Fagan v Papanicola [2008] EWHC 3348
Bankruptcy - Declaration of Trust
Iain Pester appeared in this case for Mrs Fagan.
At his wife's insistence, due to concerns about their family's financial security B made a declaration of trust transferring his beneficial interest in the matrimonial home to his wife. At the time B had no problem paying his debts, but was an alcoholic and a gambler. His wife threatened to divorce him if he did not transfer his interest to her.
B subsequently ran up significant debts and was made bankrupt. The trustee applied to set aside the declaration of trust under S.339 and 423 IA 1986.
Held:
The express reference to the grant of a gift in the declaration of trust was not conclusive evidence that the transaction was a gift- Relief under S.339 refused. The wife's promise not to bring divorce and ancillary relief proceedings was sufficient consideration for the transfer of B's beneficial interest.
- Relief under S.423 was also refused because the Trustee had not satisfied the court that the dominant purpose of the transaction was the statutory purpose of avoiding debt.