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Insolvency Law

Expert guidance on all aspects of corporate and personal insolvency

22 MAY 2013

Williams (Trustee in Bankruptcy of Taylor) v (1) Taylor (2) Raines [2012] EWCA Civ 1443; [2013] BPIR 133

(Court of Appeal, Lloyd, Ward and Rafferty LJJ, 23 October 2012)

At about the same time as a family company in which the debtor had a significant shareholding went into liquidation, the debtor transferred his property to himself and his partner, for no consideration, to hold on trust for themselves as tenants in common in equal shares. Three weeks later, a declaration of trust between them recorded that the transfer was to reflect the partner's contribution to improvements of the property and for a loan made by her to the debtor. Three years later, a bankruptcy order was made against the debtor on his own petition. HHJ Hodge QC dismissed the trustee in bankruptcy's application to avoid the transfer and declaration of trust as a transaction defrauding creditors under s 423 of the Act, holding that they were not linked to the insolvency but were intended to give effect to the arrangements already made between the parties, and the process which led to the trust being declared was initiated before the liquidation of the family company, so that no part of the debtor's purpose in entering into the transfer and the deed of trust was to escape his liabilities. The Court of Appeal dismissed the trustee's appeal. Ultimately, the appeal came down to saying that a number of objective facts were so powerful that the judge could not properly have believed the debtor and his partner as to either the existence of the prior agreements or the absence of the statutory purpose from the debtor's motivation. It was for the judge to consider whether he did believe them, and, having heard the evidence, he did so. His conclusion could not be successfully challenged. 

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