A man purchased two flats at a significant undervalue from an insolvent and conveyed them for no consideration to his wife. The insolvent’s permanent trustee successfully challenged the sales as gratuitous alienations. Before the Lord Ordinary and on a reclaiming motion to the Second Division the wife, whose husband had died before the challenge, submitted that the court had a discretion under section 34(4) to make an appropriate order, which, she submitted, was not a reduction of the dispositions but an order for payment of the difference between the price which her husband had paid and the market value of the flats at the date of the alienation. It does not appear that the wife, who as the ultimate transferee was the defender of the action, argued that it was inequitable to reduce the dispositions because she would not be able to recover the (inadequate) consideration paid. This may be because her husband had paid the consideration and she had been a gratuitous disponee of the flats from him.
Lord Sutherland said: ‘The starting point in a case of this nature for interpretation of section 34(4) is that the original alienation has been avoided and the transaction has been vitiated. This is not a good starting point for an argument which is based solely on equity. It is in our opinion clear from a reading of section 34(4) that the general purpose is to provide that as far as possible any property which has been improperly alienated should be restored to the debtor’s estate. In the case of a disposition of heritable property this can easily be done by reduction of that disposition. We consider that the reference to ‘other redress as may be appropriate’ is not intended to give the court a general discretion to decide the case on equitable principles but is designed to enable the court to make an appropriate order in a case where reduction or restoration of the property is not a remedy which is available.’
Judges:
Lord Sutherland
Citations:
1991 SLT 472
Jurisdiction:
Scotland
Cited by:
Cited – MacDonald and Another v Carnbroe Estates Ltd SC 4-Dec-2019
‘This appeal concerns the Scots law of gratuitous alienations on insolvency. It raises three principal questions. First, there is a question as to the interpretation of the term ‘adequate consideration’ in section 242(4)(b) of the Insolvency Act . .
Lists of cited by and citing cases may be incomplete.
Insolvency
Updated: 09 May 2022; Ref: scu.677421