Bataillon & Anor v Shone & Anor

For a transaction to fall within Insolvency Act 1986, s 423, the transferor must have received no consideration or entered into the transaction at an undervalue, and a real and substantial purpose must have been to put assets beyond creditors or prejudice their interests. That purpose need not be dominant or directed at the claimant, and dishonesty is unnecessary. A concurrent purpose of providing for a spouse or family member does not prevent the statutory purpose being established. The court may then grant such restorative or protective relief as is appropriate. In assessing consideration, the court examines the substance of the dealings, including whether the transferee already held the beneficial interest. Formal ownership structures do not prevent the court finding that the true beneficial ownership lay elsewhere.

The claimants were substantial judgment creditors of the first defendant. They alleged that assets transferred by him, or at his direction, to his estranged wife were transactions at an undervalue intended to defeat creditors, contrary to s 423 of the Insolvency Act 1986. The wife disputed the absence of consideration, the first defendant’s purpose, and the beneficial ownership of properties held through Panamanian foundations. The claim concerned properties, car-sale proceeds, company payments, insurance proceeds, remuneration and pension monies. The court also considered an alternative nominee case and the appropriate relief, including the wife’s personal circumstances and provision for the parties’ daughter.

Claim under s 423 allowed in substance. The court found that the relevant transfers were made at an undervalue and that a real and substantial purpose of the first defendant was to put assets beyond the reach of actual or likely creditors.

1. Statutory purpose. The intention required by s 423 is the transferor’s intention. The purpose need not be exclusive, dominant or directed towards the particular creditor bringing the claim. It is sufficient that it is real and substantial. A legitimate parallel purpose, such as securing a spouse or child, does not prevent the statutory purpose from existing. Dishonesty is not required.
2. Ownership and consideration. The Panamanian foundations were the legal owners of certain properties, but the evidence showed that the first defendant controlled them and treated the properties as his and his wife’s assets. The transfer of his beneficial interest to his wife was therefore a transaction to which s 423 could apply. Alleged informal agreements and forbearance from divorce or financial claims did not constitute consideration on the facts.
3. Individual assets. The court upheld the claim concerning 50% interests in High Trees, Sheet Street and Budleigh Salterton, and concerning the relevant car proceeds, CISEA payments, insurance proceeds, CIFG Mateen remuneration and pension monies. The Aston Martin proceeds were excluded because the wife was found to have owned that car outright.
4. Nominee claim. No finding was necessary on the alternative nominee allegation. It was academic because, if the alleged nominee arrangement had been established, the s 423 claim would also have succeeded, and the evidence did not establish the necessary agreement.
5. Relief. The court exercised its discretion to grant substantial relief, while retaining £100,000 for the daughter’s needs. The claimants were to receive specified shares of the net equity in the properties and a further monetary sum, subject to detailed submissions on the form of the order.