"Looking at all those matters and the evidence taken together, in my judgment it would be wholly unrealistic to conclude that Ms Wilson has satisfied the Desire Rebuttal Test. The judgment debt was due and owing, there was no permission to appeal and Mr Fowlds was insolvent. He knew that and chose to realise his available assets to pay all his creditors to the extent that he could but not his major creditor, Mr Mark Fowlds. He did so without being pressed for payment, at least in regard to the Payment. It is easy to infer a desire to prefer Ms Wilson and impossible to rebut the presumption based on this evidence."
"Sections 238, 239, 339 and 340 provide that the court "shall," on an application under those sections, make such order as it thinks fit for restoring the position. Despite the use of the verb "shall," the phrase "such order as it thinks fit" is apt to confer on the court an overall discretion. The discretion is wide enough to enable the court, if justice so requires, to make no order against the other party to the transaction or the person to whom the preference was given."
"The purpose of s 339 and its allied sections is to prevent a bankrupt from defeating the aim of a pari passu distribution of his assets by certain transactions; in the case of s 339 a transaction of an undervalue, in the case of other sections a voidable preference. The thesis underlying those sections is that the creditors are entitled to a pari passu distribution not merely of assets of which the bankrupt is owner at the date of his bankruptcy, but also those which he has otherwise put beyond the reach of his trustee in bankruptcy by virtue of transactions which are gratuitous or ill-motivated. Gratuitous transactions within the relevant timeframe are to be brought back within the bankruptcy fold. That is clearly the underlying basis of s 339. Since that is the underlying principle, it will require something unusual, to put it at its lowest, for the court to decide that, notwithstanding the fact there is an ostensibly qualified transaction on the facts of the particular case, those assets can and should properly be left outside the scope of the bankruptcy. It would be a departure from the norm to allow that to be the case. It may be that that is what Mr Ivory meant by 'exceptional'. If he did then I agree with it. There has to be something unusual, and, bearing in mind the wide scope of the norm, it might be thought very unusual, to allow the court to decline to exercise a jurisdiction which prima facie it ought to be exercising. That seems to me to be another way of putting the matter. If one chooses to use the word 'exceptional' to describe that, then I would not necessarily gainsay that myself."
"13. In my judgment, the nature of any order and the extent of the relief granted by the court under s.423(2) and s.425 should take into account the mental state of the transferee of property under a relevant transaction (or of any other person against whom an order is sought) and the degree of their involvement in the fraudulent scheme of the debtor/transferor to put assets out of the reach of his creditors. The principles in the application of this statutory regime should reflect in this respect general principles inherent in other areas of the law, which treat the mental state and degree of involvement of a defendant in wrongdoing as relevant to the extent of recovery available against him (compare, as one example among many, Seager v Copydex Ltd [1967] 1 W.L.R. 923, 932—no order of an account of profits ordered against an innocent wrongdoer in respect of a breach of confidence). Although the trigger conditions for liability to make restoration under s.423 set out the basic balance to be struck between the interests of the creditors and of a transferee as established by Parliament, the making of an order under s.423(2) and s.425 necessarily requires some further balancing of the interests of the transferor's creditors and of the transferee to be determined by the court, since by the time the court has to take action events will have moved on from the transfer and the balance of the equities between creditors and transferee may well have been affected by changes in circumstances over time."
"A transferee may have received a gift of money in good faith, without knowing that the transferor acted with a relevant purpose in making the gift. In such a case a broad analogy may be drawn with claims based on unjust enrichment, such as a claim for money paid on the basis of a mistake of fact, where the recipient's interest in being able to rely on the security of his receipt is overridden by the unfairness to the transferor of being held bound by a payment made by him by reason of a mistake. In relation to such claims a defence of good faith change of position on the part of the recipient applies ( Lipkin Gorman v Karpnale Ltd[1991] 2 AC 548 ). In my view, if the transferee in the example has changed his position on the basis of the receipt in a way that would make it unfair to require him to repay the money (e.g. thinking it was a completely valid gift, he has spent the money on a world cruise which he would not otherwise have taken) it would not be appropriate for the court to make an order under s.425(1)(d) requiring the transferee to pay back a sum equivalent to the amount he received."
"There is no additional defence of the general kind proposed by Mr Burles. The inquiry under ss.423 - 425 focuses upon claims to property, with a comparatively narrow scope for limited, recognised principles of justice (such as the change of defence position) to be taken into account. Parliament has not stipulated any legal standard by reference to which any such wider balancing exercise as is proposed by Mr Burles could be undertaken, and I think it clear that it did not intend that the application of these provisions should involve any such exercise. Accordingly, I conclude that no wider inquiry of the kind proposed by Mr Burles is necessary or appropriate."
