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Warwick (Formerly Yarwood) v Trustee In Bankruptcy of Clive Graham Yarwood [2010] EWHC 2272 (Ch)

Ancillary relief appeal by wife against an order at first instance that payment of share of net sale proceeds of former matrimonial home was void under Insolvency Act 1986, s284. Decision upheld, but on different grounds.

The issue in this case was whether the payment of 75% of the net proceeds of sale of a former matrimonial home constituted a disposition which was void under s 284 Insolvency Act 1986, having been made after presentation of a bankruptcy petition against the former husband. The petition had been presented six days prior to the payment being made to the former wife.

Although the parties had reached agreement through their solicitors in correspondence a consent order had not been approved by the court prior to the former wife receiving her share of the net sale proceeds.

It was argued that the disposition occurred before the presentation of the petition due to either (a) an agreement reached between solicitors in compromise of ancillary relief proceedings amounting to a legally enforceable contract or which was sufficient to give rise to a constructive trust or proprietary estoppels; or b) the exchange of contracts for sale of the property on the day before presentation of the petition giving rise to a constructive trust or proprietary estoppel.

The decision of the deputy district judge at first instance, that the disposition was void under s 284, was upheld but on different grounds. The deputy district judge had held that following Xydhias v Xydhias the agreement made between the parties was not an enforceable agreement and so could not operate to vary the 50:50 beneficial interest of each party in the former matrimonial home.

HHJ David Cooke said that had it been necessary to do so, he would have held that Xydhias was inconsistent with earlier decisions of the Court of Appeal and that on the balance of authority in that Court an agreement which contains all the ingredients of a valid contract may be enforceable notwithstanding that it is concluded in compromise of ancillary relief proceedings. However, on the particular facts there was no agreement between the parties prior to the presentation of the petition, nor was there any constructive trust or estoppel.

Summary by Matthew Stott of Field Court Chambers
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Neutral Citation Number: [2010] EWHC 2272 (Ch) 
Case No: CH/AP/393

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
On Appeal from Chesterfield County Court
Deputy District Judge Apthorpe

Birmingham Civil Justice Centre
Bull Street, Birmingham B4 6DS 
13 September 2010

B e f o r e :

HHJ DAVID COOKE
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Between:
Andrea Warwick (formerly Yarwood)
Appellant
 
- and -
 
Trustee in Bankruptcy of Clive Graham Yarwood
Respondent

____________________

Andrew Charman (instructed by Chubb & Co) for the Appellant
Lisa Walmisley (instructed by DLA Piper) for the Respondent
Hearing dates: 4 August 2010
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HTML VERSION OF JUDGMENT
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Crown Copyright ©

HHJ David Cooke:
1. On 30 April 2010 DDJ Apthorpe sitting in the Chesterfield County Court made an order on the application of the respondent Trustee in Bankruptcy that the payment on 26 March 2007 of 75% of the net proceeds of sale of the former matrimonial home registered in the joint names of the bankrupt, Mr Clive Yarwood, and his then wife Andrea Yarwood (since remarried and known as Andrea Warwick) to Mrs Warwick constituted a disposition by Mr Yarwood which was void under s 284 Insolvency Act 1986 as having been made after presentation of a bankruptcy petition against Mr Yarwood. The petition had been presented 6 days earlier, on 20 March 2007. The amount of the disposition was alleged to be £128,321.29, being the difference between half the net proceeds (which it was accepted Mrs Warwick was entitled to as a joint owner) and the 75% she received. The DDJ ordered Mrs Warwick to pay that amount to the Trustee.

2. Mrs Warwick appeals against that order, pursuant to permission which I gave on 14 June 2010. She contends that any relevant disposition occurred before the presentation of the petition, by virtue of either (a) an agreement reached between solicitors in compromise of ancillary relief proceedings on 28 September 2006, the contention being that this amounted to a legally enforceable contract for immediate transfer to Mrs Warwick of an additional 25% of the beneficial interest in the property, or was otherwise sufficient to give rise to a constructive trust to the same effect, or to give rise to a proprietary estoppel, or (b) the exchange of contracts for sale of the property on 19 March 2007, the day before presentation of the petition, on the basis of instructions given by Mr Yarwood to the solicitor dealing with the sale that the proceeds on completion were to be paid as to 75% to Mrs Warwick. This too is said to give rise to a constructive trust or proprietary estoppel.

