Cole v Billington & Anor

In quantifying relief for a transaction intended to put assets beyond a creditor’s reach, the court may assess the transferor’s contribution from the evidence and the cases advanced by the parties. Where the transferee seeks credit for sums said to be her own contribution, the evidential burden lies on her to show that the sums were realised and how they were used. A judge may make a rough-and-ready apportionment, including treating expenditure on joint living expenses as benefiting both spouses, provided the parties have fair notice and an opportunity to address the approach. On appeal, a party cannot obtain credit for a payment or evidential case not advanced below. A charge is limited to the lesser of the value of the gift and the judgment debt.

The claimant obtained a judgment debt against the first defendant and brought a claim under section 423 of the Insolvency Act, alleging that money had been transferred to the second defendant, his wife, to put it beyond the claimant’s reach. Following a split trial, the County Court found that alleged loan and share-sale transactions were fabricated gifts and ordered the Orchard property to stand charged with the judgment debt.

The second defendant appealed against the quantification of the charge. She argued that the judge should have allowed full credit for six alleged contributions, additional payments made for her husband’s benefit, and the purchase of another property. The central issues were whether the judge had acted contrary to natural justice and whether those additional matters could properly be raised on appeal.

Appeal dismissed. Lord Justice Lloyd gave the judgment, with which Lord Justice Floyd agreed.

1. The judge did not breach natural justice by crediting the second defendant with only half of the £150,000 represented by six alleged contributions. The written submissions and the hearing transcript showed that the judge had identified the possibility that the money had been used for the parties’ joint living expenses and had given counsel an opportunity to address whether the whole sum should be credited.
2. The evidential burden lay on the defendants to establish that the sums said to be the second defendant’s resources had been realised and how they had been spent. On the limited evidence, the judge was entitled to conclude that the money had been used partly for joint living expenses and to make a rough-and-ready allocation, crediting only half to the second defendant.
3. The additional schedule of payments said to total approximately £293,800 had not formed part of the case advanced at the quantum hearing. The judge was therefore entitled to decide the issue on the limited submissions and evidence before him.
4. The claimed credit for £140,016.08 paid towards 35 St Asaph Avenue was likewise not raised in the written submissions or at the hearing below. The judge could not be criticised for failing to award credit which he had not been invited to grant. In any event, the property was purchased in joint names, and the maximum possible credit would have been half the sum.
5. The charge under section 423 of the Insolvency Act was properly capped at the judgment debt. The judge’s calculation of £350,000, £16,869 and £75,000 exceeded the debt, so the Orchard was properly charged with the full amount then due.

1. Court of Appeal (Civil Division): dismissed the appeal against the order dated 5 January 2012.
2. Guildford County Court: following a split trial, found fabricated transactions to be gifts and ordered the Orchard property to stand charged with the claimant’s judgment debt.