Family Law Hub

Garwood v Ambrose & Anor [2012] EWHC 1494 (Ch)

  • In a tweet: The court will unravel transactions which appear to have been entered into to place assets beyond the reach of creditors.

    In brief: A trustee in bankruptcy's application for declaratory relief and an order for possession and sale of a family home. 

    Mr and Mrs Ambrose ("Mr and Mrs A") had purchased their family home in joint names and Mr A had been responsible for the mortgage payments. There was a rather unfortunate background to this case as Mr A had not only been made bankrupt twice but had also seen his company go into compulsory liquidation.  

    Mr A's first trustee in bankruptcy had been Mr Katz ("Mr K"); Mr K had issued proceedings against Mr and Mrs A for possession and sale of the family home. The proceedings were ultimately settled when, in July 2007, Mr and Mrs A remortgaged the property and paid Mr K £86,500 in full and final settlement of his claims. Mr K consequently removed the caution placed against the title of the property and the proceedings were dismissed by the court in September 2007. The effect of the dismissal of those proceedings was that the property ceased to be part of Mr A's estate in bankruptcy and vested in him without the necessity of a conveyance, assignment or transfer from Mr K.

    In late 2007 or early 2008, Mrs A took legal advice about protecting the property from Mr A's creditors; Lloyds TSB had obtained a judgment against Mr A in March 2006 in respect of personal guarantees Mr A had given over his company's borrowings and, when the judgment was not satirised, Lloyds TSB had taken steps to obtain a charging order on Mr A's interest in the property. Following the legal advice, Mr and Mrs A executed a trust deed in February 2008 recording that, as of 18 July 2007 (the date when they had remortgaged their family home to pay Mr K), Mrs A had become beneficially entitled to the whole of the net equity in the property. Mr and Mrs A argued that the trust deed simply reflected an oral declaration of trust that had been made in July 2007. However, there was no contemporaneous evidence of that, nor was there any evidence of any consideration having been paid and the trustee in bankruptcy (Mr Garwood - "Mr G") submitted that there was no trust and that the transaction had been at an undervalue within the meaning of s.339 Insolvency Act 1986.

    The judge found that there was no evidence of a declaration of trust having been created in July 2007 and, in any event, there had been a lack of consideration so it would have been a transaction at an undervalue under the Insolvency Act 1986. There was no evidence of express discussions between Mr and Mrs Ambrose as to an agreement for a transfer of the beneficial interest, there was no evidence of Mrs A relying to her detriment on the agreement either. Mr G was entitled to the orders he sought; however, by the time judgment was given, an agreement had been reached between the parties with  Mr and Mrs A agreeing to a payment schedule in settlement of Mr G's claim.  

    Comment

    This is a useful case not only in an insolvency situation but wherever there appears to be an improperly evidenced declaration of trust or transfer of property without consideration where it appears that the motive is to put assets beyond the reach of creditors.

Case note, published: 13/09/2012

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Published: 13/09/2012

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