2.8 Challengeable transactions

Question 1

When is there no remedy for a void disposition?

Answer 1

a trustee will not have a remedy against the recipient of a disposition if that person received the property or payment:
 in good faith;
 for value; and
 without notice that the bankruptcy petition had been presented

Question 2

What is the relevant time for a transaction at undervalue - bankruptcy?

Answer 2

5 years before petition

Question 3

What are the requirements for a transaction at undervalue?

Answer 3

Trustee must show that the bankrupt was insolvent at the time or as a consequence of the transaction

 If a TUV was entered into less than 2 years prior to the petition date, the trustee does not have to prove insolvency

 If the transaction was entered into between 2 and 5 years prior to the presentation of the petition the trustee has to prove insolvency at the time of the transaction

 Insolvency is presumed if the transaction at undervalue was to an associate

 The associate can attempt to prove otherwise (“rebut”)

 Insolvency is defined as the debtor being unable to pay their debts as they fall due or
where the value of their assets are less than the amount of liabilities

Question 4

What is meaning of associate?

Answer 4

 Current, former or reputed husband, wife or civil partner
 A relative of the individual or the individual’s (current or former) husband, wife or civil partner, including:
 brother, sister, uncle, aunt, nephew, niece, lineal ancestor or lineal descendant
 A business partner and their (current or former) husband, wife, civil partner or other relatives
 Employers/employees

Question 5

What is the relevant time for preferences in bankruptcy?

Answer 5

 2 years before the day of the petition for associates; otherwise 6 months

Question 6

What is required for a preference?

Answer 6

Both:Must be insolvent at time or as a consequence

there is desire (actual or presumed) on the debtor’s part to put that creditor into a better position;

Desire to prefer presumed re: transactions with associates

Where the person who benefitted from the preference is an associate the “desire to prefer” is presumed
 The associate can attempt to prove other wise
 Merely entering into a transaction because it was necessary (e.g. paying off a key trade creditor) will not be enough

Question 7

What is required for recovery of excessive pension contributions?

Answer 7

Applies to both approved and unapproved pensions

 Court must be satisfied that:
 Rights under scheme are directly or indirectly “the fruits of relevant contributions”
And
 The making of excessive contributions has unfairly prejudiced creditors

 Court can make such order as it thinks fit restoring the position

Question 8

What must court consider in a claim for excessive pension contributions?

Answer 8

“Relevantcontributions” may have been at any time

 Made by or on behalf of the bankrupt

Court must consider:

 Whether the purpose was putting assets beyond the reach of creditors;
AND
 Whether they were excessive in view of the individual’s circumstances at the time they were made

Question 9

What is the time period for extortionate credit transactions?

Answer 9

3 years before the commencement of the bankruptcy [i.e. the date the bankruptcy order is made]