3. Unfortunately, there is no transcript of the DDJ's judgment as it appears the court recording equipment was not operating for most of the relevant time. Counsel (who both appeared below) are agreed however that the DDJ gave a clear judgment holding that an agreement had been made between the parties on 28 September 2006 but that on the authority of Xydhias v Xydhias [1999] 2 All ER 386 it was not an enforceable agreement and so could not operate to vary the beneficial interests of the parties in the former matrimonial home. Further, for the same reason no binding agreement had been made between the parties on the alternative date canvassed, 19 March 2007. Mr Charman's primary case on behalf of the Appellant is that this conclusion was wrong in law, the passages relied on from the decision in Xydhias being, he submits, obiter and contrary to previous Court of Appeal authority, particularly Smallman v Smallman [1972] Fam 25.

4. For the respondent Ms Walmisley supports the DDJ's reasoning, but in the alternative argues a point taken in her respondent's notice, that on the facts (which are not in dispute) no agreement was reached in any event for variation of the parties' beneficial interests on either of the dates relied on.

Factual background
5. Those facts are as follows: Mrs Warwick and Mr Yarwood were married in 1984, and separated in April 2004. Mrs Warwick issued a divorce petition the following month, and a decree nisi was pronounced in September 2004. In the same month she issued an application for ancillary relief. The decree absolute was pronounced in December 2004, but the ancillary relief application continued. Mr Yarwood was a director and shareholder of what appears to have been a relatively substantial group of companies headed by Food Services Solutions Group Limited ("FSG"). Apart from his shareholding and some pension funds in each name, the only other substantial asset appears to have been the matrimonial home, Teapot Farm which is near Alfreton in Derbyshire, with an estimated value of about £500,000 net of mortgage. The property was registered in the joint names of the parties and it is not in dispute that the beneficial interest in the property was held equally between them.

6. The ancillary relief application had still not been resolved when on 2 June 2006 administrative receivers were appointed to the companies in the Food Services Solutions group. The receivers fairly promptly demanded payment by Mr Yarwood of some £936,000 owing by him on directors loan account, which he was unable to pay. He was advised that if he did not repay this loan account, he would become liable for an additional amount of tax of £374,000. In addition at that time he had credit card debts of some £23,000, and a bank overdraft of £29,000. He had given a personal guarantee to a supplier, which led to a statutory demand being made on him on 6 September 2006 for some £49,000. By that date, therefore, he had debts of approximately £1.4 million and was on the face of it deeply insolvent. Mrs Warwick was aware of this, all the relevant facts having been set out in a letter to her matrimonial solicitors on 12 July 2006.

7. The ancillary relief application was listed for final hearing in October 2006. On 26 July her matrimonial solicitors put two proposals for settlement. The first, described as "Option A" provided for a pension sharing order and for the farm to be sold, with an equal division of assets save that Mr Yarwood would retain certain vehicles and Mrs Warwick would receive an adjustment from the proceeds of sale of the farm. Given the values of those vehicles estimated in the ancillary relief proceedings, it would seem that the adjustment in her favour would have been about £15,000. Her solicitors proposed that her claims for capital provision would remain open, but to be revived only if Mr Yarwood eventually received any distribution in respect of his interest in the companies in receivership. The alternative, "Option B" was identical except that it would have provided for a clean break and "the net proceeds of sale of Teapot Farm be divided as to 75% to Mrs Yarwood and 25% to Mr Yarwood." There would be no adjustment in respect of the vehicles, but the additional payment to Mrs Yarwood from the increased share of the proceeds of sale would have been around £125,000.

