Curtis & Ors v Pulbrook & Ors

There are two related matters before the court. Both arise from an order made in June 2009 following the trial of a claim originally brought by Arthur Ronald Towns (“Mr Towns”) but continued after his death by the present claimants as his personal representatives. The order, made by Mr Richard Sheldon QC sitting as a deputy judge of the Chancery Division was that the first defendant Richard Henry Pulbrook should pay the claimants £124,195.01 together with interest of £25,312.43 to the date of judgment and a further £70,000 on account of the claimants’ costs to be assessed.

In August 2009 the claimants obtained an interim charging order over 445 shares in Farnham Royal Nurseries Limited (“FRN”) which the claimants believed to be registered in the first defendant’s name and to be beneficially owned by him. By the end of 2009 the court had made a final charging order in relation to 131 of those shares. As to the remainder, Mr Pulbrook claimed that he had during 2007 made a gift of 14 of them to his daughter Alice Pulbrook and then a gift of the balance of 300 to his wife Anucha Pulbrook. Having considered the evidence, the claimants denied that any effective gift of the 314 shares had been made by Mr Pulbrook. The first matter before me consists of the adjourned charging order proceedings in which a trial has been directed of the question whether an effective gift of the 314 shares, or any of them, was made by Mr Pulbrook. For that purpose, Anucha and Alice Pulbrook have been joined to the proceedings as the second and third defendants respectively.

The second matter before the court consists of fresh proceedings between the same parties by which the claimants seek relief under section 423 of the Insolvency Act 1986 upon the ground that, if effective gifts were made of the 314 shares, then they were made for the purpose of putting those shares beyond the reach of a person making, or who might make, a claim against Mr Pulbrook, or alternatively for the purpose of prejudicing the interests of such a person. Mr Pulbrook has counterclaimed in those proceedings for the setting aside of the charging orders made thus far on the basis of an alleged breach of a settlement agreement made at a mediation in relation to earlier proceedings between related parties.

Mr Pulbrook, who now resides with his wife in Thailand, has written to the court stating that a lack of financial resources has prevented him from attending at the trial. Neither Anucha nor Alice (who is a student at Edinburgh University) have defended these proceedings, or taken any part in them beyond making short witness statements at Mr Pulbrook’s request.

The trial has therefore consisted of the unopposed proof of their case by the claimants, represented by Miss Tracey Angus of Counsel who has, very properly, drawn to the court’s attention both the main points which might have been advanced by the Pulbrooks, if present, and the evidence tendered by them in the form of witness statements.

The claimants have relied mainly upon a witness statement of the first claimant Richard Anthony Curtis, which he formally proved on oath in the witness box and, under a Civil Evidence Act Notice, upon evidence from Henry Pulbrook’s brother Dr Roger Martin Pulbrook who was at the time of the trial absent from the jurisdiction. It will assist in an understanding of the documents to know that Mr Pulbrook and Dr Pulbrook are generally known within the family as Henry and Martin respectively. The claimants are all children of the late Mrs Edith Towns, who died in December 2005. Mr Towns, her widower, died in June 2008. Henry and Martin Pulbrook are both cousins of Mrs Towns.

The present dispute about the beneficial ownership of the 314 shares in FRN comes at the end of a long and complicated history of disputes and litigation between the claimants and Florence Nicole Tracey on the one hand, and Henry and Martin Pulbrook on the other, mainly in connection with three family settlements and the affairs of FRN. The history, so far as is relevant, may be found in the painstakingly detailed judgment of Mr Sheldon QC to which I have already referred. For present purposes it is sufficient for me to provide only a very brief summary.

Henry Pulbrook who until retirement was a stockbroker had been a director of FRN since the beginning of 1991. He and a Mr Onslow were trustees of the three family settlements. Mr Onslow was also the other director of FRN.

By 2005 Henry Pulbrook claimed to have acquired 326 FRN shares beneficially, and was by then living rent free in a main asset of FRN, namely a property near Reading known as Staddle Stones. Henry Pulbrook had also taken on the status as Mr and Mrs Towns’ financial adviser, and had signing authority on a joint bank account of theirs (“the Joint Account”).

