Re Fowlds ' Recovery Of A Preference May Not Always Be Achieved

• Published date: 02 December 2021
• Subject Matter: Corporate/Commercial Law, Insolvency/Bankruptcy/Re-structuring, Corporate and Company Law, Insolvency/Bankruptcy, Contracts and Commercial Law
• Law Firm: Blaser Mills
• Author: Mr Blaser Mills Law

In Re Fowlds [2021] EWHC 2149 (Ch) the High Court confirmed that the decision of the Insolvency & Companies Court (Bucknall & Another v Wilson (Re Fowlds) [2020] EWHC 1200 (Ch)) not to grant relief in respect of a preference claim against the associate of a bankrupt was correct, based on the facts of the case.

Both the Insolvency & Companies Court and the High Court felt that the facts of the case took it out of the norm. Peter Fowlds (F) was made bankrupt by his son in a dispute regarding the management of various properties. The son obtained a judgment in July 2014 of approximately '700,000 including interest and costs.

The Facts

Shortly after the judgment, in August and September 2014, F sold various properties. He used the proceeds to pay his legal fees in relation to the litigation with his son. He also paid '47,700 to his step daughter (W). W had assisted F during the litigation by providing accountancy services. She had invoiced '99,000 for the accountancy work. F appealed the judgment but the appeal was dismissed six months later. In October 2014 the son obtained a freezing order. However, although the properties had been sold, F did not co-operate and in August 2015 a warrant of commital was issued. The son presented a bankruptcy petition in January 2016 and a bankruptcy order was made in March 2017. The joint trustees sought repayment of the sums paid to W. F did not co-operate with the joint trustees during the administration of the bankruptcy and his discharge was suspended.

Insolvency & Companies Court decision

At first instance, the High Court (ICCJ Jones) held that whilst all the statutory grounds of a preference had been established, the circumstances of the case were so far from the norm as to justify no order for repayment of the preference. The court held that W had been paid on a commercial arm's length basis for her work, had acted in good faith and had changed her position so that it would be inequitable to require restitution. The court considered W's financial and personal circumstances meant that the rule in Ex Parte James applied to prevent the relief sought by the joint trustees. The court felt that the trustees should not have issued the application. The court emphasised that its decision was fact sensitive and rare and that no other remedy had been proposed. The court noted that trustees in bankruptcy should be wary of simply relying on the statutory presumption of desire to prefer if seeking to recover a preference from an...