Frances Coulson
- Partner
- Insolvency & Restructuring
A bankruptcy order was made against Mr Rai Hamilton on 23 October 2019 following litigation in which he became embroiled with a former friend and business associate, John Jones (The order was made in spite of the fact that Mr Hamilton had the benefit of a judgment against Mr Jones. The petitioner was a firm of solicitors.). Ed Thomas and Matthew Carter of Fovis Mazars were appointed as trustees in bankruptcy. They brought proceedings as trustees of Mr Hamilton’s estate against John Jones and his son Adam Jones, attacking two sets of transactions under s 423 Insolvency Act 1986: first, a gift of £3 million made by John Jones to his son which the latter used to purchase a property and make loans to his sister; secondly, a number of miscellaneous payments made by John Jones in the period between 26 June 2016 and 23 January 2019.ICC Judge Prentis’s judgment in Thomas & Anor v Jones & Anor [2025] EWHC 756 (Ch) is the latest in a run of recent judgments given in relation to claims under s 423. The central issue in this case was again John Jones’s intention in entering into the contested transactions.
On the Friday before the trial began the Court of Appeal handed down judgment in Re Ethos Solutions Limited; Purkiss v Kennedy and others, which, taking into account the Supreme Court decision in El-Husseiny v Invest Bank PSC, led Newey LJ to state a number of propositions regarding s 423 claims which may be summarised as follows:
(i)In construing s 423, the court had to look at the relevant wording “in the context in which it appears in the section and in the Act as a whole, bearing in mind the purpose for which it was enacted” (see R (O) v Secretary of State for the Home Department and El-Husseiny v Invest Bank PSC).
(ii) It was “unquestionably the debtor’s subjective purpose that must be established” (El-Husseiny). The court had to be satisfied that the debtor “actually had the purpose, not that a reasonable person in his position would have it” (see Hill v Spread Trustee Co Ltd).
(iii) Section 423 applied “if the statutory purpose can properly be described as a purpose and not merely as a consequence, rather than something which was… positively intended” (see Inland Revenue Commissioners v Hashmi).
(iv) Where the transaction in issue was entered into by the debtor for more than one purpose, the court did not have to be satisfied that the prohibited purpose was the dominant purpose, let alone the sole purpose, of the transaction (see JSC BTA Bank v Ablyazov): “It is sufficient simply to ask whether the transaction was entered into by the debtor for the prohibited purpose” and, “if it was, then the transaction falls within s 423(3), even if it was also entered into for one or more other purposes” (per Leggatt LJ).
(v) The fact that lawyers may have advised that a transaction was proper did not by itself mean that the purpose of the transaction was not a s 423(3) purpose (see Arbuthnot Leasing International Ltd v Havelet Leasing Ltd (No. 2) and National Westminster Bank plc v Jones).
(vi) For the purposes of s 423(3)(b), “[t]he ‘interests’ of a person are wider than his rights” (Hill v Spread Trustee Co Ltd).
(vii) The transaction in issue need not have been directed at the “victim” making the claim: “For a person to be a ‘victim’ there is no need to show that the person who effected the transaction intended to put assets beyond his reach or prejudice his interests. Put another way, a person may be a victim, and thus a person whose interests the court thinks fit to protect by making an order under s 423, but he may not have been the person within the purpose of the person entering into the transaction. That person may indeed have been unaware of the victim’s existence” (per Arden LJ in Hill v Spread Trustee Co Ltd).
(viii) The debtor’s denial of having had a s 423(3) purpose does not prevent the court from inferring that he had such a purpose (Hill v Spread Trustee Co Ltd).
In addition to those propositions, ICC Judge Prentis cited Singh LJ in El-Husseiny on the relationship between s 423 and insolvency:
“The important point…is that, although s 423 finds itself in the same Act as those provisions which are concerned with bankruptcy or corporate insolvency, its scope is wider. There is no need for there to be any insolvency. The unfortunate reality of life is that even very wealthy debtors are sometimes unwilling, rather than unable, to pay their debts. They may well make strenuous efforts to use various instruments, including a limited company, for the purpose of putting their assets beyond the reach of a person who is making, or may make, a claim against them; or otherwise prejudicing the interests of such a person.”
With the foregoing propositions in mind, ICC Judge Prentis turned to whether the trustees had proved the necessary purpose in the case before him, which involved, as they recognised, drawing inferences in this case. Deciding that issue involved a detailed fact-finding exercise by the judge including a careful examination of a deed of gift and a review of the litigation between Mr Hamilton and Mr Jones. The judge said,
“I do not doubt that a motivation behind the gifts (a purpose, in s 423 language) was a desire to make a life-time gift in the hope that it might enable tax to be avoided or reduced. John Jones was keen to arrange his affairs to avoid tax; and there is no legal wrong in that.”
But there were other factors too: the oddity that Mr Jones was benefitting his son only; what the judge described as “the Joneses’ evidential contortions;” the loan Adam made to his sister without any form of security and on exceptionally generous terms; and problems with the deed of gift too. The judge said,
“In my judgment, those matters indicate that John Jones had the requisite purpose at the date of the gifts: he knew of Mr Hamilton’s claims; he knew that they might be of significant value; he knew he owed the 5%, whatever that might be; he knew their dealings had been complex, and had ended in acrimony; he knew that other claims might be brought against him; he was doing all he could to prevail against Mr Hamilton, including deliberately making his life as difficult as possible; and he wanted to put his family first.”
The judge went on:
“Mr Jones says that he had no such purpose because he did not at the time perceive the value of any claim by Mr Hamilton as exceeding his assets.”
However: “By itself, that does not negate the purpose for s 423…”
The trustees’ claim in relation to the £3 million gift succeeded.
They fared less well on their miscellaneous payments claims. These were various as were the amounts involved and the explanations for making them. The judge found that only one transaction was a gift. But:
“Even had I found that any of the Miscellaneous Payments after the first were gifts, the trustees’ s 423 case would not have succeeded because they would not have demonstrated the necessary purpose. As I have already observed, this group is of a different quality to the gifts; and there is no suggested link between any date of payment and an event in the litigation or other significant life event for John Jones. They were passing to father and son, but were in among the far greater payments John Jones was using in speculative investments; and those are only the ones we know about. In other words, they do not seem imbued with any special character directed at putting assets beyond the reach of a claimant, or prejudicing such a person’s interests.”
The result was that, although the trustees’ s claim succeeded in respect of the £3 million gift, it failed as regards the other transactions which they sought to impugn.
The foregoing brief account of a factually complex case tinged by fraught relationships will not disguise the fact that cases such as this succeed or fail on their facts and the quality of the witness evidence. John Jones, whose conduct was at the heart of this case, was plainly a determined and difficult man with little respect for the law. In the Hamilton/Jones litigation he had been sentenced to 12 months imprisonment for contempt of court. ICC Judge Prentis described him as “a strong personality, of decided views and great intelligence, who gives the impression of providing detailed and therefore accurate accounts of his skein of deals, carried out through multiple entities and funding arrangements in various jurisdictions. That reliability is illusory. He is a man quick-witted enough to thread together into plausibility strings of incomplete and partial facts. When picked apart, his narrative often relied on mixing his own person with that of companies of which he did not have sole control; and on transactions, often speculative, for which no paperwork ever existed, because they were said to rely on trust; or for which the paperwork had later been created in post-event reconstruction; or just on a self-created factual construct.”
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