The Court of Appeal found that voluntary transfers of property from a husband to his wife were fraudulent even though his creditor only became a creditor eleven years after the transfers.
Details of the case:
- 1993: a complaint of sexual abuse made to Gardaí by a pupil against her former teacher
- 1998: Teacher made a voluntary transfer of property to his wife
- 1999: Teacher arrested and charged with assault in 1999
- 2000: Teacher made another voluntary transfer to his wife
- 2007: the former pupil brought civil proceedings against her teacher
- 2011: Pupil was awarded €400,000 in damages
When the teacher failed to discharge the award of damages, the pupil brought High Court proceedings to set aside the voluntary transfers on the basis that they were made to defeat her claim as a future creditor.
- The High Court found in her favour and set aside the transfers. The matter was then appealed to the Court of Appeal.
Issues considered by the court
- A key issue considered in the case was whether the pupil had to have been a creditor at the dates of the transfers in order for the transfers to be found to be fraudulent.
- Since the transfers occurred in 1999 and 2000, the applicable statute was the Conveyancing Act (Ireland) 1634 (repealed by the Land Reform and Conveyancing Act in 2009).
- The Court of Appeal referred to the 1887 decision of the Irish Court of Appeal in In Re Moroney, a bankrupt. This decision sets out the test for a finding of fraudulent intent under the 1634 Act. Firstly, the conveyance must be fraudulent and secondly, the class of fraud must be “intent to delay, hinder or defraud creditors”. The intent does not have to exist “in the mind of the grantor, but the necessary or probable result [of the transfer] is to defeat or delay creditors”.
- The Court of Appeal held that the Act of 1634 applied not just to existing creditors, but also to persons who might become a creditor in the future.
- It was found that the correct conclusion was drawn under law that the teacher intended to defraud his future creditor.
- Even if the former teacher did not form an intention to defraud at the time of the transfers, the natural and probable result of the transfers was to defeat or delay his creditors, including future creditors.
What can be learned from this case?
This case demonstrates that rationale applied in having a transfer set aside. The fact that the transfer was made eleven years prior to the plaintiff becoming a creditor was irrelevant to the court’s conclusion.
Doherty v Quigley  IEHC 361