that the way forward was to propose to the bank that it should appoint him or his partner as LPA receivers to sell the property. The idea at this stage seems to have been that a “friendly”

“Further to our meeting, I am writing to you to set out our reasons for disposing of the farm via the use of an LPA receiver, and in particular, Poppleton & Appleby. These are as follows: 1. Due to outbreak of foot and mouth, several farms in the area will be coming up for sale. I consider that it is important to achieve a sale quickly, as prices will probably be affected by the glut of sales. 2. At present, the indications are that the value of the farm will settle the bank, pay the receivers and leave a small excess for the Intervention Board, about which you are aware. 3. Currently, there is a buyer available, who will leave the tenancy in place, which will leave me earning a living, which is important to me. 4. Such is our relationship with Poppleton and Appleby, we have confidence that they will deal with the transaction to the satisfaction of all parties, while avoiding any potential adverse publicity to the bank. I look forward to hearing from you as soon as possible.” 32. On 8th June 2001 KF, by now appreciating that NatWest was not going to appoint LPA receivers, wrote again to Mr Dicks a letter which included the following passages: “When we visited your office four weeks ago it was to suggest a way of paying off the bank debt and also to leave my family and myself here as a tenant still with a viable business. As I explained to you there is a potential customer who has taken a liking to the farm, actually at present running a few horses here. They are interested in buying Hill Farm subject to the tenancy remaining in the company name and are happy to let us carry on living at Hill Farm renting the bulk of the land leaving them access to a small area of land and stables. I think I did write and inform Ian Cook of this very early on in the year. Undue nationwide publicity at this stage, when our business is owed considerable money for our stock slaughtered here and in France because of the FMD, could spell the demise of our business as well as bringing unwanted publicity to the bank. My legal advice from my family solicitor in Salisbury has been that the bank are able to sell under its mortgage by using at least two valuers who would put a correct valuation on the property for the bank taking into account the company tenancy and the remaining problems surrounding the FMD outbreak around here. The bank could then use these values to give instruction to a solicitor to sell to the interested party at what would then be the correct market price. Two valuers of excellent reputation who did the valuation of Hill Farm for my divorce were Mr Gwyn Williams of Williams Parry Richards, Ross on Wye and Mr Robert Parry of G Herbert Banks, Worcester. Both know the farm intimately and could value the property again on behalf of the bank without falling foul of these (schedule A) FMD restriction, stopping people coming on to the farm. Robert Davies of Robert Davies Partnership whom as you know I used for the past year to try to sell Hill Farm without success, is a very competent solicitor. At present I understand he has the deeds and has done all necessary searches on the property and again with his knowledge of the farm could work for the bank probably a lot cheaper and a lot faster than another firm of solicitors who would have to start from scratch …..I am mindful that when we advertised the farm nationally one year ago at considerable expense before the problems with the FMD we only found one customer whom as you know we have lost. I think we have been lucky to find a person who has stayed interested and would be prepared to purchase Hill Farm and effectively relieve RBS of the debt and I do not want to lose this client. All I want to do is get the bank cleared secure a home and a future for my family by keeping our business going and would only ask that we move towards this end as soon as is practically possible. Several valuable weeks have already passed by since I first came to Birmingham and we are aware that other properties are coming onto the market most of which do not have any restrictive problems with FMD.” 33. On 14th June 2001, Mr Dicks wrote to KF. He said that he had instructed Hammond Suddards Edge (“HSE”) to act for the bank (thus rejecting KF’s suggestion that RDP should act) and would arrange valuations on a tenanted basis and then proceed with the sale. On 15th June 2001, HSE wrote to D1 setting out the procedure that the bank proposed to take, saying that the bank would sell pursuant to the power for sale to a purchaser to be introduced by KF. It was envisaged that the farm would be sold subject to an existing tenancy, but the letter reserved the bank’s position as to whether any existing tenancy bound it. 34. By a letter dated 25th June 2001 Miss Hawkins then introduced herself to HSE “as the client who is prepared to purchase Hill Farm”, informing them that she proposed to use RDP as her solicitors, and saying: “I am prepared to purchase Hill Farm with the tenancy staying in place so that Mr Feakins can continue running his business from there. I have had the benefit of knowing the farm and its problems for some time now and have taken advice on the price that I shall offer. I am prepared to pay £450,000 for Hill Farm as it stands today. That price reflects on the company tenancy that exists on the farm and the problems with the Foot & Mouth disease. That money is available without the necessity of having to sell any properties” 35. It is far from clear that at that date Miss Hawkins did have the necessary money available. What is clear is that at least from a date very shortly afterwards what was in contemplation by KF and Miss Hawkins was that the purchase from NatWest would be followed by a sale by her to the Nevchatals: a manuscript note addressed by KF to RDP, made on a letter dated 3rd July from HSE to KF, instructed RDP that “you will need to draw up a legal document for [the company] to give up the tenancy when you sell from [Miss Hawkins] to [the Nevchatals].”