8. Mr Yarwood's solicitors did not immediately either accept or reject these proposals and a certain amount of correspondence followed, dealing in part with what appeared to be a reluctance by Mrs Warwick's solicitors to accept that the receivership of the companies meant that Mr Yarwood's interest in them was worthless. On 7 September Mr Yarwood's solicitors sent a copy of the statutory demand which had been served on him, pointing out that if he were made bankrupt the family court could no longer transfer any assets to Mrs Warwick. It is also clear from the documents that by that date Mrs Warwick's solicitors had obtained a copy of FSG's statement of affairs filed by the receivers, which showed an estimated deficiency of assets of just under £2 million. If these figures were correct (and there seems no reason to doubt them, since they came from receivers appointed by the company's bank and were not therefore in any real sense under the control or influence of Mr Yarwood) by that stage any hope that Mr Yarwood would somehow emerge with anything from the receivership, let alone a sizeable distribution, ought to have evaporated. Nevertheless Mrs Warwick's solicitors wrote to her on 8 September saying that they were "unsure whether this means that all of the companies within the group are insolvent and Clive's shares worthless as a result" (solvency of any of them would have made no difference if, as it appears, all the other companies were wholly owned subsidiaries of FSG) and that they were "concerned that true assets of the group (including the land on which the … sites are based) are not reflected in the figures." They proposed a further accountants report and told her that "if you wish to settle matters now, you will be doing so without getting to the bottom of his affairs." Clearly the solicitors were still concerned that the insolvency was in some way a ruse by which Mr Yarwood might be concealing assets. Whether there was anything substantive to these concerns, or they were being excessively cautious, is not something I have to determine.

9. Plainly there had been some telephone discussion between the respective solicitors in the previous few days, because the letter goes on to say "you [ie Mrs Warwick] have indicated to me on the telephone that you would be willing to agree the proposal put forward to me verbally by [Mr Yarwood's solicitors] within the last few days. Although I have not received written confirmation of the offer, I understand that it will be a broad acceptance of Option B in my letter … of 26 July 2006". The letter went on to advise that Mrs Warwick should "obtain full and frank disclosure before settling" and enclosed a form of disclaimer for Mrs Warwick to sign if she nevertheless wished to settle on the terms offered. The letter said nothing about the consequences if Mr Yarwood was in fact made bankrupt.

10. Mrs Warwick instructed her solicitors to agree the terms offered and a further telephone conversation between the solicitors took place on 15 September 2006, after which her solicitor made a file note saying "[Mr Yarwood's solicitor] asked whether we had a deal and I said on a without prejudice basis we did….[he] wanted to know whether we would need to serve the pension providers and I said that we would. He said that on that basis if he could have a copy of the draft consent order this would be great and we would then need to vacate the hearing once he had agreed in correspondence that matters were concluded."

11. It is not contended that this conversation resulted in any concluded agreement. Mr Charman accepts that in the context of the discussions that were taking place, the reference to a deal "on a without prejudice basis" meant that it was not binding. On the 19 September 2006, Mrs Warwick's solicitor wrote sending a draft consent order and pension sharing annexe, which were said not to have been approved by Mrs Warwick and "therefore subject to her instructions and any amendments she wishes to make." Nevertheless, Mr Yarwood's solicitors were asked to take his instructions "and confirm whether the document is agreed as drafted. If it is, a joint approach to the court will be necessary to vacate the final hearing and the pension trustees will also need to be contacted for their approval of the draft order." After a telephone conversation in which proposed amendments were discussed, Mrs Warwick's solicitors wrote on 28 September 2006 saying "we write further to our telephone conversation this morning to confirm that matters are agreed between our respective clients. We enclose the draft consent order containing the final amendments discussed". The letter makes it clear however that the pension sharing annexe was still in draft and required to be approved by the trustees of Mr Yarwood's pension fund. I will need to come back to the terms of the draft consent order in more detail in due course. It is this letter that Mrs Warwick relies on.