In 2005, discontent among beneficiaries of the family settlements, including the claimants, about Henry Pulbrook’s conduct of the affairs of the settlements and FRN came to a head. Following letters of claim from Messrs Payne Hicks Beach on their behalf, Mr Onslow resigned as trustee of two of the settlements and director of FRN and was in due course replaced as trustee by Martin Pulbrook. Proceedings seeking Henry Pulbrook’s removal as trustees of one of the settlements (“the Curtis Settlement”) and of Henry and Martin Pulbrook as trustee of another (“the 1925 Settlement”) were commenced in December 2005, just before Mrs Towns’ death: (“the 2005 Claim”). Proceedings seeking their removal as trustees of another family settlement (“the Towns Trust”), and an order that Henry Pulbrook transfer 138 FRN shares to newly appointed trustees of the Towns Trust were commenced in November 2006 (“the 2006 Claim”).

In the meantime Henry Pulbrook had sought to cement his authority in relation to the family’s affairs by obtaining, first, an Enduring Power of Attorney for Mr Towns in February 2006, secondly a letter of indemnity from Mr Towns, which Henry Pulbrook prepared, in March 2006, and thirdly, after doubts about the effectiveness of the letter, a deed of indemnity from Mr Towns purporting to indemnify both Henry and Martin Pulbrook against all costs which they might incur in connection with the 2005 Claim and any other claims brought by the Curtis children or Dr Tracey, again in March 2006: (“the March 2006 Deed”).

The 2005 and 2006 Claims were eventually compromised at a mediation by a written agreement (“the Mediation Agreement”), by which (inter alia):

Henry and Martin Pulbrook had by then incurred very substantial fee liabilities to Farrers in connection with the defence of the 2005 and 2006 Claims. Between January and May 2007 Henry Pulbrook caused to be paid out of the Joint Account (the beneficial ownership of which had devolved upon Mr Towns upon his wife’s death) sums amounting to in the aggregate to £124,000 odd which were used to discharge both Farrers’ fees and a costs order in favour of the claimants arising from an application to enforce provisions of the Mediation Agreement.

On 26^th June 2007 Lester Aldridge LLP, solicitors newly instructed by Mr Towns, wrote to Mr Pulbrook notifying him of the revocation by Mr Towns of his power of attorney in Mr Pulbrook’s favour, asking him not to contact Mr Towns on that matter, and requesting the return of Mr Pulbrook’s set of keys to Mr Towns’ residence. On 11^th July 2007 FRN contracted to sell Staddle Stones.

The documents relevant to the purported gift to Alice are as follows. First, there is a share certificate (Number 153) showing Henry Pulbrook as the owner of 124 shares, dated 13^th June 2007 and cancelled on 14^th July 2007 under his signature. Secondly there is a new share certificate (Number 154) recording Alice as the holder of 14 shares signed by Henry Pulbrook and dated 14^th July 2007. Thirdly there is a new share certificate in Henry’s favour for the balance, made on the same date. Fourthly there is a stock transfer form signed by Henry Pulbrook recording the transfer of 14 of his shares to Alice for nil consideration, dated 14^th July 2007. Fifthly there are extracts from FRN’s Register of Shareholders purporting to record Alice as the holder of 14 shares. Finally there is a letter from Henry Pulbrook to Alice dated 14^th July 2007.

Alice was Henry Pulbrook’s daughter by an earlier marriage. The letter records that, upon the anticipated completion of the sale of Staddle Stones in September, Henry Pulbrook would have nowhere to live in the UK and would be emigrating to Thailand with Anucha. Reference is made to the impending liquidation of FRN, and to Henry Pulbrook’s substantial shareholding as his only remaining wealth. The letter continues:

“I have given much thought to how I can best help and support you through University, and have decided to make a gift to you of 14 shares in the Company. The net worth of these is likely to be about £10,000, or with any luck, a bit more; and this, as I have explained, will be paid to you by the liquidator at various times between about March 2008 and December 2009.

…

I am therefore sending you your share certificate, which is your document of title to the distribution proceeds which I have described. In due course, the liquidator will write to you and ask you to submit it to him – so keep it safely!”

As indicated, the letter enclosed the share certificate in favour of Alice which I have described, but not the stock transfer form.