“(1) This section relates to transactions entered into at an undervalue; and a person enters into such a transaction with another person if…(c) he enters into a transaction with the other for a consideration the value of which, in money or money’s worth, is significantly less than the value, in money or money’s worth, of the consideration provided by himself. (2) Where a person has entered into such a transaction, the court may, if satisfied under the next sub-section, make such an order as it thinks fit for – (a) restoring the position…and (b) protecting the interests of persons who are victims of the transaction. (3) In the case of a person entering into such a transaction, an order shall only be made if the court is satisfied that it was entered into by him for the purpose – (a) of putting assets beyond the reach of a person who is making, or may at some time make, a claim against him, or (b) of otherwise prejudicing the interests of such a person in relation to the claim which he is making or may make… (4) ….. (5) In relation to a transaction at an undervalue, references here and below to a victim of the transaction are to a person who is, or is capable of being, prejudiced by it.” ”

“I think it more probable than not that both KF and Miss Hawkins were of a mind by 25th June 2001 that a sale to the Nechvatals was very much on the cards.”

“That said the fact remains that it was the bank which made its own decision to sell to Miss Hawkins subject to the tenancy. That sale suited KF and Miss Hawkins very well: there can be no doubt that their purpose was to get Hill Farm into Miss Hawkins’ name, out of the reach of DEFRA as a secured creditor of KF, and to enable the vacant possession value to be realised in Miss Hawkins’ hands.”

“The answer, in my judgment, is that it is permissible as a matter of statutory construction, and entirely consonant with the purpose of the section, to read ‘enter into a transaction’ as ‘participate in an arrangement’, and to ask whether KF participated in the arrangement. That was not a question which had to be addressed in Re Brabon. The ‘arrangement’ here whereby the asset was transferred at an undervalue consisted, in my judgment, of an agreement between KF and Miss Hawkins whereby they agreed that KF would introduce Miss Hawkins to NatWest as a potential purchaser subject to the tenancy but with KF’s commitment in advance to procure a surrender of the tenancy if and when NatWest took the bait. Miss Hawkins’ ability to purchase from NatWest was dependent on the existence of that prior commitment (since the only finance available to her was finance premised on a subsequent sale with vacant possession to the Nevchatals), and fulfilment of that prior commitment was the means by which value in excess of the £450,000 paid by her was effectively gifted to her. If that is the correct identification of the ‘arrangement’, then, subject to what there may be in the ‘company point’, I do not think that there is any difficulty in saying that KF participated in it: his ability to commit in advance to, and subsequently to procure, a surrender of the tenancy was central to it.”

“Mr Jourdan submitted that no such analysis of the transactions was possible. He submitted, first, that only two transactions could be identified, namely the sale by NatWest to Miss Hawkins and the surrender by the company of the tenancy to Miss Hawkins, secondly that KF was not a party to either of them, and, thirdly, that in any event it was not permissible to treat them together as one transaction for the purposes of applying section 423. As to the first two submissions I have already indicated why I regard the relevant arrangement as having encompassed more than the two individual transactions, and the way in which KF participated in that arrangement. In support of the third proposition Mr Jourdan sought support from the decision of the Court of Appeal in National Westminster Bank v Jones [2001] EWCA Civ 1541, [2002] 1 BCLC 55 [“Jones”]. In that case, farmers were advised to incorporate a company, and then grant a tenancy and transfer the farming assets to the company, in order to try and prevent the bank from obtaining possession of the farm. They followed that advice. The company was incorporated with the shares beneficially owned by the farmers. Two weeks later a tenancy was granted to the company and the farming assets sold to it. The bank applied to set aside the tenancy and sale under s.423. The farmers argued that the incorporation of the company and the tenancy and sale were a single transaction. As they owned the shares in the company, if the tenancy or sale were at an undervalue, the effect would be to increase the value of the shares, so that overall, the value of the consideration received by them was not significantly less than the value of the tenancy and assets to the company. Thus (so the argument ran) there was, looking at the matter in the round, no “transaction at an undervalue”

“In my judgment DEFRA’s claim under section 423 succeeds and it is entitled to an order which restores its position to what it would have been had the transaction not been entered into. As at present advised, an order which has the effect of charging Miss Hawkins’ freehold interest with the amount previously secured by IBAP’s charging order would appear to be the correct solution: I understand that it is common ground between the parties that Robin Feakins’ charge would have priority in that event. It may, however, be argued that some other order would be more appropriate and I will hear further argument on this. In that connection I am open to persuasion that an order should also seek to reverse that part of the arrangement which consisted of the surrender by the company: amongst the consequences of so ordering would be to enable the creditors of the company to derive what advantage they might be able to negotiate from the technical existence of the tenancy and to claim any user damages in respect of trespasses by DEFRA during the intervening period.”