12. Following this, the solicitors jointly requested that the final hearing be vacated, and there then followed correspondence seeking to agree the terms of the pension sharing annexe to the order. From the correspondence, it appears that the solicitors needed to agree the percentage division of Mr Yarwood's pension fund necessary to achieve equality, and they were at odds about who should pay the charges involved. It does not appear that the draft order was sent to the pension trustees until 23 April 2007. In the meantime, the farm was put on the market, and a separate firm of solicitors instructed to handle the sale. On 28 February 2007 Mrs Yarwood's matrimonial solicitors wrote to the conveyancing solicitors saying "she has asked that we write to you confirming the financial settlement within her divorce proceedings and in particular the division of the net proceeds of sale of Teapot Farm. I should mention that whilst the terms of the draft order had been agreed, it has not yet been approved by Nottingham County Court as there have been some problems with the pension sharing aspect. We do however expect the order to be approved in due course. In accordance with the terms of the proposed order … the remaining net proceeds of sale are to be divided as to 75% to Mrs Yarwood and 25% to Mr Yarwood." On 12 March 2007 Mr Yarwood's solicitors wrote a similar letter saying "I confirm that it is agreed between the parties that the net sale proceeds are to be divided as to 3/4 to Mrs Yarwood and as to ¼ to Mr Yarwood."

13. Contracts were exchanged on 19 March 2007. The bankruptcy petition was presented the following day, 20 March 2007. The sale was completed on 23 March 2007. On 26 March 2007, the conveyancing solicitor distributed the proceeds of sale as he had been instructed. It appears that Mrs Yarwood's matrimonial solicitor was not informed about the existence of the bankruptcy petition until 18 April 2007, by which time the pension sharing annex had still not been sent to the pension trustees. It was thereafter agreed by them, and the final order in the ancillary relief proceedings was made by consent on 4 June 2007. The bankruptcy order was made on 13 September 2007.

The law: s 284
14. Section 284 Insolvency Act 1986 provides, so far as relevant, as follows:

"284 Restrictions on dispositions of property

(1) Where a person is adjudged bankrupt, any disposition of property made by that person in the period to which this section applies is void except to the extent that it is or was made with the consent of the court, or is or was subsequently ratified by the court.

(2) Subsection (1) applies to a payment (whether in cash or otherwise) as it applies to a disposition of property and, accordingly, where any payment is void by virtue of that subsection, the person paid shall hold the sum paid for the bankrupt as part of his estate.

(3) This section applies to the period beginning with the day of the presentation of the petition for the bankruptcy order and ending with the vesting, under Chapter IV of this Part, of the bankrupt's estate in a trustee."

15. The Act does not contain a definition of "disposition", though counsel are agreed that the expression must be widely construed. It was also agreed that the payment out of the proceeds of sale of the farm would not amount to a void disposition if, by one or other of the routes argued for, Mrs Warwick held a 75% beneficial interest in the farm no later than 19 March 2007. The position would be the same if she was entitled to a proprietary estoppel at that date. If Mrs Warwick could not establish either of these propositions, it is conceded that the enhanced payment to her was a disposition caught by the section.

The Xydhias points
16. I am told that the DDJ held that the letter of 28 September 2006 did show a concluded agreement between the parties for the transfer of an additional 25% of the beneficial interest in the farm which, but for the effect of the decision in Xydhias, would have been enforceable in law and therefore sufficient on ordinary principles immediately to vest that additional share in Mrs Warwick. Mr Charman's first argument is that the DDJ was wrong to hold that Xydhias prevented the agreement from being enforceable.

17. The passage which, I am told, was principally relied upon by the DDJ came from the judgment of Thorpe LJ (with whom the other Lords Justices agreed) at page 394:

"My cardinal conclusion is that ordinary contractual principles do not determine the issues in this appeal. This is because of the fundamental distinction that an agreement for the compromise of an ancillary relief application does not give rise to a contract enforceable in law. The parties seeking to uphold a concluded agreement for the compromise of such an application cannot sue for specific performance. The only way of rendering the bargain enforceable, whether to ensure that the applicant obtains the agreed transfers and payments, or whether to protect the respondent from future claims, is to convert the concluded agreement into an order of the court."

