It is a popular misconception that all debtors need to do to avoid their creditors is to transfer their assets to someone else. The fallacy of that belief was shown by a High Court case involving a businessman who moved property, cars and cash to his estranged wife in a fruitless attempt to escape his liabilities.
Investors in the businessman’s failed financial scheme had obtained a judgment against him for 2.5 million dollars and sought to enforce that debt against various assets, which had been given to his wife or placed in her name. It was submitted that the transfers were at an undervalue, within the meaning of Section 423 of the Insolvency Act 1986, and were designed to put the assets out of his creditors’ reach.
The Court upheld the investors’ arguments in respect of a number of residential properties, cars – including an Aston Martin – and various cash sums and other benefits which had been passed from husband to wife. The latter’s plea that the car was a wedding anniversary gift, and that other assets had been moved to her as part of an informal separation agreement, were rejected.
The ruling opened the way for the investors to enforce the debt against the assets which had been gifted by the businessman to his wife for no consideration. However, the Court exercised its discretion to allow the wife to retain £100,000 of the relevant sum so that she would have the opportunity to re-settle herself and to pay for the completion of her daughter’s education.
For further information on this article, please contact Leanne Schneider-Rose on 0121 698 2200, email l.schneider-rose@sydney mitchell.co.uk or fill in our online enquiry form.
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