“5. In my judgment it is not necessary under section 423, when the Court is considering the form of the order to make for “restoring the position to what it would have been if the transaction had not been entered into and protecting the interests of persons who are victims of the transaction” that the order should seek to replicate the precise position which would have existed but for the impugned arrangements. The principal purpose of the section is to adjust the position as between the parties to the transaction, and the parties to the transaction, for the purposes of this action, were the defendants, and the victim was DEFRA. 6. To the extent that the company played a role in those arrangements, it was the entirely voluntary role by which it surrendered its tenancy for £1. If the directors of the company perceived that at that time to be in the best interests of the company, then there is no reason to suppose that it does not remain a transaction which was a good idea from the point of view of the company. If, on the other hand the directors of the company were not considering the interests of the company at all in executing the surrender, but were simply to confer a benefit out of company assets on Miss Hawkins, then it does not seem to me to lie in the mouth of the company under the control, still, of the same directors, now to come to Court and seek to take advantage of their own abuse of powers to restore the company’s position. 7. If, as a result of all that, the unsecured creditors of this insolvent company have suffered damage as a result of the voluntary actions of the board of the company, those creditors may, in due course, in another forum, have their remedy in respect of that. But, having reflected on the matter, and having had the benefit of further submissions, it does not seem to me to be the right, as part of my order, to resurrect the tenancy.”

“2. It is ordered that [Miss Hawkins] beneficial interest in Hill Farm shall stand charged with the payment of the sums which [KF] was liable to pay to the Intervention Board for Agricultural Produce, and is now liable to pay to the Claimant, under the judgment of the High Court entered in Claim No. 1992 F No. 0165 against [KF] by Mr Justice Kennedy on 23 June 2000 consisting of the principal sum of £650,645.68 and the costs of £10,000.00, less the sum of £16,500 received by the Intervention Board for Agricultural Produce or the Claimant from Sarah Feakins in February 2002, together with interest thereon pursuant to the Judgments Act 1838 at 8% per annum. 3. The charge created in paragraph 2 above is to rank behind the Robin Feakins Charge, but not behind any other interest in Hill Farm whatsoever. 4. The surrender of the Tenancy by the Company to [Miss Hawkins] on 5 October 2001 is not to be set aside.”

“As a matter of ordinary language, it appears to me that the ‘transaction’ or ‘transactions’ in the present case was or were the tenancy and the sale agreement entered into between the defendants and the company. I do not think that the acquisition of the company could be said to be part of the ‘transaction’ under consideration in the present case. The acquisition of the company could no doubt be a transaction for the purposes of section 423(1), but it seems to me that it was a separate transaction from the tenancy and the agreement, not least because it was entered into between the defendants and third parties and related to the company as the subject matter of that transaction, whereas the transaction or transactions under attack in the present case consist of the tenancy and the sale agreements entered into between the defendants and the company itself.”

“The answer is the tenancy agreement and the sale agreement. They were the transactions entered into by Mr and Mrs Jones with [the company] for the admitted purpose of putting assets (i.e. the farm land and the farming stock) beyond the reach of the bank, which was making a claim, and of prejudicing the interests of the bank in relation to the claims it was making against Mr and Mrs Jones under its securities. The acquisition of [the company] and the issue of the shares in it was not a relevant transaction within section 423.”

“The first two issues to which I referred earlier, particularly the second, depend on ascertaining, for the purposes of section 238 of the [1986 Act], what was the transaction alleged to have been entered into by the company at an undervalue. The allegation of the liquidator is that the share sale agreement was the transaction so that only the consideration passing to and from the company thereunder is to be taken into account. This was disputed by Brewin Dolphin on the basis that the court must have regard to the whole transaction not just that part of it the liquidator seeks to challenge. This is a point of some importance on the true construction and application of section 238. It is true that the word ‘transaction’ is very widely defined. It is also true, as submitted by counsel for Brewin Dolphin, that, given the purposes of sections 238, 339 and 423 to which it applies, the court should not strain to narrow the definition by judicial decision. However, the word ‘transaction’ is to be construed and applied as part of section 238 as a whole…. First, the transaction must be identified by reference to the person (or persons, for the singular must include the plural) with whom the company entered into it. Only the elements between the company and that person may be taken into account. Thus, without more, a contract between the company, A, and B cannot be part of a transaction entered into by the company, A, with C. I introduce the caveat ‘without more’ to guard against cases where the transaction is artificially divided. The second limit appears to me to flow from the comparison the statute requires the court to make. In each case it is necessary to ascertain the consideration to be received by the company. In the case of section 238(4)(a) the transaction is either a gift of ‘on terms that provide for the company to receive no consideration’. In other cases, as provided for in subsection (4)(b), the task is to ascertain the value of the consideration provided by the other person ‘for’ the consideration provided by the company. Whether or not the word ‘consideration’ in those contexts is confined to its legal meaning it clearly connotes the quid pro quo for that which it is alleged the company disposed of at an undervalue.”

