A couple owned a house. The husband went bankrupt. The wife claimed she got most of the house in exchange for letting the husband keep money from a remortgage. Even though the wife wasn't perfectly believable, the judge believed her enough to say the deal was fair, so the bankruptcy people couldn't take the house.
Key Facts
- •Mr. and Mrs. Hussain jointly owned a property.
- •A Letter of Severance dated October 4, 2017, transferred 98% beneficial interest to Mrs. Hussain and 2% to Mr. Hussain.
- •Mr. Hussain was declared bankrupt on January 28, 2019.
- •Joint trustees sought the sale of the property to recover assets for the bankruptcy estate.
- •The trustees argued the Letter of Severance was a transaction at an undervalue under section 339 of the Insolvency Act 1986.
- •Mrs. Hussain claimed the severance was in exchange for Mr. Hussain's sole use of £152,000 from a remortgage.
- •The trustees challenged the existence and validity of this agreement.
Legal Principles
Transaction at an undervalue
Insolvency Act 1986, section 339(3)(a) and (c)
Burden of proof
Case law principles
Assessment of witness credibility
Case law principles
Outcomes
The application by the trustees to set aside the Letter of Severance was dismissed.
The court found that Mrs. Hussain's evidence, although given with caution, combined with other facts and circumstances, showed a valid agreement for valuable consideration. The £152,000 from the remortgage, while paid into a joint account, was effectively controlled and used solely by Mr. Hussain. The use of part of those funds for household expenses did not invalidate the agreement as Mr. Hussain was the sole income provider. The court did not find a transaction at an undervalue.