The evidence shows that, just before emigrating to live with his wife in Thailand in October 2007, Henry Pulbrook delivered a package of FRN’s documents to the Reading offices of Ratcliffe Duce & Gammer (Solicitors) for their safekeeping. The documents included the Share Register, a copy of the share certificate in favour of Alice, but not the stock transfer form or any copy of it. That document emerged for the first time when exhibited to a witness statement of Henry Pulbrook dated 6^th September 2009 (his fifth), which also exhibited copies of the share register and share certificates which I have described. That witness statement was made in connection with the charging order proceedings, and Henry Pulbrook confirms in it that he gave his daughter the 14 shares as described in his letter to her dated 14^th July. Alice confirms receipt of the shares as a gift in a short witness statement which concludes:

“My father has provided no other financial assistance for my further education and I accepted the gift in good faith.”

There is no evidence that Alice did or abstained from doing anything in reliance upon receipt of the shares as a gift. No distribution has been made to her as a shareholder.

The documents relating to the purported gift to Anucha are as follows. First, there is a share certificate (Number 139) for 321 shares in favour of Henry Pulbrook, cancelled under his signature on 18^th July 2007. Secondly there is a share certificate (Number 156) for 300 shares in Anucha’s favour signed by Henry Pulbrook and dated 18^th July 2007. Thirdly there is a certificate (Number 157) for the residue of 21 shares in Henry Pulbrook’s favour also dated 18^th July 2007. Fourthly there is a completed stock transfer form of the same date recording a transfer of 300 shares by Henry Pulbrook to Anucha for nil consideration. Again, the company’s Share Register records Anucha as holder of 300 shares in FRN as from that date. Both the share certificates and share register entries in Anucha’s favour were included in the bundle of company documents sent to Radcliffe Duce & Gammer in October 2007, but not the stock transfer form.

In his fifth witness statement Henry Pulbrook describes Anucha as having emigrated back to Thailand on 29^th July 2007, and asserts that he gave the 300 shares to her on 18^th July. Again, copies of the documents which I have described are exhibited to that witness statement. In a witness statement of her own, which she stated her husband had helped her to prepare, Anucha confirmed that she had been given her share certificate on 18^th July, and had asked Henry Pulbrook to keep it safely for her. She said that Henry had later told her that the certificate was “safely deposited at solicitors in Reading”. She makes reference in addition to a single share in the company which she had held since 2005, and which is not in issue in these proceedings. Neither Henry Pulbrook nor Anucha Pulbrook suggest that she received the stock transfer form in July 2007, or at all. It is merely referred to as included in the exhibits to Henry Pulbrook’s fifth witness statement (as it is). It was not included in the bundle of company documents sent to Radcliffe Duce & Gammer.

There is a conflict of evidence between Henry Pulbrook and his co-director and brother Martin as to the extent to which, if at all, Henry involved Martin in relation to the purported gifts of shares to his wife and daughter. Henry’s evidence is that he simply told Martin that he was doing so. Martin’s evidence is that he knew nothing whatsoever about the gifts, or about any change in Henry’s shareholding in the company, as at the date of Henry’s emigration to Thailand in mid-October 2007.

Article 16 of FRN’s Articles of Association provided that:

“The Directors may at any time in their absolute and uncontrolled discretion refuse to register any proposed transfer of Shares and shall not be bound to assign any reason for such refusal;”

The quorum for a meeting of directors of FRN was two. By Article 33, the Directors were entitled from time to time to entrust to and confer upon the Managing Director all or any of their powers, subject to certain irrelevant restrictions. Although Henry Pulbrook has in his defence relied upon Article 33, there is no evidence that this power was exercised in his favour as Managing Director, at least in relation to the question whether or not to approve the registration of a share transfer. On the contrary, there is copious evidence in relation to the period from October 2006 until June 2007 of both directors being fully and punctiliously involved in that process, in relation to share transfers which immediately preceded the purported gifts.

Although the claimants do not challenge the genuineness of the dates of the documents relating to the purported gift to Alice, Miss Angus has drawn my attention to evidence giving rise to a real issue whether the documents relating to the purported gift to Anucha were backdated. The evidence is as follows. On 21^st August 2007 Payne Hicks Beach, by then instructed by Mr Towns, wrote to Henry Pulbrook challenging the legitimacy of payments which he had, under the (by then revoked) power of attorney caused to be made from the Joint Account, seeking a full accounting and threatening proceedings. The amount then claimed, subject to a full accounting, was £66,000 plus interest. On the following day, Payne Hicks Beach sent a further letter seeking undertakings in relation to the proceeds of the impending completion of the sale of Staddle Stones. Both letters were sent by fax and by post.

