Application to set aside a transaction defrauding creditors
| Author | Mark Watson-Gandy |
| Pages | 377-391 |
OBJECTIVE
The court has wide powers
‘Transaction’ is flexibly interpreted and covers arrangements spanning from formal contracts to informal understandings.
APPLICATION
The application is made by application notice (on Form IAA) or by claim form in ordinary chancery litigation.
If made by application, the application must recite the nature of the declaration sought and the grounds for bringing the application.
The application should be returnable to the registrar in the Companies Court or to the district judge in a Chancery District Registry or county court with insolvency jurisdiction.
Insolvency Act 1986
378 Corporate Insolvency Practice
The applicant can be the Official Receiver, the liquidator or administrator of the company or a victim of the company. If the company is in administration or liquidation, a victim will need the permission of the court to make this application. ‘Victim’ is flexibly interpreted.
The respondent should be the person who made the transfer and any other party to the transaction that the applicant is seeking to set aside.
COURT FEES
Where fresh proceedings need to be brought, a court fee of £280 is payable.
the application can be made as part of exisiting proceedings and the application is on notice to other parties, a court fee of £155 is payable.
EVIDENCE
The application should be supported by a witness statement by the liquidator or administrator. This will need to address:
ƒ the capacity in which the deponent makes this application (e.g. victim, liquidator, etc);
ƒ the order he seeks;
ƒ the date the company was incorporated;
ƒ the registered office of the company;
ƒ the nominal share capital of the company;
ƒ the issued share capital of the company;
ƒ the objects of the company;
ƒ the date upon which the petition to wind up the company or place it into administration or notice of administration was presented (if applicable);
ƒ the date upon which the company went into liquidation or administration
(if applicable);
ƒ the date of the transaction subject to challenge;
ƒ the particulars of the transaction subject to challenge;
ƒ the value of the company’s asset transferred under the transaction;
ƒ that the asset was transferred for no consideration or identifying the price it was transferred for and stating that this was significantly less than its value in money or money’s worth;
ƒ why it is said that the transaction has been entered into for the purpose of either putting assets beyond the reach of a person who is making, or may make, a claim against the company or otherwise prejudicing such a person’s interests in such a claim;
ƒ (in so far as there is an application to set aside the transaction) that the proposed order will not prejudice any interest in property that was acquired in good faith, for value and without notice of the relevant circumstances;
ƒ (in so far as there is an application to set aside the transaction) that the proposed order will not require a person who has received a benefit from the transaction in good faith, for value and without notice of the relevant circumstances to pay any sum unless he was not a party to the transaction.
The witness statement should exhibit:
ƒ (as applicable) evidence of his appointment as liquidator or administrator or of the basis upon which the applicant asserts he was a victim of the transaction;
ƒ (as applicable) a copy of the winding up or administration order;
ƒ evidence of the transaction subject to challenge;
ƒ evidence of the company’s ownership of the asset transferred;
ƒ evidence of the transaction under which the company’s asset was transferred and of its date;
ƒ evidence of the consideration (if any) paid under the transaction;
ƒ an independent valuation of the property disposed of showing its value at the date of the transaction (to show the transaction was at a significant undervalue).
THE FIRST HEARING
At the first hearing, the registrar or district judge will give directions as to whether points of claim are needed and for the filing of evidence. He may also require the application to be served on other people. He may give directions as to whether witnesses are to attend for cross examination. The first hearing is likely to be heard in chambers and the advocates are not expected to robe.
SERVICE
The application and the evidence in support will need to be filed at court and served on the respondent as soon as practicable after it is filed and in any event,
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