18. Mr Charman presented a well structured argument to the effect that the conclusion stated in this passage was obiter or wrong. He relied in particular on the analysis given by Ward LJ in Soulsbury v Soulsbury 2007 EWCA Civ 969. As to whether it was obiter, the facts in Xydhias were that counsel seeking to negotiate a compromise of the wife's claim for ancillary relief had reached terms of settlement which were broadly agreed. Drafts of a proposed consent order passed between them but were never finally settled. However, the differences between the respective positions of each side were relatively small. As Thorpe LJ said "all that remained unresolved was either mechanics of trivial". The husband then sought to resile entirely from the proposed terms and contest the matter fully at trial. The question for the Court of Appeal was whether the district judge had been right to decide that the parties had concluded an agreement which ought to be reflected in an order of the court, not whether the terms of any such agreement would have been enforceable between the parties irrespective of a court order.

19. It is right to say that Thorpe LJ also reviewed authority showing that an agreement between the parties could never be conclusive as to the order the court would make, since the court must always exercise its own discretion under section 25 of the Matrimonial Causes Act 1973. At page 395 he said:

"… it is clear that the award to an applicant for ancillary relief is always fixed by the court. The payer's liability cannot be ultimately fixed by compromise, as can be done in the settlement of claims in other divisions. Therefore, the purpose of negotiation is not to finally determine the liability (that can only be done by the court) but to reduce the length and expense of the process by which the court carries out its function. If there is a dispute as to whether the negotiations led to an accord that the process should be abbreviated, the court has a discretion in determining whether an accord was reached."

20. It is tempting to think that the actual decision in Xydhias could have been reached by the following process:

i) No agreement between the parties, however detailed or formally arrived at, and even if it expressly provides that it is in full and final settlement of matrimonial claims or that one party will not make an application to the court, prevents the court from exercising its jurisdiction to consider such an application; see Hyman v Hyman [1929] AC 601. Nor does such an agreement oblige the court to make an order in the terms agreed; see Edgar v Edgar [1980] 3 All ER 887. The court must always exercise its own discretion, taking account of all the factors set out in section 25.

ii) The existence of an agreement between the parties is however highly relevant to the exercise of discretion, to the extent that is satisfied that such an agreement has been reached, the court will in the absence of some vitiating factor normally regard it as setting out what the parties considered to be fair, and make an order giving effect to the terms agreed; see Edgar itself and innumerable cases following it.

iii) Since the court is always exercising its own discretion, it can in the exercise of that discretion have regard to terms broadly agreed between the parties just as much as to an agreement which, on ordinary principles, would have satisfied the requirements for formation of an enforceable contract, using its own powers to make good any omissions or lack of detail in those terms. In that sense, as Thorpe LJ said, "ordinary contractual principles" would not have been determinative of the appeal, as the court would be, in the exercise of its discretion, making an order to put into effect a bargain substantively agreed between the parties, even though it might not have been sufficient to have been binding as a matter of contract between them in other circumstances.

21. The trouble with that approach is that it is not the way the decision was expressed by Thorpe LJ, whose decision was that the order below was correct not despite the fact that the agreement may not have been independently enforceable, but because it never could have been enforced. As Mr Charman recognised, a similar submission was expressly rejected by Ward LJ in Soulsbury at paragraph 41 where he said "I cannot accept that submission because that [the 'cardinal conclusion'] was the key plank in the reasoning of the court. It was an essential part of the ratio." I am unable therefore to conclude that the DDJ should have treated what Thorpe LJ said as obiter.

22. Mr Charman's argument then moves on to the submission that, insofar as Xydhias holds that an agreement to compromise ancillary relief proceedings can never give rise to an enforceable contract, it is wrong, in the sense that it is inconsistent with previous Court of Appeal authority. It is not of course open to me, any more than it was to the DDJ, to depart from a decision of the Court of Appeal. But if Mr Charman is right that there are two or more indistinguishable decisions of that court which are inconsistent with each other (and in the absence of an express decision by the Court Appeal to depart from an earlier decision of its own), the lower courts are obliged to choose which of them should be followed in a particular case. The conflict can of course only be fully resolved by a future decision at the level of the Court of Appeal or above.