On 22^nd August Henry Pulbrook responded to the second letter, in which, in passing, he described himself as:

“A major shareholder who is forced by circumstances to emigrate to Thailand….”

In his Defence to the section 423 proceedings (endorsed with a statement of truth) Henry Pulbrook described his motivation for the purported gift to his wife. He said it was primarily to reward her for her kindness in providing a home for him in his retirement (in Thailand). He continued:

“21.

My second motivation was to prevent my sister, Dr Nicole Tracey (“Nicole”), from interrupting receipt by me of my entitlement to FRN distribution proceeds under the Mediation Agreement. My concern that Nicole might attempt this was based specifically on her post-mediation challenge to my annual honorarium from FRN (£3,500), which had been openly declared during the mediation talks, but which Farrers had omitted to mention in the document. After the Mediation (22 and 23 January 2007), I quickly became increasingly aware of the extraordinary lack of good faith and lack of care for my interests with which Farrers had conducted the procedure and, more particularly, of their negligence in the drafting of the Agreement document. These matters are more fully set out in my Part 20 Claim which accompanies this Defence and forms an essential part of it.

22.

I do believe that I prevaricated over the completion of the associated paperwork, while enquiring of my sister, Mrs Rosalind Strang, if she would hold some of my shares as a nominee. I certainly completed the paperwork by mid-August at the very latest.”

Nothing turns on the reference to Henry Pulbrook’s Part 20 Claim which has, in any event, been struck out.

The proceedings threatened by Payne Hicks Beach in their letter of 21^st August 2007 were duly issued on 5^th October 2007 and, after Mr Towns’ death in June 2008, were tried by Mr Sheldon QC in February 2009, leading to the order for payment by Henry Pulbrook which I have described. The claimants say, and there is no evidence suggesting otherwise, that they became aware of the alleged gifts by Henry Pulbrook to his wife and daughter only in February 2009, during the trial before Mr Sheldon QC, at which Mr Pulbrook told the Deputy Judge that he held only 131 shares, referred to the gifts to his daughter and his wife, and said that 80 of the 131 were held on bare trust for his younger sister. Mr Pulbrook has throughout recognised the need to retain beneficial ownership of sufficient shares to pay the £25,000 costs liability created by the Mediation Agreement.

The factual issues which I must resolve are therefore:

In relation to the issues of fact, the only witness who presented himself to verify his witness statement was Mr Curtis, who had no personal knowledge of the events which give rise to the factual issues. Mr and Mrs Pulbrook have chosen not to attend, albeit for reasons which may have as much to do with straitened financial circumstances as with a desire not to subject themselves to cross-examination. Martin Pulbrook has been, for what appears to me to have been good reason, unable to attend for cross-examination. Of course, none of the defendants have attended trial to resist the claim, but I must nonetheless be satisfied that the claimants have established their case on the facts.

Little weight can be placed upon the evidence of Henry Pulbrook, mainly because his successive accounts of the gift of shares to his wife are contradictory, in particular in relation to date. Furthermore, Henry Pulbrook’s acknowledgement in his defence (signed in May 2010) that he may have completed the paperwork relating to the gift to his wife as late as mid-August 2007 is in stark contrast with his fifth witness statement dated 6^th September 2009, in which he adheres to the date as being 18^th July 2007, and with his wife’s witness statement made on the same date, with his assistance, in which she said that he handed her the relevant share certificate on the same day, before her departure to Thailand eleven days later. Logically, the share certificate to his wife was the last of the documents which Henry Pulbrook thought he needed to create.

It is on the face of it therefore surprising to find Henry Pulbrook describing himself as a major shareholder in FRN in a letter to Payne Hicks Beach as late as 22^nd August if he had done what he thought he needed to do to complete a gift of 300 shares to his wife in July, leaving him with only 131 shares, 80 of which he later suggested he held on bare trust for his younger sister, and the remainder of which were earmarked to satisfy his costs obligation under the Mediation Agreement.

All that can be said with certainty is that he had completed what he thought was the necessary paperwork by the time of his departure for Thailand in mid-October, since part of it (albeit not the stock transfer form) was included in the package left with Ratcliffe Duce & Gammer just before his departure.

