Curtis & Ors v Pulbrook & Ors

An imperfect voluntary transfer of shares does not transfer the donor’s beneficial interest merely because the donor intended an immediate gift. Equity may intervene where the donor has done everything necessary to enable the donee to obtain the transfer without further assistance, where the donee’s detrimental reliance makes a constructive trust appropriate, or where the transaction is properly construed as an effective gift or declaration of trust. Those exceptions require evidence supporting their application. A gift may also be set aside under section 423 of the Insolvency Act 1986 where putting assets beyond the reach of a potential claimant, or prejudicing that claimant’s interests, was a substantial purpose of the transaction.

The claimants were personal representatives of Arthur Ronald Towns. They sought to make final charging orders over shares in Farnham Royal Nurseries Limited said to remain beneficially owned by Richard Pulbrook. Pulbrook alleged that he had gifted 14 shares to his daughter and 300 shares to his wife.

The claimants also sought relief under section 423 of the Insolvency Act 1986, alleging that the gifts were intended to put assets beyond the reach of persons who might claim against Pulbrook. The defendants did not attend the trial. The issues included whether legal or beneficial title had passed and, if so, whether the gifts were transactions at an undervalue entered into for a prohibited purpose.

1. Legal title. Pulbrook lacked authority to issue share certificates or enter the donees in the company’s register. There was no evidence that the board had delegated that function to him. Legal title therefore did not pass to either donee.
2. Beneficial title. The court considered Pennington v Waine [2002] 1 WLR 2075 and Zeital v Kaye [2010] EWCA Civ 159. None of the recognised routes for perfecting an imperfect gift applied. Pulbrook had not done everything necessary to enable either donee to obtain the shares without further assistance. He retained the executed stock transfer forms and had not provided the original certificates from which the gifts were to be carved. There was no detrimental reliance and no basis for treating him as a constructive trustee. Nor could the documents be construed as a declaration of trust.
3. The attempted gifts accordingly transferred neither legal nor beneficial title. The charging order could therefore be made final over all 314 shares.
4. Section 423. Under section 423(3) of the Insolvency Act 1986, the prohibited purpose need not be the only or dominant purpose. A substantial purpose is sufficient. The claimant need not have been contemplated by the debtor or have been an existing creditor when the transaction occurred.
5. Putting assets beyond the reach of, or prejudicing the interests of, potential claimants was a substantial purpose of both attempted gifts. The claimants would have been prejudiced had the gifts taken effect and were victims for the purposes of section 424. If the gifts had been effective, the court would have set them aside under section 423(2)(a). The charging order was therefore also justified under this alternative ground.

First-instance decision. No appellate history is stated in the judgment.