Random House UK Ltd v Allason & Ors

For the purposes of Insolvency Act 1986, s.423, putting assets beyond creditors’ reach need not be the debtor’s only or dominant purpose. It is sufficient that it was a real and substantial purpose. A transaction is not protected merely because it might have occurred for another reason. A person may be a victim under s.423 even if they were not an existing creditor, and even if the debtor did not contemplate prejudicing them. The limitation period runs from the date on which the claimant became a victim, not necessarily from the date of the transaction. A claim concerning a settlement made by deed is subject to a 12-year limitation period. A beneficial interest in land must be established by a written declaration satisfying the statutory requirements; a copy document cannot be relied on without satisfactory secondary evidence.

Random House sought to enforce unpaid costs orders against Rupert Allason and related trustees. It challenged the asserted ownership of leasehold premises at 6 Burton Mews and sought relief under s.423 of the Insolvency Act 1986 concerning a £150,000 settlement made for Mr Allason’s children.

The principal issues were whether the property was beneficially owned by the family trust, whether the settlement was entered into for the statutory purpose of prejudicing creditors, whether Random House was a statutory victim, and whether the claim was time-barred.

1. The court found that 6 Burton Mews had never been an asset of the trust. The evidence overwhelmingly showed that it was acquired and held by Westintel Research Ltd. The purported declaration of trust and draft contract naming the trust as purchaser were not genuine documents.
2. A beneficial interest in land required a written declaration complying with s.53(1)(b) of the Law of Property Act 1925. Since the original declaration had not been produced, the trustees also had to establish that it existed or had existed, that it had been lost or destroyed, and that a reasonable explanation had been given. They failed to do so. The court held, additionally, that there had never been a genuine declaration of trust.
3. Under s.423(1) of the Insolvency Act 1986, the £150,000 gift was a transaction at an undervalue. Applying IRC v Hashmi, [2002] 2 BCLC 489, the relevant purpose was Mr Allason’s subjective purpose. The purpose of putting assets beyond creditors’ reach need not be the only or dominant purpose. It was enough that it was a real and substantial purpose, and the transaction was not saved merely because it might have occurred for another purpose.
4. The evidence established that protecting the £150,000 from actual or potential Lloyd’s creditors was at least a real and substantial purpose of the settlement. Random House therefore satisfied the substantive requirements of s.423(3).
5. Following Hill v Spread Trustee Co Ltd, [2007] 1 WLR 2404, Random House was a victim under s.423(5), even though it was not a creditor when the settlement was made and had not been specifically contemplated by Mr Allason. The claim was not time-barred. It was a claim on a specialty subject to a 12-year limitation period, running when Random House became a victim rather than automatically from the date of the settlement.
6. Liability under s.423 was established in relation to the £150,000 gift. The appropriate remedy was reserved for further submissions.