In my judgment, and notwithstanding Henry Pulbrook’s protestation in his defence that the documentation must have been completed by mid-August 2007, it is more likely that he completed it after receiving Payne Hicks Beach’s letter of 21^st August, threatening proceedings in relation to his misuse of the Joint Account. I consider that Henry Pulbrook then backdated that documentation to 18^th July, in part to pretend that the gift was not motivated by apprehension about that threatened claim, and in part to pretend that it occurred before his wife’s departure for Thailand.

That said, I see no reason to disbelieve Henry Pulbrook’s statement in his defence that he had formed an intention to divest himself of those shares in July, initially by seeking to persuade his sister Mrs Strang to hold them as his nominee.

It is convenient to address Henry Pulbrook’s motivation for the purported gift to his wife first. In his defence he acknowledges that part of his motivation for divesting himself of the 300 shares was to prevent his sister Dr Tracey from seeking to challenge his receipt over many years of what he described as “my annual honorarium from FRN (£3,500)” and using that challenge as the basis for persuading the liquidator of FRN to deduct the aggregate amount out of any distribution to him as a shareholder. I see no reason to reject that evidence. Nonetheless I consider that a more fundamental aspect of Henry Pulbrook’s motivation was an apprehension that he would be subjected to a major claim arising out of his misuse of the Joint Account. He cannot have been in the slightest doubt about that risk once in receipt of Payne Hicks Beach’s letter of 21^st August 2007. In my judgment his apprehension of such a risk can be dated back to his receipt of notice of termination of his power of attorney from Mr Towns, by Lester Aldridge’s letter dated 26^th June 2007. It must in my view have been a clear warning to Henry Pulbrook that Mr Towns was about to change sides, and support his step-children against his former financial adviser.

Furthermore, when seeking the costs indemnity from Mr Towns in March 2006, Henry Pulbrook had ignored advice from Farrers that he ought to ensure that Mr Towns received independent advice before executing the March 2006 Deed. In due course, it was because Mr Towns had no such independent advice that the March 2006 Deed was set aside by Mr Sheldon QC for undue influence, in February 2009. It was the setting aside of that document which exposed Henry Pulbrook to liability to repay the amounts which he had misappropriated from the Joint Account.

Thus, regardless whether the decision to make a gift to his wife occurred in July or (as I consider probable) late August, I am satisfied that it was substantially motivated by his fear of a claim that he refund the monies taken from the Joint Account. Further if, as I have no reason to disbelieve, Henry Pulbrook intended from July onwards to divest himself of the 300 shares, but initially by a transfer to his sister Mrs Strang, then his motivation for divesting himself of apparent ownership of those shares was, throughout, substantially based upon his apprehension of a claim by, or on behalf of, Mr Towns in relation to the Joint Account.

I have no reason to doubt that some part of Henry Pulbrook’s motivation to make a gift to his wife may have flowed from a perception that he was, morally at least, in her debt. Nonetheless, since on his own admission she was a fall-back recipient of the 300 shares after an earlier attempt to persuade Mrs Strang to take them had failed, and since he could more easily have made practical benefits available to his wife by waiting for a money distribution to himself in respect of shares remaining vested in him during the liquidation of FRN, I do not attribute much weight to that motivation.

The motivation for Henry Pulbrook’s gift to his daughter Alice is more difficult. On the face of the documents, it first appeared that it was part and parcel of a general divestment of shares by Mr Pulbrook (leaving enough shares to satisfy his £25,000 obligation under the Mediation Agreement), since the two purported transfers are dated only four days apart.

Nonetheless, having concluded that it is more probable that the purported gift to his wife occurred at least a month later, then the gift to his daughter is less easily analysed as part and parcel of a more general exercise of asset divestment by Mr Pulbrook. Viewed on its own, the transfer of a mere 14 shares out of what was then Mr Pulbrook’s total holding of 445 shares hardly looks like an exercise directed in any meaningful sense towards putting assets out of reach of actual or potential creditors. Again, I have no reason to doubt that Mr Pulbrook was motivated to a significant degree by desire to do something for his daughter before emigrating to Thailand. But there seems no obvious reason why he should not have awaited a distribution by the liquidator to him, and then transferred cash to his daughter, rather than transferring shares and leaving her to claim a distribution on account of them directly from the liquidator.

