Fraudulent Preference in UK Law

Leading Cases
  • Rasu Maritima S.A. v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Government of the Republic of Indonesia intervening)
    • Court of Appeal (Civil Division)
    • 09 March 1977

    So far as concerns defendants who are within the jurisdiction of the court and have assets here, it is well-established that the court should not, in advance of any order or judgment, allow the creditor to seize any of the money or goods of the debtor or to use any legal process to do so. His proper remedy is to get judgment - under Order XIV if he can - and issue bankruptcy proceedings against the debtor. There are statements of the highest authority to this effect.

  • Ashborder BV and Others v Green Gas Power Ltd and Others
    • Chancery Division
    • 15 March 2005

    On the other hand, it may be helpful to summarise briefly the following conclusions that I have reached from the decided cases that I have reviewed: (1) The question whether a particular transaction is within the ordinary course of a company's business in the context of a floating charge is a mixed question of fact and law; (2) it is convenient to approach the matter in a two stage process; (3) first, to ascertain, as a matter of fact, whether an objective observer, with knowledge of the company, its memorandum of association and its business, would view the transaction as having taken place in the ordinary course of its business, and, if so (4) second, to consider whether, on the proper interpretation of the document creating the floating charge, applying standard techniques of interpretation, the parties nonetheless did not intend that the transaction should be regarded as being in the ordinary course of the company's business for the purpose of the charge; (5) subject to any such special considerations resulting from the proper interpretation of the charge document, there is no reason why an unprecedented or exceptional transaction cannot, in appropriate circumstances, be regarded as in the ordinary course of the company's business; (6) subject to any such special considerations, the mere fact that a transaction would, in a liquidation, be liable to be avoided as a fraudulent or otherwise wrongful preference of one creditor over others, does not, of itself, necessarily preclude the transaction from being in the ordinary course of the company's business; (7) nor does the mere fact that a transaction was made in breach of fiduciary duty by one or more directors of the company; (8) such matters in (6) and (7) may, however, where appropriate and in all the circumstances, be among the factors leading to the conclusion that the transaction was not in the ordinary course of the company's business; (9) transactions which are intended to bring to an end, or have the effect of bringing to an end, the company's business are not transactions in the ordinary course of its business.

  • Re Cutts (A Bankrupt)ex parte Bognor ; Mutual Building Society v Trustee of T W Cutts
    • Court of Appeal
    • 17 May 1956

    Though the question of pressure in some form or another has, in the reported cases, often been the crux of the matter, it is plain that an inference of intention to prefer may be displaced in many other ways than by shoeing that the debtor acted under pressure.

  • Peat v Gresham Trust Ltd
    • House of Lords
    • 27 March 1934

    The onus is only discharged when the Court upon a review of all the circumstances is satisfied that the dominant intent to prefer was present. That may be a matter of direct evidence or of inference, but where there is not direct evidence and there is room for more than one explanation it is not enough to say there being no direct evidence the intent to prefer must be inferred.

  • Ward v Aitken and Others ; Re Oasis Merchandising Services Ltd
    • Court of Appeal (Civil Division)
    • 09 October 1996

    Considerations such as these lead us to consider whether a distinction should not be drawn between assets which are the property of the company at the time of the commencement of the liquidation (and the property representing the same), including rights of action which arose and might have been pursued by the company itself prior to the liquidation, and assets which only arise after the liquidation of the company and are recoverable only by the liquidator pursuant to statutory powers conferred on him.

  • Re Dennis (a Bankrupt)
    • Court of Appeal (Civil Division)
    • 04 April 1995

    If the debtor was adjudicated bankrupt, then as from the date of the act of bankruptcy neither the debtor nor any such person claiming under him who could not bring himself within the protective provisions of the Bankruptcy Acts had any title at all; as from that date title was vested in the trustee. Outside the law of bankruptcy no similar ambulatory title was known to the law.

  • Kevin Hellard and Another v Horacio Luis De Brito Carvalho
    • Chancery Division
    • 25 September 2013

    It is clear that established, definite insolvency before the transaction or dealing in question is not a pre-requisite for a duty to consider the interests of creditors to arise. If, on the other hand, a company is going to be able to pay its creditors in any event, ex hypothesi there need be no such constraint on the directors.

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Legislation
  • Companies Act 1862
    • UK Non-devolved
    • January 01, 1862
    ... ... S-164 ... Fraudulent Preference. 164 Fraudulent Preference ... 164. Any such Conveyance, ... ...
  • Bankrupt and Insolvent Act 1857
    • UK Non-devolved
    • January 01, 1857
    ... ... or cause to be made, either within this Realm or elsewhere, any fraudulent Grant or Conveyance of any of his Lands, Tenements, Goods, or Chattels, or ... Sum to be divided among his Creditors, or of giving any undue Preference to any of the said Creditors, discharged or concealed any Debt due to or ... ...
  • Companies Act 1947
    • UK Non-devolved
    • January 01, 1947
    ... ... 15. # M2 1946 c. 67 ... 92: Amendments as to fraudulent preference ... (1) ... ...
  • Companies Act 1948
    • UK Non-devolved
    • January 01, 1948
    ... ... Issue of Shares at Premium and Discount and Redeemable Preference Shares ... Issue of Shares at Premium and Discount and Redeemable ... any other person or otherwise for a fraudulent ... or unlawful purpose or in a manner oppressive ... of any part of its ... ...
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Books & Journal Articles
  • THE VALIDATION OF TRANSACTIONS INVOLVING THE PROPERTY OF INSOLVENT DEBTORS—A comparison of judicial discretion with a statutory code
    • No. 46-3, May 1983
    • The Modern Law Review
    ... ... unless they fell within specified exceptions such as fraudulent con- veyances, voluntary settlements or fraudulent preference ... ...
  • THE INFILTRATION OF EQUITABLE DOCTRINE INTO ENGLISH COMMERCIAL LAW*
    • No. 43-5, September 1980
    • The Modern Law Review
    ... ... and suggest that a stranger who participates in a fraudulent breach of trust without receiving trust property will be liable ... of trust by Kayford not constitute a fraudulent preference invalidated by section 320 (1) of the Com- panies Act ... ...
  • A Study In The Interrelation Between Choice Of Law Clauses And The Conflict Of Laws
    • No. 12-4, October 1949
    • The Modern Law Review
    ... ... ; (b) If in England or elsewhere he makes a fraudulent convey- ance, gift, delivery, or transfer of his property, or ... this or any other Act be void as a fraudulent preference if he were adjudged bankrupt ; (d) If with intent to ... ...
  • Wrongful Trading: An Impotent Remedy?
    • No. 4-1, March 1996
    • Journal of Financial Crime
    • 38-46
    Improved creditor and community protection seemed attainable goals when Professor Daniel Prentice described s. 214 of the Insolvency Act (‘s. 214’) as ‘one of the most important developments in com...
    ... ... were having difficulty establishing dishonesty under the fraudulent trading provisions.4 The courts demanded a strict standard of proof for ... court held that the claims for wrongful trading and fraudulent preference were arguable but the claim for the transaction at under value was ... ...
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Law Firm Commentaries
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