"The whole idea of the defence of change of position is that the equity lies with the payee and not with the payor who wants to get back his payment. But where a trustee in bankruptcy carries out a duty to sue to undo a fraudulent payment, it is difficult to say that change of position makes the trustee's suit inequitable."
"it was for the judge to fashion the remedy that, in her discretion, she considered would best restore the position to what it would have been if the May dividend had not been paid and best protect the interests of the victims."
"86. The fact that a respondent no longer holds the assets which were received as part of the transaction or has changed position because it received those assets does not provide any defence to a claim under s.423. Those matters may be relevant however to fashioning the relief to be granted. In that regard, the mental state of the respondent and the degree of their involvement in the scheme will be relevant factors (see 4Eng at [13]). The reasons are obvious: if a recipient further dissipates assets as part of a joint scheme to put them beyond the reach of the judgment creditor, the recipient cannot rely on his own further wrongdoing to excuse him from having to restore the victim's position; and, equally, if a person chooses to engage in risky ventures with assets which they know have been improperly transferred away by the debtor, they do so at their own risk and not at the victim's risk. 87. In choosing what relief is appropriate in a given case, a great deal will depend upon the particular facts. One of the reasons the court is given such a wide jurisdiction as to remedy is to allow it flexibility in fashioning relief which is carefully tailored to the justice of the particular case (see 4Eng [16]). This may be because, by the time the court has to take action, events will have moved on from the transfer and the balance of the equities between creditors and transferee may well have been affected by changes in circumstances over time."
"Every conveyance or transfer of property, or charge thereon, and every payment obligation and judicial proceeding, made, incurred, taken or suffered by any company in favour of any creditor at a time when the company is unable to pay its debts within the meaning of s.93 with a view to giving such creditor a preference over the other creditors shall be invalid if made, incurred, taken or suffered within six months immediately preceding the commencement of a liquidation."
"… Whilst common law defences against a statute may be available in litigation between private parties where no others have an interest, it is quite another matter where the statutory provisions in question are concerned to protect the wider interests of the public or a section of the public. In such cases neither estoppel nor change of position should be available as a defence. The court's task is to implement the policy of the statute. As we have seen, the insolvency avoidance provisions are designed to ensure pari passu distribution. To allow a defence such as estoppel or change of position would be to promote the interests of a particular party who had received a benefit to which he was not entitled over those of the general body of creditors whom the statute is designed to protect."
"As a matter of principle, the well-established principle of public policy which is applied by the courts so as to deny effect to arrangements in fraudem legis does not, of its nature, pick and choose according to the detriment which may be suffered by the defendant as a consequence of its operation."
"(a) First, the discretion is at large. (b) The basic principle is one of pari passu distribution. Lightman J explains the principle in Coutts & Co v Stock[2000] 1 WLR 906 , 909. In a passage at para 6 (cited with approval by the Court of Appeal in Hollicourt (Contracts) Ltd v Bank of Ireland[2001] Ch 555 , 563, para 21) he describes the invalidation of dispositions under s.127 as "part of the statutory scheme designed to prevent the directors of a company, when liquidation is imminent, from disposing of the company's assets to the prejudice of its creditors and to preserve those assets for the benefit of the general body of creditors." (c) In determining whether a validation order should be made, the court should ensure that the interests of the unsecured creditors are not prejudiced. (d) The court should not, except in special circumstances where it was in the interests of creditors generally, validate a transaction which would result in one or more pre-liquidation creditors being paid in full where other such creditors would only receive a dividend. (e) A disposition carried out by the parties in good faith at a time when they were unaware that a petition had been presented would normally be validated unless there are grounds for thinking that the transaction was an attempt to prefer the disponee."
"55. As so often with a paraphrase, some nuances in the judgment of Buckley LJ have been lost in these propositions. Moreover, in stating the propositions Fox LJ does not examine the points at which they may be in tension with each other and how such tensions might be resolved: I have referred to some of the difficulties above. In particular, proposition (7) appears to me to be misleading as a general proposition, not least because Fox LJ himself did not apply it as a governing criterion in the Denney case, but also because it does not marry up in a coherent way with the basic principles identified in the Re Gray's Inn Construction Limited case[1980] 1 WLR 711 and repeated by Fox LJ. 56. In my judgment, the time has come to recognise that the statement by Buckley LJ at p 718F–H cannot be taken at face value and applied as a rule in itself. The true position is that, save in exceptional circumstances, a validation order should only be made in relation to dispositions occurring after presentation of winding up petition if there is some special circumstance which shows that the disposition in question will be (in a prospective application case) or has been (in a retrospective application case) for the benefit of the general body of unsecured creditors, such that it is appropriate to disapply the usual pari passu principle."
