Read the full judgment text of CACV 000074/1994 on BabelCite. This Court of Appeal judgment was delivered on 21 October 1994 before Power VP, Penlington JA, Godfrey JA.
Civil procedure – summary judgment – O.14 – allegation of fraud – Conveyancing and Property Ordinance (Cap.219) s.60 – intent to defeat creditors – conveyance at undervalue – parent and subsidiary company – insolvency. Property law – fraudulent conveyance – undervalue conveyance between related companies shortly before winding-up – whether summary judgment available. The plaintiff company was compulsorily wound up in January 1993. Prior to the winding-up, it had conveyed two properties to the 1st defendant, its parent company, at substantial undervalues: a Mid-levels flat for $1.1 million (originally purchased in 1985 for $1.2 million) and a Kowloon office for $800,000 (originally purchased in 1982 for $1 million), representing approximately one-third and one-fifth of market value respectively. Payment was by book debt. The liquidator applied under O.14 for summary judgment to set aside the conveyances under s.60 of the Conveyancing and Property Ordinance (Cap.219), on the basis that they were done with intent to defeat creditors. Held, dismissing the appeal: (1) The court assumed without deciding that O.14 was available despite the claim involving an allegation of fraud, but held that summary judgment should only be granted in such cases where the evidence of fraud is overwhelmingly clear. (2) Under s.60, which derives from the Statute of Elizabeth and is equivalent to s.172 of the Law of Property Act 1925, the plaintiff must prove that the conveyance was executed with intent to delay, hinder or defraud creditors, a question of fact determined by reference to the whole of the circumstances. (3) Following Lloyds Bank v. Marcan [1973] 1 W.L.R. 1387, a dishonest intention is a necessary element when the conveyance is for consideration, even if inadequate. (4) Where the defendant has denied any fraudulent intent and offered a credible explanation for the transaction, the court will rarely be able to conclude on a summary judgment application that the necessary intent has been sufficiently established. (5) The 2nd defendant's affidavit, explaining the conveyances as a corporate restructuring to obtain better financing from Forex Bank and the undervaluation as relating to tax considerations and historic cost, was an explanation capable of being believed and raised a triable issue requiring a full trial. Appeal dismissed.
Legal issues: Whether O.14 summary judgment is appropriate for a s.60 CPO claim involving an allegation of fraud · Whether intent to defraud creditors under s.60 CPO can be established on summary judgment
Outcome: Appeal dismissed.
Cited by 3 cases