Pozzuto & Anor v Iacovides

A shareholder’s ability to acquire bona vacantia property at a substantial discount may constitute a valuable contribution to its acquisition, even where another person pays the nominal purchase price. A resulting trust arising from a payment towards the price ordinarily reflects the value of that payment, but the court must also account for other valuable contributions, including a discount obtained through the purchaser’s status. Where a bankrupt transfers that beneficial interest for no consideration, the transfer may be a transaction at an undervalue under section 339 of the Insolvency Act 1986.

A dissolved company’s freehold reversions vested in the Crown as bona vacantia. The bankrupt and his wife, former shareholders, acquired the reversions from the Treasury Solicitor for £200 and costs under a discounted purchase scheme. The bankrupt’s daughter supplied that money. The property was subsequently transferred into the names of the wife and daughter for no consideration, after a substantial judgment had been entered against the bankrupt and within two years of the bankruptcy petition.

The trustee in bankruptcy challenged the transfer under section 339 of the Insolvency Act 1986. The Registrar set it aside. The central issue on appeal was whether the bankrupt had acquired a beneficial interest in the property despite the daughter having paid the nominal purchase price.

1. The appeal was dismissed and the Registrar’s order was affirmed. The bankrupt had prima facie acquired a beneficial interest because he was a shareholder entitled, together with his wife, to acquire the property at a nominal price and had subsequently conveyed his interest for no consideration.

2. The burden shifted to the wife and daughter to establish that the bankrupt had no beneficial interest. Their evidence did not establish an agreement excluding him from beneficial ownership. It showed only that the property would first be transferred to the bankrupt and his wife and then transferred to the wife and daughter.

3. A payment towards the purchase of property in another person’s name may raise a presumption of resulting trust. The resulting equitable interest is ordinarily proportionate to the contribution, subject to evidence of a different intention. The daughter’s payment of £200 and costs could not, in common sense, entitle her and her mother to property worth about £12,000 without recognising the value of the discount obtained through the bankrupt’s and his wife’s shareholder status.

4. The same principle may apply where the discount arises from an extra-statutory arrangement or an expectation under administrative guidelines rather than a statutory right to buy. The discount was a financial benefit attributable to the named purchasers and constituted a valuable contribution for assessing the parties’ beneficial interests.

5. The bankrupt therefore had a beneficial interest which was disposed of by the later transfer. That transfer was for neither money nor money’s worth and constituted a transaction at an undervalue under section 339. The court’s power under section 339(2), supplemented by the non-exhaustive forms of relief in section 342, justified restoring the property to the trustee, subject to reimbursement of the daughter’s contribution.

The judgment itself records the following procedural history:

• High Court (Chancery Division): Mr Registrar Simmonds set aside the transfer as a transaction at an undervalue and ordered the freehold reversion to be sold.
• High Court (Chancery Division): The appeal by Mrs Pozzuto and Mrs di Iulio was dismissed and the Registrar’s order affirmed.