"ICCJ Jones: Now, then that's obviously a large sum to receive, although clearly in accordance with your entitlement under the contract, but it's still a large sum to receive. Ms Wilson: Yeah. ICCJ Jones: What happened to it? Ms Wilson: Well, during the period where I was providing Peter with these professional services, I, I wasn't working, so I sort of shelved my plans to restart working. So, I was actually, at the time, I was in the fairly fortunate position that my, my father, who isn't a party to any of this, had been financially propping me up. He was, thank God, at that point, he was able to do it, particularly at the point when my marriage started to break down and I was having to go through legal proceedings with that as well, I mean, fortunately we managed to stay out of court but, going through a divorce is not an easy thing to do. So, fortunately, my father was able to subsidise me doing that and then, following the divorce, he was, again, continuing to subsidise me. So, the money, I, I repaid what I owed my father. My father and my stepmother are currently in lockdown in Barcelona. My stepmother is Spanish. She is, she has terminal breast cancer and he, I believe, he spent the money on paying for treatment for her. He has no assets and he's 83 tomorrow and he has no income to speak of, except a small pension. And, under the circumstances, not only do I believe he has no money to be able to lend me, but I wouldn't, I couldn't bring myself to ask him. He's about to lose his wife and we can't be with him because they're in lockdown in Spain. So, so that's really where the money went. There was, some of it was also spent on things like paying for doing some other borrowings and then just paying bills like, you know, putting food on the table and gas bills and stuff, it's living expenses. ICCJ Jones: I'm sorry, this was because I didn't hear it, before you talked about spending money on bills, you referred to spending money on something else, what, what was that? Ms Wilson: Just paying off other debts, you know, where I've got, where I had credit card bills. ICCJ Jones: Credit card bills, thank you. Ms Wilson: Like, just generally trying to get myself in a more stable, slightly more stable, financial position. ICCJ Jones: If you didn't have that money, when would you have had to repay your father? Ms Wilson: Oh, pretty much, I think it, we had some discussions for quite some time about it. Initially, he was, he jokingly called it an advance on my inheritance which is a joke because there is no inheritance to come but, sadly. But I, I did, I can't remember the date when I did transfer the funds to him. ICCJ Jones: Right, OK, so it was, I mean, in the sense of the term advance on inheritance indicates he wasn't expecting it back. Ms Wilson: Well, he wasn't but the situation was that he was, he ended up with, he, at one point, had a house, no, a flat, but he sold that, he lost a lot of money on the stock, no, the foreign exchange markets and just got himself into no end of financial trouble and, I'm his daughter, I couldn't, in any consciousness, just not repay what he, when he had been there for me, I needed to be there for him. He's my father. What else, what else would anybody do? And, and now, with the situation with my stepmother, I'm even more grateful that I did it. ICCJ Jones: OK. Thank you. Just see, bear with me, are you able to recollect when your stepmother first needed treatment approximately? I appreciate it won't be exact. Ms Wilson: It is, oh gosh, I think it's been going on for a couple of years. So, she's quite close to the end now. ICCJ Jones: So, we're talking more about 2017, are we? Ms Wilson: Yeah, I think so. ICCJ Jones: Roughly, very roughly, OK, that's fine. Ms Wilson: Yeah, to be, to be honest, they are, they, they're quite, they don't tell me an awful lot because they have this ridiculous idea that, if they tell me, I'll worry. ICCJ Jones: OK. Ms Wilson: I know. I, I have to drag information out of them. ICCJ Jones: OK. That's, those are my questions. Just pausing to think that they are. Yes, thank you. What I'm going to, although I said that you've got a right to, actually, Mr Brown, I know you can, may wish to re-examine on it, I think what I'll do is, I'll ask Miss Wilson to say anything she wants to and then you can pick up after that … Mr Brown, following up from my questions, it must be right that you could ask, if you wish to, anything with regard to the answers that came out, if you wish. Mr Brown: I have no desire to do so, Judge. ICCJ Jones: Thank you."