23. In this respect, Mr Charman adopts in its entirety the analysis of previous authority in the Court of Appeal and below which was set out in the judgment of Ward LJ in Soulsbury, at paragraphs 23 to 40. I do not propose to set out that analysis in full here, still less to seek to improve on it. In the course of it, Ward LJ observed that prior to Xydhias the Court of Appeal had enforced terms agreed between matrimonial parties as a matter of contract in a number of cases, provided that it was satisfied that the requirements necessary to establish an enforceable contract (in particular the existence of consideration and the intention to create legal relations) were established. He cited Goodinson v Goodinson [1954] 2 QB 188, Gould v Gould [1970] 1 QB 275 and Merritt v Merritt [1970] 1 WLR 1211.

24. Although earlier in his judgment, at paragraph 21, he had noted the first instance decision in Sutton v Sutton [1984] Ch 184 in which it had been held that an agreement between husband and wife for a transfer of property by implication sought to exclude the jurisdiction of the court, thus offending against the rule in Hyman v Hyman with the result that the whole contract was unenforceable, no similar objection seems to have prevented the Court of Appeal enforcing such agreements in the above cases. Indeed (although this is my observation and not that of Ward LJ) it is not obvious why a rule of policy which holds that a term agreed between parties to the effect that they will not apply to the court is void also requires that anything else they may have agreed should not be enforceable. Why should the offending term not be severed?

25. In Smallman v Smallman [1972] Fam 25, the parties had reached an agreement which was expressly "subject to the approval of the court". The husband sought to resile from it, but on appeal Lord Denning held that such a condition did not mean that there was no agreement at all but that it was the obligation of the parties to apply to the court for approval, and pending the decision of the court neither could withdraw from what had been agreed. In Amey v Amey [1992] 2 FLR 89 Scott Baker J at first instance said that the law had moved on since Smallman, and held that such an agreement was immediately effective, even before it had been submitted to the court for approval.

26. Ward LJ also cited (at paragraphs 32 and 35) passages from the judgment of Lord Diplock in de Lasala v de Lasala [1980] AC 546 in which he said that a maintenance agreement made between parties without the intervention of the court was enforceable by action, but that once arrangements agreed upon by the parties had been made the subject of a consent order by the court the legal effect of those arrangements no longer depended on the agreement of the parties but derived from the order of the court.

27. He concluded his review of the earlier cases as follows (paragraph 35):

"True it is that an agreement converted into a court order has the advantage of the means of enforcement available to enforce the court's order whereas a party has to sue on the agreement to obtain eventual enforcement. But that does not meet Mr Millett's point: settlement without recourse to the courts is nonetheless enforceable. So I prefer the argument of Mr Millett. There is nothing in the decisions which I have recited thus far which suggests that an agreement containing financial arrangements made between spouses and former spouses with the intention of creating legal relations between them and which is not contrary to public policy cannot be enforced in the civil jurisdiction of the courts. Against that background I turn to Xydhias."

28. In the course of his review of the decision in Xydhias, Ward LJ expressed (at paragraph 40) his doubts about the statement that in the Family Division the question whether parties had arrived at an agreement, as distinct from the effect to be given to that agreement, was to be determined at the discretion of the court. At paragraph 45 he said this:

"In my judgment the cardinal conclusions expressed by Thorpe L.J. are stated in terms which are too wide. I accept that if there are negotiations to compromise a claim for ancillary relief, then there is a duty to seek the court's approval as is stated in Smallman. But as Smallman states, and I do not see how that authority of this court can be ignored by me, even an agreement subject to the approval of the court is binding on the parties to the extent that neither can resile from it."

29. That is a strong statement, but in the end, it was not necessary for the purposes of deciding the appeal in Soulsbury for the court to consider whether it should depart from Xydhias. The case itself was decided on the "narrow basis" that the agreement sought to be enforced was not one which sought to compromise any anticipated application for ancillary relief and it thus did not fall within the principle in Xydhias.

30. No such distinction can be made in this case, and were it necessary to do so to decide this appeal I should have respectfully agreed with the analysis and conclusions of Ward LJ, accepted Mr Charman's argument that Xydhias was inconsistent with earlier decisions of the Court of Appeal and held that, on the balance of authority in that court, in principle an agreement between parties which satisfies all the normal requirements for formation of a valid contract may be enforceable notwithstanding that it is made in compromise of ancillary relief proceedings.

