A gratuitous alienation?

A gratuitous alienation?

Stephanie Carr, insolvency partner at Harper Macleod, unpicks the Supreme Court’s decision on whether a sale of property by a company prior to it being put into liquidation constituted a gratuitous alienation.

Original news

Henderson v Foxworth Investments Ltd and another [2014] UKSC 41, [2014] All ER (D) 19 (Jul)

This appeal relates to the purchase of a country club, Letham Grange, by a Mr Liu under the company name LGDC. In 2001, LGDC was experiencing financial difficulties and Letham Grange was sold to a company called NSL. Later, a standard security granted by NSL over Letham Grange in favour of Foxworth Investments Limited (a company linked to Mr Liu) was registered in the Land Register of Scotland. The appointed liquidator for LGDC, Mr Henderson, brought an action for a decree of reduction, arguing that the sale of the Grange was a fraudulent and gratuitous alienation to remove the Grange from the liquidation with a view to putting the asset out of the reach of creditors and that:

the disposition from LGDC to NSL was not made for consideration, and

that the rights acquired by Foxworth were not acquired in good faith

What were the key features of the case?

The key features of the appeal to the Supreme Court included consideration, and application in the current circumstances, of an appeal court’s role where the appeal point involves a challenge to a judge’s assessment of the evidence and subsequent findings of fact. The Supreme Court, with reference to judicial precedent, set out established principles being that an appellate court should only interfere with the decision of a judge who had had the benefit of hearing witnesses giving evidence and of balancing up all of the evidence heard, when a finding can be made by the appellate court that the judge whose decision is being challenged issued a decision that ‘no reasonable judge’ could have come to having assessed the evidence and

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.