Keith Algie & Anor (as Trustees in Bankruptcy of Christopher Michael Hutcheson) v Greta Diane Hutcheson

For Insolvency Act 1986 section 423, the debtor’s actual subjective purpose must be established. A prohibited purpose need not be dominant or sole, and insolvency is unnecessary. The court may infer that purpose from the evidence, despite a denial by the debtor.

In a sole-name property case, the starting point is that the legal owner is the sole beneficial owner. That position may be displaced by evidence of a common intention to share beneficial ownership, objectively inferred from conduct. Financial contributions are important, but the court must assess the whole circumstances.

Relief under sections 339 and 423 may restore the position or protect creditors affected by an undervalue transaction. The claim succeeded in respect of the transfer of one spouse’s share of net property-sale proceeds, but failed in respect of other proceeds where the evidence showed that the bankrupt had received his full share.

The applicants were trustees in bankruptcy of Christopher Michael Hutcheson. They sought relief against Greta Diane Hutcheson concerning dealings with four properties and the distribution of sale proceeds.

The claims included transactions at an undervalue under sections 339 and 423 of the Insolvency Act 1986. The principal issues were whether Mrs Hutcheson had beneficial interests in properties registered in her husband’s sole name, whether sale proceeds had been distributed unequally, and whether a transfer of proceeds had been made to put assets beyond creditors’ reach.

The court also considered whether the bankrupt had received his full entitlement from the sale of jointly owned properties. The central issue was whether the challenged transactions were undervalue transactions made for the statutory purpose, and what relief was appropriate.

1. Section 423. The statutory purpose is the debtor’s actual subjective purpose. The court must examine the language in its statutory context. The prohibited purpose need not be dominant or sole; it is sufficient if it was one purpose for entering into the transaction. The purpose may be inferred from the evidence, and the debtor’s denial is not conclusive.
2. Section 423 is not founded on fraud and does not require insolvency. A victim need not be the person whom the debtor specifically intended to prejudice. The relevant interests extend beyond strict legal rights.
3. Beneficial ownership. In a sole-name case, the starting point is that the sole legal owner is also the sole beneficial owner. That presumption may be displaced by evidence of a common intention that beneficial ownership should differ from legal ownership. The intention is objectively inferred from the parties’ conduct, including financial contributions and the wider course of dealing.
4. Romsey was beneficially owned jointly. Mrs Hutcheson had made a substantial contribution to its purchase, knew of and desired the acquisition, and it was intended to benefit both spouses and their family. Wycombe Place was also jointly owned because a substantial part of its purchase price derived from Romsey and the property was acquired for family benefit. The later transfer of Wycombe Place into joint names was consistent with that conclusion.
5. The Mount Street sale proceeds did not establish an undervalue transfer. After accounting for payments made directly, payments made on Mr Hutcheson’s behalf, and agreed shared expenditure, he had received his full share or more. The claims concerning those proceeds therefore failed.
6. Mr Hutcheson’s transfer of his share of the net Wycombe Place proceeds to Mrs Hutcheson was a gift. The 6 August 2017 letter was deliberately crafted to disguise that transfer and to present a false account of their assets and entitlements. The statutory purpose under section 423 was established. The transaction was also at an undervalue under section 339, at a time when insolvency was presumed and in fact established.
7. The appropriate recoverable amount was half the net sale proceeds, £328,541. The Trustees’ claims succeeded in that respect and failed otherwise. Interest and costs, if not agreed, were reserved for a consequentials hearing.