31. But in my view that conclusion would not be sufficient to decide the appeal in favour of the Appellant. In my judgment the point taken in the Respondent's notice is made out, namely that on the agreed facts there was never in any event an agreement sufficient to give rise to a constructive trust or proprietary estoppel prior to the presentation of the petition.

Was there a binding agreement in any event? If so, what for?
32. Firstly, in my judgment, irrespective of the Xydhias argument, on the facts of this case no enforceable contract had been reached at the time the letter of 28 September 2006 was written. Whatever degree of agreement might have been taken into account by a family court making a discretionary order in matrimonial proceedings, for an agreement to be enforced by action all the normal rules for formation of a valid contract must be shown to be satisfied. At 28 September 2006, the parties had not reached agreement on all the terms under discussion, because an important part of the proposed consent order, which was the document that would set out the terms of their agreement, was the annexe relating to pension sharing, which had not been settled at that date and indeed does not appear to have been settled until at least the following April. It cannot in my judgment be said that this was a matter separate from an agreement in relation to the farm; the parties were negotiating a package of arrangements intended to dispose of the ancillary relief application and as a matter of contract it seems to me that they could not be said to have reached an agreement until all the terms they were discussing were concluded. If there was no binding agreement at all, there can be no question of a constructive trust being imposed to give effect to it.

33. When the letter of 28 September 2006 said that "matters are agreed between our respective clients" it meant only that a sufficient degree of agreement had been reached to make it unnecessary to proceed with the final hearing. It was not wrong of the solicitors, in the context of matrimonial proceedings, to say that matters were agreed because if the parties have subsequently fallen out over the final detail of the pension transfer or some other aspect of the consent order, it would have been open to either party to apply to the court to make an order, as was done in Xydhias, implementing the terms of the broad agreement and resolving any minor outstanding matters.

34. Secondly, and even if I am wrong on the last point, I accept Ms Walmisley's submission that what was set out in the draft consent order was not an agreement for the immediate transfer of a share of the beneficial interest in the property, but an agreement for the property to be sold and for payment of an amount of money defined by reference to, and paid out of, the sale proceeds. In this context, it is important to recall that the family court has a wide range of powers available to it on an application for ancillary relief. Relevantly, they are divided between orders for financial provision of various kinds, set out in section 23 of the Matrimonial Causes Act 1973, and orders for adjustment of property rights, set out in section 24. An order for payment of a lump sum is an order for financial provision made under section 23. An order for transfer of land, or an interest in land, by one spouse to the other is a property adjustment order made under section 24. By section 24 A:

" where the court makes under section 23 or 24 of this Act … an order for the payment of a lump sum or a property adjustment order, then, on the making of that order or at any time thereafter, the court may make a further order for the sale of such property as may be specified in the order, being property in which or in the proceeds of sale of which either or both of the parties to the marriage has or have a beneficial interest …"

35. An order for sale is thus not a freestanding order, but always an adjunct (a 'further order') to one of the specified types of financial provision or property adjustment orders. The court could thus in principle have been asked to order either:

i) that Mr Yarwood should transfer 25% of the beneficial interest in the farm to Mrs Warwick, and that the farm should then be sold, or

ii) that Mr Yarwood should pay a lump sum to Mrs Warwick, and that the jointly held property should be sold in order to provide the funds for him to do so.

36. These are not however the same order and they do not have the same effect. The fact that an order for sale is made does not of itself necessarily imply that an interest in property is being transferred. If an order were made in the second form, even if the amount of the lump sum is defined by reference to the amount of the sale proceeds, it is still an order for payment of an amount of money, and not an order for the transfer of ownership of the asset from which the money is expected to be paid. The distinction is obvious if one considers what would happen if, say, such an order had been made but instead of paying the lump sum from the sale proceeds, Mr Yarwood had paid an equivalent amount from some other source, such as borrowing. His obligation would be discharged and Mrs Warwick would not be entitled to insist on being paid again out of the sale proceeds. The same would not be true if she were already the owner of an enhanced share in the beneficial interest in the property as she would by virtue of ownership of that interest be entitled on its sale to receive the appropriate share of the proceeds (although no doubt the separate payment might well then be repayable on restitutionary grounds).