In my judgment taking that course was motivated to a significant degree by Mr Pulbrook’s desire to avoid any further claims originating from other members of his family being visited upon his distribution rights as a shareholder, whether by way of set-off by the liquidator (in relation to his “honorarium”) or otherwise. Furthermore, his own admission that prior to August, he had sought to arrange for Mrs Strang to receive as nominee the shares which he later gave to his wife tends to support a conclusion that his chosen method of benefiting his daughter was indeed part and parcel of an exercise designed to prevent claims against him being pursued in relation to any distribution from the liquidator to him as shareholder.

On this straightforward clash of evidence between Henry and Martin Pulbrook, I consider that the probabilities clearly favour accepting Martin’s account, namely that he had nothing whatsoever to do with either of the share transfers, and knew nothing about them at the time. By contrast with Henry Pulbrook’s contradictory evidence about the gifts, his brother’s evidence (albeit untested by cross-examination) is consistent with the documentary evidence. The only board meeting of FRN at the material time occurred on 4^th September 2007, and the minutes disclose no mention of the relevant share transfers.

In my judgment Henry Pulbrook was not authorised by FRN either to issue share certificates to his wife and daughter, or to record them as shareholders in the company’s Register. There is, as I have said, no evidence of a delegation of that function by the board to him as managing director, and all the evidence relating to prior share transfers shows both the Pulbrook brothers vigorously engaged in the process.

It follows that legal title to the shares did not pass either to Alice or Anucha Pulbrook.

Miss Angus very properly treated me to a full citation of the two most recent authorities bearing upon this question, namely Pennington v. Waine [2002] 1 WLR 2075 and Zeital & anr v. David Norman Kaye & ors [2010] EWCA Civ 159. In Pennington v. Waine, Arden LJ (with whom Schiemann LJ agreed) identified three routes by which, in the context of a defective voluntarily transfer of shares, the court might avoid the rigorous application of the principle that equity will not compel the completion of an imperfect gift, in the absence of a valid declaration of trust. She described all three as methods whereby a court of equity might temper the wind to the shorn lamb. The first is where the donor has done everything necessary to enable the donee to enforce a beneficial claim without further assistance from the donor: see paragraphs 55 to 56 and Rose v. Inland Revenue Commissioners [1952] Ch 499. The second is where some detrimental reliance by the donee upon an apparent although ineffective gift may so bind the conscience of the donor to justify the imposition of a constructive trust: see paragraph 59. The third is where by a benevolent construction an effective gift or implied declaration of trust may be teased out of the words used: see paragraphs 60 to 61, apparently based upon Choithram International SA v. Pagarani [2001] 1 WLR 1. On its facts, Pennington v Waine appears to have been an example of a sufficient detrimental reliance by the donee, who had agreed to become a director of the subject company upon an assumption that he had received an effective gift of qualifying shares in it: see paragraphs 64 and 66.

In the present case, as in Zeital v. Kaye, no amount of benevolence in construction would lead to the conclusion that Mr Pulbrook intended to declare himself a trustee. On the contrary he did his incompetent best to transfer both legal and beneficial title to the shares. Nor do the difficulties in identifying a perfect gift stem from any lack of clarity of intention that there should be an immediate gift, capable of being resolved by a benevolent construction. Again, on the contrary, Mr Pulbrook did his best, but without success, to effect an immediate and outright transfer of his beneficial interest.

As in Zeital v. Kaye, the difficulty arises from Henry Pulbrook’s failure to take the necessary steps sufficient to enable his wife and daughter to obtain a transfer of the 300 and the 14 shares without further recourse to assistance from him. In fact, he failed to send either of them the share certificate of his own from which he intended that the gifts should be carved out, and he failed to send either of them the executed stock transfer forms. While it appears that he did send his relevant share certificates to the company, in the sense that they duly turned up among the documents which he sent to solicitors for safekeeping in October, he did not send the stock transfer forms to the company, but kept them himself. All that his wife and daughter received were documents purporting to be new share certificates in their names which Mr Pulbrook had created without FRN’s authority. The result was that, without his assistance in making available the duly completed stock transfer forms, neither his wife nor his daughter could perfect the intended gifts without further assistance from Mr Pulbrook.

The evidence does not show any acts or omissions by either Anucha or Alice Pulbrook in reliance (let alone detrimental reliance) upon having received an apparent gift of shares, so that there is no basis upon which Mr Pulbrook could be treated as a constructive trustee. It follows that none of the methods of tempering the wind to the shorn lamb identified by Arden LJ in Pennington v. Waine avail either of them.

