The High Court has upheld a Bankruptcy Court decision to set aside the transfer of a freehold reversion that had been acquired by a bankrupt and his wife for a nil consideration.
Lawrence Collins J said that the bankrupt and his wife were shareholders in a company that had been dissolved in 1998. The company’s assets vested in the Crown as bona vacantia. Among its assets was the freehold reversion to various flats in Hampstead.
The reversion in question had been acquired by the couple for £200 under a scheme that enabled shareholders of a dissolved company to purchase freehold reversions at a discounted price. The purchase price and costs were paid by the couple’s daughter.
A substantial judgment was entered against the bankrupt, and the reversion was later transferred into the name of his wife and daughter. This transaction occurred seven months before the bankruptcy petition was presented.
A bankruptcy order was then made, and the trustee in bankruptcy successfully sought to set aside the transfer as a transfer at an undervalue.
Rejecting an appeal by the bankrupt, his wife and daughter against the setting aside of the transaction, Lawrence Collins J held that the registrar had been entitled to find that there had been an agreement between the three family members whereby the daughter had paid the purchase price for the freehold reversion. However, he went on to say that the court ought not to give effect to that agreement and the “improper trusts” created thereby, because it had been a “deceit” on the Crown”.
Pozzuto and others v Iacovides Chancery Division: Bankruptcy Court (Lawrence Collins J) 7 March 2003.
Bajul Shah (instructed by Radcliffes Le Brasseur) appeared for the appellants; Richard Fisher (instructed by Steptoe & Johnson) appeared for the respondent.
References: PLS News 11/3/03