"The fact that Ms Wilson explained what happened to the Payment during the trial and, as a result, introduced the principle of "change of position" has resulted in this judgment including case law to which the court was not referred. Fairness requires the Applicants through Mr Brown to have the opportunity to consider whether they require the opportunity to address that law. As a result, judgment will be handed down on a date to be fixed. Mr Brown should first inform the court of any proposals should the Applicants wish to take advantage of that opportunity. The Court will be grateful if he could email to inform it of the Applicants' intentions as soon as practical and if possible by 4.00 pm on Friday 24 April at latest … It is emphasised for the avoidance of doubt that there is no criticism of Mr Brown's submissions. He would not have been prepared to cover the point."
"39. I asked during Ms Wilson's examination what had happened to the Payment. She explained that she had had to borrow money from her father to " prop her up financially especially when her marriage broke down and following her divorce ", which would have been during 2013/14. No time for repayment had been specified and it was jokingly described as an advance on her inheritance. He was not expecting it to be repaid. However, her father's financial position deteriorated as a result of losses on the foreign exchange market. As his daughter, she felt and decided she had to repay him when he was in need and most of the Payment was transferred for that purpose. The balance of the Payment was used to help her pay for her living expenses including to repay credit card balances. 40. The sums received from the Payment were no longer available to her father by the time the claim was notified to Ms Wilson by the Trustees. He had had to spend it largely to pay for his wife's cancer treatment during 2017. He has no assets to assist her and lives off a "meagre" pension. She changed her position before the nature of a claim was indicated to her by the Trustees. I accept she did so believing it to be a valid payment of the consideration contractually owed to her for the work she provided and for which she invoiced."
"110. … Whilst the information concerning the use of the Payment was not previously provided, nor was it sought. The Trustees have wide investigatory grounds, the question I asked is an obvious one in the context of the statutory provisions and the nature of the claim and it is now too late within this litigation for them to start to ask it and conduct investigations. That conclusion is substantiated by the fact that it has never been suggested that Ms Wilson retained the Payment or has access to it or to its fruits. Indeed, the trial proceeded on the basis that it was accepted she has not. 111. Another reason for my decision is that the same result will apply even if the third factor is excluded from consideration when exercising the discretion. Alternatively, the principle in ex parte James will apply in any event. There is also the need for finality especially in the context of the costs being disproportionate to the sum involved."
"A trial judge is perfectly entitled to ask a party or other witness to clarify the answers he or she has given in evidence and it is often important to do so. Where a party is unrepresented, as a matter of fairness both to the unrepresented party and the other party or parties to the litigation, it may also be both appropriate and necessary to ask questions in order fully to understand the unrepresented party's case as pleaded, their submissions and their evidence. In doing so, the judge should take care not to ask leading questions of the unrepresented party in his capacity as a witness. It may even be necessary to ask questions of other witnesses about matters central to the issues in the case which have not been posed by the unrepresented party in cross-examination. Such questioning should be approached with caution and limited to essential matters. In this case, as Patten LJ has pointed out, the judge's finding that no definitive decisions were made about declaring dividends did not form part of Mr Hale's case at all and was based upon the judge's own line of cross examination for which there was no existing evidential basis. It is very important that whilst seeking to clarify the issues and the evidence and to be fair to all parties the trial judge does not stray from the case as pleaded and the evidence before the court."
"As the cases show, it is not uncommon for a wife with young children to be faced with eviction in circumstances where the realisation of her beneficial interest will not produce enough to buy a comparable home in the same neighbourhood, or indeed elsewhere. And, if she has to move elsewhere, there may be problems over schooling and so forth. Such circumstances, while engendering a natural sympathy in all who hear of them, cannot be described as exceptional. They are the melancholy consequences of debt and improvidence with which every civilised society has been familiar."
"105. There is no danger of this decision opening the flood gates to wash away the importance of section 340 of the Act to the statutory scheme and policy of equal distribution. It would not then be out of the norm. The discretion is only to be used in rare cases because of the strength/weight of the statutory scheme and policy of equal distribution amongst creditors I have reached the decision that this is one of those cases. The decision is fact sensitive and is made in this case within the context of a most unusual set of circumstances and facts. It is a decision to be made if justice requires and this is a case out of the wide scope of the norm where it does. Restoration would be unfair and unjust. No other remedy has been proposed or is apparent."
"the court will not permit its officers to act in a way that it would be clearly wrong for the court itself to act. That is to be judged by the standard of the right-thinking person, representing the current view of society. If one were to pose the question "would it be proper for the court to act unfairly?", Only one answer as possible"