Collardeau v Fuchs & Anor

Factual and Procedural Background

The Applicant and First Respondent were parties to financial remedy proceedings culminating in a final order in June 2023 requiring the First Respondent to pay the Applicant a lump sum of approximately £18.964 million. Subsequent enforcement orders were made due to non-payment, including an order for the sale of several assets, notably a property known as the Cotswolds Property. The Applicant applied on 27 September 2024 to set aside, or declare a sham, a purported assured shorthold tenancy ("AST") over the Cotswolds Property, entered into between the First Respondent and the Second Respondent. The AST was first disclosed in August 2024, after contracts for the sale of the property had been exchanged, with the buyer insisting on the AST being set aside prior to completion.

The AST, dated 5 September 2023, was an agreement between the First Respondent as landlord and the Second Respondent as tenant, with a fixed term from 1 June 2024 to 31 December 2030 and an annual rent of £70,000. The First Respondent had not disclosed the AST to the Court or Applicant prior to August 2024 despite disclosure obligations and relevant enforcement proceedings. The matter was initially heard by a Deputy High Court Judge who adjourned the case and directed evidence exchange, fixing a two-day hearing before Mr Justice Poole. The First Respondent did not attend the hearing and did not provide evidence, while the Second Respondent was represented by new solicitors shortly before the hearing.

Evidence was heard from the Applicant, a representative of the estate management company, and the Second Respondent’s representative, Mr Hooker. Documentary evidence included bank statements and rental schedules. The Court considered the conduct of the parties, the nature of the AST, and the surrounding circumstances of the enforcement proceedings.

Legal Issues Presented

1. Whether the purported assured shorthold tenancy ("AST") over the Cotswolds Property constituted a "reviewable disposition" under Matrimonial Causes Act 1973 s37, capable of being set aside.
2. Whether the AST was entered into with the intention of defeating the Applicant’s claim for financial relief or frustrating enforcement of the financial remedy order.
3. Whether the AST was a sham agreement, lacking genuine legal effect.
4. Whether the Second Respondent acted in good faith and without notice of the First Respondent’s intention to defeat the financial relief claim, thereby satisfying the exception under MCA 1973 s37(4).
5. Whether an order under the Insolvency Act 1986 s423 was appropriate as an alternative to setting aside the AST under MCA 1973 s37.

Arguments of the Parties

Applicant's Arguments

• The AST was a disposition intended to defeat the financial remedy claim and frustrate enforcement orders.
• The First Respondent failed to disclose the AST despite disclosure obligations, indicating an intention to conceal the disposition.
• The AST was a sham agreement, hastily created without genuine intent to be legally binding.
• The Second Respondent was not acting in good faith and had knowledge of the First Respondent’s intentions.
• The AST prevented the sale of the Cotswolds Property, thereby impeding enforcement of the final order.

Second Respondent's Arguments

• The AST was a genuine commercial lease agreement for valuable consideration.
• The Second Respondent acted in good faith and without notice of any intention to defeat financial relief.
• The Second Respondent requested time to gather evidence and initially sought to resist the application.
• Payments evidenced by bank transfers were made as rent under the AST.
• The AST was not an assured shorthold tenancy but could still be an effective agreement.

First Respondent's Arguments

The First Respondent did not attend the hearing, did not provide evidence, and did not oppose the application.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court analysed the nature of the AST, the timing of its creation, and the conduct of the parties. It found that although the AST was not an assured shorthold tenancy in law (given it was granted to a company), it was a commercial lease agreement granting exclusive possession and rights to sub-let, thus constituting a conveyance or disposition of property under MCA 1973 s37(6).

The Court rejected the argument that creation of a tenancy is not a disposition, distinguishing the case law relied upon and applying a broad statutory definition. The AST was found to be a disposition made less than three years before the application, triggering a presumption of intent to defeat the financial relief claim under s37(5).

The Court examined the evidence regarding good faith and notice. It found Mr Hooker’s evidence inconsistent, uncorroborated, and contradicted by reliable witnesses. There was no documentary or witness evidence supporting the genuine operation of the AST, including lack of payment of utilities, absence of marketing or bookings by the Second Respondent, and failure to notify vacancy as required by the AST.

The Court concluded the AST was a sham, designed to defeat the Applicant’s financial remedy claim and frustrate enforcement orders. The First Respondent’s failure to disclose the AST until after enforcement orders, and his non-participation in the hearing, supported this conclusion. The Second Respondent was found to have known the First Respondent’s intention and acted without good faith, failing to meet the exception under s37(4).

The Court exercised its discretion to set aside the AST to give effect to the enforcement order for sale of the Cotswolds Property. It declined to consider the alternative Insolvency Act 1986 s423 application due to lack of evidence on undervalue.

Holding and Implications

The Court GRANTED the Applicant’s application to set aside the purported assured shorthold tenancy (AST) with immediate effect.

This decision restores the Cotswolds Property fully to the First Respondent’s estate, removing the impediment to enforcement of the financial remedy order, specifically the sale ordered by Knowles J. No new precedent was established beyond the application of existing statutory provisions and case law to the facts. The ruling underscores that sham agreements intended to defeat financial relief claims will be set aside, and that good faith and notice exceptions under MCA 1973 s37(4) require clear evidential support, which was absent here.