4Eng Ltd v Harper & Ors

A transfer is within section 423 of the Insolvency Act 1986 if defeating or prejudicing creditors was a real and substantial purpose. That purpose need not be the transferor’s sole or dominant purpose, and may coexist with legitimate family or tax-planning motives.

The remedial jurisdiction is broad and restorative. Relief should be tailored to the transferee’s knowledge, participation and any good-faith change of position. A voluntary transfer between spouses is a gift at an undervalue unless it forms part of a genuine, quantified matrimonial financial claim resolved by agreement or court order. The jurisdiction does not require a general inquiry into the transferee’s financial needs or quality of life.

This was a first-instance claim by 4Eng Ltd to realise assets after it had obtained judgments against Roger Harper and Barry Simpson for deceit arising from the sale of an engineering company. Liability had been determined by Briggs J on 3 May 2007, and damages were assessed by David Richards J in 4Eng Ltd v Roger Harper and Barry Simpson [2008] EWHC 915 (Ch).

The present claim concerned transfers by Mr Simpson to his wife, Joyce Simpson. 4Eng sought relief under sections 423 to 425 of the Insolvency Act 1986, contending that the transfers were gifts or transactions at an undervalue intended to shield assets from actual or potential creditors. The issues included the timing and purpose of the transfers, whether matrimonial expectations supplied consideration, and the appropriate restorative relief.

Claim succeeded in part. Sales J held that several transfers made from about April or May 2003 were reversible transactions, but that earlier tax-planning and ordinary joint-family arrangements were not shown to have been made for a relevant statutory purpose.

1. Applying Hashmi v Commissioners of Inland Revenue [2002] EWCA Civ 981, the statutory purpose need not be sole or dominant. It must, however, be a real and substantial purpose rather than an incidental consequence. Mr Simpson began to act with that purpose when he obtained advice to protect the family home and then transferred material assets into his wife’s sole name.

2. The transfer of Mr Simpson’s interest in Sunset Lake was a gift at an undervalue and was made to shield it from claims. The argument that Mrs Simpson’s possible entitlement on a future divorce supplied consideration was rejected. Hill v Haines [2007] EWCA Civ 1284 concerned a court-supervised matrimonial financial claim that had been quantified and satisfied by a property adjustment order. There was no such claim, agreement or order at the time of these gifts.

3. Sections 423 and 425 of the Insolvency Act 1986 confer a broad restorative jurisdiction. The transferee’s knowledge, involvement and any change of position are relevant when selecting relief. Mrs Simpson was entitled to retain her pre-existing 50 per cent beneficial interest in Sunset Lake, as declared by the Bournemouth order. She was nevertheless ordered to transfer legal title into the spouses’ joint names as tenants in common. An inquiry was ordered into loss caused by her false affidavit, which had delayed execution against Mr Simpson’s half share.

4. Relief was also granted in respect of Mr Simpson’s transferred half share in the Portman account, the Jeep Cherokee, the HSBC investment account, and potentially a later Halifax account once details were known. The entire sums channelled through joint accounts into the HSBC investment account were treated as Mr Simpson’s diversion of assets to his wife, not merely as transfers of a half share. Mrs Simpson’s own defence costs could be restored only to the extent consistent with market movements in the investment fund; she had not established a change-of-position defence.

5. There was no additional general defence based on Mrs Simpson’s needs, financial requirements or quality of life. The parties were directed to agree figures and the terms of the resulting order, with liberty to restore outstanding disputes.

High Court (Chancery Division): This was a first-instance section 423 claim following an earlier liability judgment of Briggs J, unreported, 3 May 2007, and a damages judgment of David Richards J in 4Eng Ltd v Roger Harper and Barry Simpson [2008] EWHC 915 (Ch).