Knowledge not relevant to transaction to defraud

The court rejected an argument that for a claimant to establish that a transaction was a transaction to defraud creditors, the transferor had to have knowledge of the claims of the “victims” at the time of the transaction.

The claimant obtained a charging order against the transferor’s interest in a property having established, at first instance, that the attempt by the transferor to grant a trust over his interest in the property, in favour of his children, was a transaction to defraud creditors (the “order”).

The claimant obtained a cost order against the transferor, which remained unpaid, and issued proceedings for the order and the charging order, which was granted.

The transferor appealed that decision to the High Court. He was refused leave to advance an argument that the claims were statute barred, when it was held that the limitation period was six years from the date that the claimant’s claim arose.

Despite being subject to a civil restraint order, the judge heard the transferor’s appeal on grounds for which permission was given, namely whether the transferor had to have knowledge of the claimant’s claim when the transaction was entered into. That appeal was dismissed.

The judge considered the relevant provisions of the insolvency legislation and noted that the victim was someone who ““may at some time make” a claim against the transferor, contradicting the argument that knowledge of a claim was relevant.

The judge also considered the authorities raised by the transferor and concluded that they did not contradict his view that it was purpose, not knowledge, that was relevant to the question as to whether a transaction was a transaction to defraud.

In regards to Malik v Messalti [2024] EWHC 2713 (Ch).

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