The mortgagor, knowing of the bank’s application for possession of the property, granted a lease to his wife for a term of twenty years. He intended to deprive the mortgagee bank of the ability to obtain vacant possession of the property as and when a possession order was made.
Held: Before section 172 could be used to avoid a transaction, dishonesty had to be shown. This transaction was dishonest. Russell LJ said:- ‘If he disposes of an asset which would be available to his creditors with the intention of prejudicing them by putting it, or its worth, beyond their reach, he is in the ordinary case acting in a fashion not honest in the context of the relationship of debtor and creditor.’
Cairns LJ said that:- ‘a conveyance for good consideration would be regarded as fraudulent if made with the deliberate intention of hindering creditors and for the benefit of the debtor himself rather than as a bona fide . . arrangement’
Judges:
Russell LJ, Cairns LJ
Citations:
[1973] 1 WLR 1387, [1973] 3 All ER 754
Statutes:
Jurisdiction:
England and Wales
Equity, Land
Updated: 08 April 2022; Ref: scu.259221
