Analysis
The first and second defendants are a married couple. The defendants purchased 17 Blackmore Crescent, Woking, Surrey (the property) in 1997. The purchase was financed in part using a loan secured on the property.
By declaration of trust dated 14 January 1998 (the trust deed), the first defendant transferred his beneficial interest in the property to the second defendant. Under the terms of the trust deed, the property was to be held upon trust for the second defendant, who was to have sole use and occupation of the property and was to indemnify the first defendant in respect of the mortgage. The first defendant gave evidence that the purpose of the trust deed was to protected the second defendant and the couple’s children from the outcome of litigation in which he was involved in 1998. The second and first defendant continue to live together in the property following the execution of the trust deed. The trust deed was not initially registered. It was not until August 2013 that a restriction was added to the register.
In May 2012 the first defendant stood for re-election as a local councillor for the Sheerwater Ward of Woking Borough Council. The first defendant was elected, but the claimant challenged the outcome by a petition presented to the Election Court on 25 May 2012, on the grounds that the election was procured by corrupt and/or illegal practices on the part of the first defendant and his agents and/or there was general corruption in the ward to secure the election of the first defendant. A hearing before a commissioner took place in July 2013 and a judgment was handed down on 29 July 2013. The commissioner held that the first defendant and his agents were guilty of various corrupt and illegal practices and declared the election to be voided pursuant to ss159(1) and/or s164(1)(a) of the representation of the People Act 1983. The first defendant was ordered to pay the claimant’s costs of the proceedings. The amount payable was established by a default costs certificate dated 30 September 2013 in the sum of c.£172,860.
These proceedings were concerned with the enforcement of that costs award. The claimant obtained an interim charging order in October 2013 and applied for an order that the interim charging order should be made final. The claimant also applied for an order under Insolvency Act 1986, s423 setting aside the declaration of trust on the basis that it was entered into for the purpose of putting assets beyond the reach of someone making a claim against him. The claimant also asserted that the declaration of trust was a fabrication and/or sham.
Held:
- 1) An allegation of sham is capable of being proved by inference. However, here the evidence did not support the allegation that the trust deed was a sham; 1) An allegation of sham is capable of being proved by inference. However, here the evidence did not support the allegation that the trust deed was a sham;
- 2) To succeed in an application under s423 IA 1986, the claimant had to show that the purpose of the transaction fell within s423(3), which included ‘putting assets beyond the reach of a person who is making, or may at some time make, a claim against him’, and that this proscribed purpose was a real and substantial purpose. On the first defendant’s evidence, the trust deed was brought into existence for the purpose of protecting the second defendant from the risk that the property would have to be sold as a result of certain proceedings in 1998. It was not suggested that the second defendant had provided any consideration in return for the transfer. The claimant was entitled to set aside the transaction. The fact that the current claimant was not contemplated by the first defendant at the date of the trust deed was immaterial.
Continue reading "Ali v Bashir & anr [2014] EWHC 3853 (Ch)"