Court declines to strike out claim based on transaction defrauding creditors

The claimant claims against the defendants as successor to the Bank of Cypriot (“the lender”). The lender obtained judgment in a Cypriot court against the first defendant in the sum of €708,721.49 plus interest and costs.

In May 2017, the first defendant transferred his shareholding in Central London Car & Taxi Hire Ltd to his wife (the “second defendant”).  In August 2018, the second defendant then transferred the shares back to the first defendant.

The claimant brought claims under Section 423 IA 1986 for a declaration that the transfer of shares by the first defendant to the second defendant was a transaction that defrauded the lender.

The defendants applied to strike out those claims or for summary judgment in their favour.  They argued that, because the shares had been transferred back to the first defendant prior to the commencement of the proceedings, (i) the claimant could not constitute a ‘victim’ for the purposes of the Act, and (ii) there was no relief which the court could have granted which could achieve more than had already occurred. 

The court found that Sections 423 and 424 are drafted widely. If a person's interests are, or may be, prejudiced by the transaction at the time it takes place, that person is a 'victim', within Section 423(5). The lender was a victim of the transfer notwithstanding the return of the shares.

Further, the court held that it was not sufficiently clear that no relief will or could be granted to justify striking out the claim or giving summary judgment. In particular, it was held that there is more than a fanciful prospect that the court may order the payment of a sum under Section 425(1)(d) IA1986, notwithstanding the fact that the shares had been returned. The defendants’ application was dismissed.

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