Ever since the 1634 it has been effectively illegal for an insolvent person to transfer assets to another person.
This was made law in the time of Charles the 1st in the Conveyancing Law (Ireland) Act which provided for the avoiding and abolishing of “fained, covenous and fraudulent gifts contrived of malice, collusion or guile to have the purpose and intent to delay hinder or defraud creditors or others …”
This Act was in place up until December 2009 when it was replaced by section 74 of the Land and Conveyancing Law Reform Act 2009.
Over the last number of years a number of cases have come before the Courts which show the expansive nature of these provisions.
The facts of “Keegan Quarries Limited v McGuinness” are as follows.
McGuiness sold land to Keegan Quarries and as part of that transaction represented to Keegan that the land had been used as a quarry as far back as the 1950s. When Keegan Quarries began operating the quarry there was a planning objection lodged in court and at trial it became clear that the quarry did not have planning and had not been operated since the 1950s as had been promised.
Keegan Quarries sued McGuiness for damages for misrepresentation.
Now before that legal action had even begun, McGuiness transferred his land to his wife “out of natural love and affection”. There was evidence at the trial that the transfer was motivated also by “any come back” in relation to Keegan Quarries.
The Court held that there had been a misrepresentation from McGuiness to Keegan Quarries and that damages should be paid in the amount of €5.5m.
It further held that that the transfer by McGuiness of his property to his wife was unlawful and the court ordered that the transfer be rewound.
What is interesting about this case is that the “creditor” (Keegan Quarries) were not a “creditor” at the time of the transfer. They became a “creditor” years later and only after a trial before the Courts.
In her judgement Finlay Geoghegan J found that the law included not only a “creditor” but also “other person” and this meant that a party “from whom a potential claim is contemplated by the transferor is a person intended to be protected”.
Finally, while in Keegan Quarries there was evidence to suggest that the transferor had in his mind the possibility of a future action, and that this motivated his decision to transfer, it is also settled law that where no actual evidence of this exists, a fraudulent intent can be presumed where the effect of the transfer is such as to defeat or hinder a person who might become a creditor in the future.