36. The draft consent order which was sent with the letter of 28 September appears at page 203 of the bundle. The first operative provision of the draft was as follows:

"The former matrimonial home, Teapot Farm … be sold forthwith on the open market and the following consequential provisions shall apply … (e) the proceeds of sale … shall be applied as follows … (iv) in payment of the balance as to 75% to the wife with the remaining 25% to the husband."

37. There is no reference in that provision, or anywhere else in the order, to a variation of the beneficial interests of the parties in the property prior to sale. If an order had been made by the court in that form, in my judgment it would not have been a property adjustment order, but an order for payment of a lump sum, with an order for sale to provide a means of payment. Insofar as the draft document sets out an agreement between the parties, in my judgment on its proper construction it does not show, by implication or otherwise, that they agreed on an immediate transfer of a share of the beneficial interest in the property, but that they agreed to sell their joint property and what they would do in future with the proceeds of sale as and when received. It was thus an agreement for payment of a sum of money, and not an agreement to vary their existing respective interests in the farm.

Common intention constructive trust/proprietary estoppel
38. Mr Charman's next argument was that even if no binding contract was made on 28 September 2006, a constructive trust arose because of the parties' common intention that their beneficial interest in the property should be varied. He referred me to the well-known cases of Lloyds Bank Plc v Rossett [1991] 1 AC 107, Yaxley v Gotts [2000]Ch 162 and Stack v Dowden [2007] 2 AC 432 and submitted that, applying the approach that the court should seek to "ascertain the parties shared intentions, actual inferred or imputed" from their whole course of conduct in relation to the property, it should be found that the parties had formed a common intention that Mrs Warwick should have an immediately increased beneficial interest in the property. That submission however founders on the fact that in my view, what was negotiated and set out in the draft consent order was not an arrangement for transfer of a beneficial interest in the property, but an arrangement for payment of a money amount. The same objection applies to his submission that a proprietary estoppel arose; the foundation of such an estoppel would be a promise or understanding that an interest in the property would be transferred, but in this case, to the extent there was any promise or understanding it was for payment of money.

Agreement/trust/estoppel in March 2007?
39. Mr Charman's alternative case was that a constructive trust or estoppel arose at the time when contracts were exchanged for the sale of the farm on 19 March 2007, with the result that any relevant disposition occurred on that date and therefore before the presentation of the petition. He submitted that this was so because exchange of contracts amounted to an act by Mrs Warwick to her detriment in reliance upon the agreement that had been earlier made, ie the alleged agreement on 28 September 2006. That does not assist him if, as I have held, the earlier agreement was for payment of money and not transfer of a property interest. In the further alternative he submitted that the fact that both parties instructed the conveyancing solicitor as to the payment of the proceeds of sale, and that Mrs Warwick allowed contracts to be exchanged on the basis of those instructions, showed that a common intention was formed at that date for transfer of an interest in the property (or alternatively that there was a promise or understanding that such an interest would be created sufficient to found a proprietary estoppel), the exchange of contracts constituting reliance on her part. I do not accept that submission; in my judgment what the parties were doing was taking steps to implement the arrangement they had made for the property to be sold and a monetary amount to be paid (which they were of course perfectly entitled to do even if as I have held that arrangement did not have the status of a binding contract). There is no suggestion in the documentation that they were changing the existing arrangement or forming or expressing any new intention with regard to the transfer of a beneficial interest in the property, and in my judgment no such intention can be inferred from their actions.

Conclusion
40. In the result, therefore, I dismiss the appeal and uphold the decision of the Deputy District Judge on different grounds; not that the parties were incapable as a matter of law of entering into a binding agreement for transfer of a property interest, but that on the facts of this case they did not in fact do so, and nor did they have any common intention that such an interest should be transferred, nor was there any promise made or understanding come to for the transfer of such an interest.

41. I will list a short hearing at which this judgment will be handed down. If as I anticipate the parties are agreed on the terms of the order to be made, there need be no attendance.