Tribe v Tribe

Where a gratuitous transfer is made to a person in whose favour the presumption of advancement applies, the transferor will ordinarily fail if recovery requires proof of an illegal purpose. However, the transferor may rebut that presumption where he has withdrawn before the illegal purpose has been carried out.

In a property-transfer case, executing and registering the transfer does not itself carry out a scheme to deceive creditors. The purpose is carried out only if a creditor is in fact deceived. Genuine repentance is unnecessary. Voluntary withdrawal when the unlawful arrangement is no longer needed is sufficient.

The claimant transferred his remaining shares in a family company to his son for an apparent consideration that was neither paid nor intended to be paid. The judge found that the son had agreed to hold the shares for the claimant pending resolution of dilapidations claims against the claimant. The transfer was intended to create the appearance that the claimant no longer owned the shares, but no creditor was ever shown the transfer or deceived by it.

His Honour Judge Weeks QC held that the claimant could rely on the unimplemented illegal purpose to rebut the presumption of advancement and recover the shares. The son appealed. The central issue was whether the locus poenitentiae exception applied where a father had transferred property to a son for an illegal purpose which had not been carried into effect.

Appeal dismissed unanimously. Lord Justice Nourse and Lord Justice Millett each held that the claimant could recover the shares. Lord Justice Otton agreed.

1. The Court accepted that, under Tinsley v Milligan [1994] AC 340, a transferor who must rely on an illegal purpose to rebut the presumption of advancement will ordinarily fail. The transfer to a son was presumed to be a gift unless the claimant could prove otherwise.

2. That rule did not exclude the established locus poenitentiae exception. A transferor may give evidence of the illegal purpose and recover property if he has withdrawn before that purpose has been wholly or partly carried out. The exception applies in equity as well as at law and can therefore be used to rebut the presumption of advancement.

3. The relevant question was whether the illegal purpose, rather than the transfer transaction itself, had been implemented. The execution and registration of the share transfer did not deceive a creditor. The purpose would have been carried out only if a creditor had been deceived by the apparent disposal of the shares. No such deception occurred.

4. Lord Justice Millett further held that genuine repentance was not required. Voluntary withdrawal from an illegal arrangement when it had ceased to be needed was enough. The claimant was not barred because he sought retransfer after the perceived danger from creditors had passed.

5. The trial judge was therefore entitled to admit the evidence rebutting the presumption of advancement and to find that the son held the shares for the claimant pending settlement of the dilapidations claims. The appeal was dismissed with costs.

• Court of Appeal (Civil Division): Dismissed the son's appeal and upheld the order of His Honour Judge Weeks QC requiring recognition of the claimant's beneficial ownership of the shares.
• Chancery Division, Cardiff District Registry: On 21 December 1993, Judge Weeks QC held that the son had agreed to hold the shares on trust pending settlement of the dilapidations claims and granted relief to the claimant.