“First, the parties acting at arms’ length and for readily understandable reasons chose to structure the deal between them so that on the face of the documents the share sale agreement and the lease agreement effected two separate, though linked, transactions. There is no indication that this different treatment was a sham or otherwise colourable. If parties in such circumstances choose to structure their commercial dealings in my view the court should give full weight to their intentions. Second, for reasons I have already given, the share sale agreement and the lease agreement cannot be the same transaction for the purposes of the section because, though the company was party to both of them, only Brewin Dolphin was party to the first and only PCG party to the second. Third, the parties to the lease agreement … unambiguously attributed the four annual payments of £312,500 to rent due thereunder for possession and use of the computer equipment to which it related. The promise to make those payments cannot be re-characterised as consideration by PCG or Brewin Dolphin ‘for’ the shares being sold by the company.”

“Where the value of the consideration for which a company enters into a section 238 transaction is as speculative as is the case here, it is, in my judgment, for the party who relies on that consideration to establish its value. PCG and Brewin Dolphin are, in the present case, unable to do so.”

“The mere creation of a security over the company’s assets does not deplete them and does not come within the paragraph [a reference to section 238(4)]. By charging its assets the company appropriates them to meet the liabilities due to the secured creditor and adversely affects the rights of other creditors in the event of insolvency. But it does not deplete its assets or otherwise diminish their value. It retains the right to redeem and the right to sell or remortgage the charged assets. All it loses is the ability to apply the proceeds otherwise than in satisfaction of the secured debt. That is not something capable of valuation in monetary terms and is not customarily disposed of for value.”

“Prima facie it seems most unlikely that the legislature would have intended a transaction of the Lloyds Bank Ltd v. Marcan type to escape the net of the section. Nevertheless, the wording of section 423 is very different from that of the old section 172 and, while having due regard to the purpose of the section, we must apply that wording as we find it.”

“I see some force in the argument that mere detriment to the person entering into the relevant transaction, unaccompanied by a corresponding benefit to the other party, cannot properly be treated as part of the consideration provided by such person for the purpose of applying section 423(1)(c) unless the incurring of the detriment is actually part of the bargain, as opposed to being merely an incidental result of the transaction. However, I have some doubts as to whether this is what Parliament would have intended and would prefer to leave this question open for decision in another case. For I am of the clear opinion that Mr Moss [for the AMC] is correct in his second main submission on this appeal. This submission focused attention not so much on the detriment to the first defendant as on the benefit to the second defendant conferred by the transaction. ‘Transaction’, it was pointed out, is a wide word, defined by section 436 as including ‘a gift, agreement or arrangement’. The tenancy, if effective, gave her the threefold benefits of safeguarding the family home, enabling her to acquire and carry on the family farming business, and a surrender value. Furthermore, and most significantly, the transaction, if effective, placed her vis-à-vis the plaintiff in what Mr Moss described as a ‘ransom’ position. If the tenancy was effective, the plaintiff would have had to negotiate with and no doubt pay a high price to her before it could obtain vacant possession of the farm and sell it for the purpose of enforcing its security and repaying the debt owed to it by the first defendant. Thus, it was submitted, the transaction plainly conferred, and was intended to confer, on her significant enhanced benefits beyond the rights granted by the tenancy agreement itself, for which enhanced benefits she did not pay. Mr Dowding, in answering these submissions, naturally relied strongly on the concession that the annual rent of £37,250 reserved under the tenancy represented a full market rent, being the best rent that could reasonably be obtained. … In Mr Dowding’s submission, to bring the case within section 423(1)(c) the plaintiff would have to show that the annual rent of £37,250 was significantly less than the market rent and this has not been shown. The alleged threefold benefits relied on by the plaintiff are, he contended, irrelevant. Any such tenant could have acquired the farming business and lived in the farmhouse. Any such tenant would have acquired the benefit of the surrender value. All these potential advantages were part and parcel of the factors which would be reflected in the assessment of the market rent, which, together with the other obligations entered into by the second defendant under the tenancy agreement, constituted full consideration for the benefits conferred on her. Persuasively though these submissions were advanced, I am not persuaded by them. 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 a rent 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 section 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.”

“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.”

“[T]here can be no doubt that their purpose was to get Hill Farm into Miss Hawkins’ name, out of the reach of DEFRA as a secured creditor of KF, and to enable the vacant possession value to be realised in Miss Hawkins’ hands.”