Brown and Another (Joint Administrators of Oceancrown Ltd) v Stonegale Ltd: SCS 11 Dec 2013

Administrators sought to have set aside transactions made before the companies went into administration.
Held: Rejecting the director’s arguments, the Lord Ordinary said: ‘No one paid anything for 110, 210, 260 Glasgow Road and 64 Roslea Drive. The sellers, namely Oceancrown, Loanwell and Questway, did not receive anything in return for the dispositions under challenge. They gifted the properties to the dispones . . That the bank was prepared to discharge the standard securities over all five properties in return for the monies forwarded to it does not create a consideration given in return for the subsequent dispositions to Stonegale. No party gave the sellers anything in return for the conveyances under challenge. Any value received was the value paid in respect of number 278. That is what was transferred to McClure Naismith. In my view nothing else alters that basic fact. All that happened was that Strathcroft, on the direction of Mr Pelosi senior, paid the bank monies which were designed to, and did persuade the bank to discharge the standard securities over the five properties, all in order to facilitate the subsequent gratuitous sales. Neither that payment, nor any consequential reduction in indebtedness, was in consideration for the subsequent transactions. It was a mechanism for allowing the inter-company transfers which it was hoped would achieve the retention of the ‘profit’ on 278 within the group (and regarding Roslea Drive, Mr Pelosi junior) – and free of the bank’s securities.’ . . And ‘The dispositions under challenge were gratuitous alienations. Were it otherwise the bank would have received in excess of andpound;4m, and the overall indebtedness would have been reduced by that amount. The price obtained for 278 was used to allow the other Glasgow Road properties to be transferred without consideration to another company which, nominally at least, was owned and controlled by Mr Pelosi junior, and, in the case of 64 Roslea Drive, to him personally.’

Lord Ordinary Lord Malcom
[2013] ScotCS CSOH – 189
Bailii
Insolvency Act 1986 242
Cited by:
Appeal fromBrown and Another v Stonegale Ltd and Another SC 22-Jun-2016
The insolvent companies administrators sought reduction of alienations by the companies before entering into administration. It was said that their banker lenders had been misled as to the values of secured properties, agreeing to their release . .

Lists of cited by and citing cases may be incomplete.

Scotland, Insolvency

Updated: 27 November 2021; Ref: scu.519235