Analysis
Mr Sahota issued a Part 8 claim to enforce a charging order over Mr Rajan Sohal’s interest in a property known as 31 Windsor Road. There were three deeds in respect of the subject properties, dated 5 October 2012, 7 August 2015 and 17 May 2019, purporting to grant Pooja Sohal, Mr Sohal’s wife, and Veena Sohal, Mr Sohal’s mother, interests in 31 Windsor Road. These deeds, if valid and effective, would have reduced the equity in 31 Windsor Road to the extent that there was unlikely to be any equity to satisfy Mr Sahota’s charging order. Mr Sahota challenged the three deeds on the basis that they were made after the dates they bore, they were shams, they created illusory trusts, under the 2019 deed Mr Sahota had priority in any event and they effected transactions made for the purpose of defrauding Mr Sohal’s creditors within the meaning of s423 of the Insolvency Act 1986. A trial on the issue of the validity of the deeds was listed.
Held:
- (1) The 2012 deed, according to its terms, created an equitable charge over 31 Windsor Road in favour of Veena Sohal. There was no evidence that the 2012 deed was made after the date it bore. The 2012 deed was not a sham because there was no evidence that it was intended to create a false impression or that the interests were different from those it articulated. The fact that it was later concealed did not make the deed a sham. The 2012 deed also did not create an illusory trust. However, Mr Sahota had standing with the leave of the court under s423 of the Insolvency Act 1986 to challenge the 2012 deed, the transaction it effected was at an undervalue and, as it intended to protect Veena Sohal, its purpose was to put assets beyond the reach of Mr Sohal’s unsecured creditors. It was appropriate to order that the amount of the undervalue in the transaction, being £761,372.52, be removed from Veena Sohal’s security over 31 Windsor Road. As the limitation period was 12 years, there was no concern over limitation.
- (2) The 2015 deed was not validly witnessed as a deed, the court using handwriting evidence not from an expert witness to determine the same. In so far as it may have operated as an agreement, it was also not supported by consideration and was therefore ineffective.
- (3) The 2019 deed, according to its terms, displaced the 2012 deed, replacing Veena Sohal’s equitable charge with an equitable interest in 31 Windsor Road. The 2019 deed also transferred a 25% interest in 31 Windsor Road to Pooja Sohal. The 2019 deed was made on the date that it bore. Although the 2019 deed provided that Veena Sohal’s interest was subject to ‘charges’, this did not provide that Mr Sahota’s charging order took priority to Veena Sohal’s interest as such charging order was not a ‘charge’. The 2019 deed was not a sham, as demonstrated by its registration, and it did not become a sham merely because such registration was later removed and the deed was concealed. The order made under s423 of the Insolvency Act 1986 in respect of the 2012 deed did not render the change to Veena Sohal’s interest a transaction at an undervalue. However, it meant that Veena Sohal’s interest would be reduced by the same amount as her security had been reduced, being £761,372.52. The transfer of the 25% interest to Pooja Sohal was a transaction at an undervalue and such interest should be re-vested in Mr Sohal and subject to Mr Sahota’s charging order.
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