- Trustees in bankruptcy entitled to more than return of shares wrongfully transferred by bankrupt
- Trustees also entitled to recover loss in the value of shares
- Appropriate basis of valuation was fair value (not market value)
A bankrupt transferred shares to family members after the presentation of a bankruptcy petition against him. The trustees in bankruptcy (the Trustees) sought to recover the shares on the basis they were void dispositions under the Insolvency Act, together with damages for the loss suffered by the bankrupt’s estate.
The day before trial commenced, the respondents conceded that the transfers were void and re-transferred the shares to the Trustees. The question for the court was whether the Trustees were entitled to relief in the form of the value of the shares as at the date of the transfers.
The court held that the Trustees were entitled to the value of the shares as at the date of the transfer less any value remaining in the shares at the point that they were re-transferred back to the Trustees. The court dismissed the respondents’ argument that the Trustees were not entitled, in the absence of evidence of actual loss and an actual proposed sale of the shares, to any award based on a notional value at the time of the transfers. The court also held that, in the circumstances, the correct valuation of the shares was fair value rather than market value.
Relief under s284 is discretionary and this judgment confirms that such relief can extend not only to the return of assets wrongfully transferred to third parties (here family members who had not acted in good faith) but also to payment of the diminution in the value of such asset since the date of transfer.