JSC BTA Bank v (1) Mukhtar Ablyazov (2) Madiyar Ablyazov (2018)
In proceedings under the Insolvency Act 1986 s.423 for the recovery of a sum paid as a gift by a former banker to his son, the fact that the banker was aware at the time of the transaction that he was facing claims against his assets did not compel a finding that the transaction was entered into for the prohibited purpose of prejudicing creditors.
A Kazakh bank appealed against the rejection of its claim that a payment of money made by the first defendant as a gift to his son, the second defendant, was made for the purpose of putting assets beyond the reach of creditors and was therefore liable to be set aside under the Insolvency Act 1986 s.423. The second defendant sought an order that the claim had been brought after the expiry of the limitation period.
The bank had been controlled by the first defendant until his removal for embezzlement. The first defendant fled to the UK to avoid imprisonment. In February 2009, he had transferred £1.1 million to the second defendant when the latter was resident in the UK as a student. The instant action commenced in December 2015. The judge held that the money was a gift and that the transfer was not caught by s.423. In reaching that conclusion, he had taken into account the facts that the transfer had been effected after the finding of fraud and that the first defendant had fled the jurisdiction in the knowledge that he faced claims against his assets. The judge found that the he had given false evidence in a witness statement that part of the funds transferred to his son were for university fees and living expenses. He held that, although the first defendant was aware that the transaction would result in the fund being placed out of reach of creditors, that was not a substantial purpose of the transfer. The bank was refused permission to appeal against the judge's finding that the first defendant would have made the transfer to his son even if there was no possibility of any claims being made against him. The judge also held that the claim under s.423, if otherwise well-founded, would not have been time-barred, as the second defendant was "claiming through" his father within the meaning of the Limitation Act 1980 s.38(5).
Dual purpose transactions - Where a transaction was entered into by a debtor for more than one purpose, the court did not have to be satisfied that the prohibited purpose of prejudicing creditors, within the meaning of s.423(3), was the sole or dominant purpose of the transaction, Inland Revenue Commissioners v Hashmi  EWCA Civ 981 followed. If the transaction was entered into for the prohibited purpose, it fell within s.423(3) even if it was also entered into for another purpose. There was no rule of law that, if the debtor knew at the time of entering into the transaction that he was facing claims, the judge had to find that the transaction was entered into for the prohibited purpose unless the debtor adduced evidence to the contrary. Had it wished to do so, Parliament could readily have created a rule to that effect. It was for the judge to decide in what order to consider the various factors and what inference to draw from the evidence as a whole (see paras 13-14, 17, 27-29 of judgment).
Adverse inferences - It would have been questionable for the judge to treat the fact that the first defendant had lied in his statement as a reason to infer that the transfer was made for the prohibited purpose. Any significance attaching to the fact that a witness had lied fell squarely within the province of the judge whose role it was to find the relevant facts: he was not obliged as a matter of law to draw adverse inferences from such matters (paras 36-37).
Findings of fact - An appellate court should only interfere with a finding of fact made by the trial judge if satisfied that their conclusion was plainly wrong or beyond the bounds within which reasonable disagreement was possible and was thus one that no reasonable judge could have reached, McGraddie v McGraddie  UKSC 58 followed. No challenge had been made to the findings of primary fact on which the judge based his assessment of the purpose for which the transfer had been made by the first defendant to his son; nor had the bank pointed to any demonstrable error in the judge's reasoning. On the contrary, there was evidence that the first defendant had acted out of concern that his son would retain the right to remain in the UK and have funds available to him even if he became unable to support him because of the creditors' claims (paras 43-46).
Limitations - As a matter of law, no property was transferred from the first to the second defendant when the money was paid into the latter's bank account. However, that did not prevent the operation of s.38(5). The requirement was met where the right to a chose in action constituted by money credited to the payee's bank account was acquired through or by the act of the payor in causing the payment to be made, GL Baker Ltd v Medway Building and Supplies Ltd  1 W.L.R. 1216 followed. There was no justification for adopting a restrictive interpretation of s.38(5). The judge had been right to regard the second defendant as a person "claiming through" the first defendant within the meaning of s.38(1) and s.38(5), such that the bank could rely on s.32 of the 1980 Act as extending the limitation period (paras 54-55, 61, 65).
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