I reach that conclusion without any great comfort that the existing rules about the circumstances when equity will and will not perfect an apparently imperfect gift of shares serve any clearly identifiable or rational policy objective. Leaving aside section 423, there was no lack of intention to make a gift on Mr Pulbrook’s part and it is clearly not a case in which any policy of permitting donors to change their minds (per Arden LJ in Pennington v. Waine at paragraph 62) has any application to the present case where, no doubt, Mr Pulbrook would be only too pleased to provide any assistance now, were it not for the intervention in the meantime of the interim charging order. Apart from the considerations arising from section 423 (which, as Arden LJ points out, have nothing to do with the policy behind the purely equitable rules) I might have been straining to find a way in which to give effect to the attempted gifts in the present case. Nonetheless, I have been unable to do so, within the constraints of the equitable rules as laid down in the two most recent authorities to which I have referred.

It follows that there was not an effective gift of Mr Pulbrook’s beneficial interest either in the 14 or in the 300 shares which he attempted to give respectively to his daughter and to his wife so that, in the result, there is nothing to prevent the charging order being made final in relation to all of them. Since however I have thus far arrived at that conclusion on highly technical grounds in relation to an area of law that may warrant further examination, I shall also state my conclusions in relation to the claim to set aside the gifts under section 423.

For present purposes the relevant parts of section 423 of the Act are as follows:

“(1)

This section relates to transactions entered into at an undervalue; and a person enters into such a transaction with another person if—

(a)

he makes a gift to the other person …

(2)

Where a person has entered into such a transaction, the court may if satisfied under the next subsection, make such order as it thinks fit for—

(a)

restoring the position to what it would have been if the transaction had not been entered into, and

(b)

protecting the interests of persons who are victims of the transaction.

(3)

In the case of a person entering into such a transaction, an order shall only be made if the court is satisfied that it was entered into by him for the purpose —

(a)

of putting assets beyond the reach of a person who is making, or may at some time make, a claim against him, or

(b)

of otherwise prejudicing the interests of such a person in relation to the claim which he is making or may make.

…

(5)

In relation to a transaction at an undervalue, references here and below to a victim of the transaction are to a person who is, or is capable of being, prejudiced by it; and in the following two sections the person entering into the transaction is referred to as “the debtor”.”

Section 424 permits an application for an order under section 423 to be made by a victim of the transaction.

It is not necessary that the purpose of the debtor about which the court must be satisfied under section 423(3) is his only or dominant purpose. It is sufficient that it was a substantial purpose: see IRC v. Hashmi [2002] 2 BCLC 489, and Hill v. Spread Trustee Co Ltd [2007] 1 WLR 2404, at paragraph 131.

Nor is it necessary that the victim making an application under section 423 need have been in the contemplation of the debtor: see Hill v. Spread Trustee Co Ltd (supra) at paragraph 101, nor need the victim actually be a creditor at the date of the transaction: Random House UK Ltd v. Allason & ors [2008] EWHC 2854 (Ch) at paragraph 94.

In the present case I am, for the reasons already given, satisfied that putting assets beyond the reach of a person who might at some stage make a claim against him, or otherwise prejudicing the interests of such a person in relation to such a claim did form a substantial purpose of Mr Pulbrook in entering into the attempted gifts both to his wife and, albeit not so obviously, to his daughter. In my judgment the primary potential claimant whom he had in mind both in July and August 2007 was Mr Towns, but he also had in mind possible attempts by FRN itself, at the instigation of the claimants, to seek to claw back all or part of the annual honorarium which he had been causing the company to pay him for many years.

Equally, I am satisfied that Mr Towns and, after his death, his personal representatives are persons who, had the attempted gifts been effected, would have been prejudiced by them, so that the claimants are properly to be regarded as victims of the transaction for the purposes of section 424. It is common ground that the transactions constituted attempted gifts.

It follows that, had I concluded that either of the attempted gifts by Mr Pulbrook to his wife and daughter had been effective to transfer either the relevant shares, or his beneficial interest in them, to the intended donees, I would have concluded that the jurisdictional requirements of section 423 were satisfied in relation to both of them, and I would have made an order under section 423(2)(a) setting aside both gifts.

The result is that, under this alternative head of the claimants’ claim, I would have concluded, having set aside those gifts, that the charging order in relation to the outstanding 314 shares should be made final.