Case law update

IPA Insolvency Practitioner newsletter, September 2025

An insolvency case law update prepared by Stuart Lindley, Associate Director at Manolete Partners PLC.

Stuart is an Associate Director in Manolete’s London team, joining in December 2023 after serving as an insolvency partner at the London office of a leading national law firm. With over two decades of experience in contentious insolvency, he has acted predominantly for insolvency practitioners in both corporate and personal insolvency matters across the UK.

Beginning his legal career in Yorkshire in 2002, Stuart moved to London in 2008 to further develop his specialism in complex insolvency disputes. His work has also included advising companies in financial distress and guiding directors through the legal challenges arising from their conduct.

Recognised in Chambers & Partners for the past nine years for his expertise in personal insolvency, Stuart has been described as “an excellent lawyer” with “excellent knowledge of personal insolvency” and praised for being “easy to deal with”.

Antecedent transactions; transactions defrauding creditors

(1)Emma Sayers (2) Jeremy Willmont (as joint trustees in bankruptcy of John Charles Dixon) v. (1) John Charles Dixon (2) Janet Marie Dixon [2025] EWHC 1886 (Ch) (30 July 2025)

Background

In 1997, Mr Dixon, an accountant, joined Ernst & Young (“E&Y”) as a partner, having previously been a partner at Thornton Baker (which later became Grant Thornton).

In 2008, Mr Dixon was appointed as managing partner and UK Head of Taxation for E&Y, earning approximately £2 million per annum prior to his departure in September 2014.

In early September 2010, Mr Dixon sought advice from solicitors with a view to setting up some trusts in favour of his wife. The Dixons had concerns about the volatile business world following the 2008 financial crash and Mr Dixon’s own position as a partner in a professional services firm and him being the beneficial owner of family assets.  Mr Dixon had a call with the solicitors in which he said he’d heard that it was common practice amongst partner colleagues for assets to be in the spouse’s name as a form of protection, to avoid those assets being susceptible to attack by creditors of the firm. 

Mr Dixon executed six declarations of trust (“DoT”) on 9 September 2010, which purported to divest all his present and future assets to Mrs Dixon, including property, motor vehicles and Mr Dixon’s E&Y capital account and undrawn profits.

Despite his income, Mr Dixon failed to make a payment on account of £337,310.42 to HMRC in respect of self-assessed income tax/NIC for the tax year 2012/13 by the due date of 31 July 2013.

Matters worsened, and on 23 September 2015, HMRC served a statutory demand upon Mr Dixon for the sum of £627,302.59. He was declared bankrupt on 30 August 2017.

The trustees in bankruptcy (“the Trustees”) were appointed in August 2018 and issued proceedings against Mr and Mrs Dixon in June 2023. The Dixons fully contested the proceedings.

Applications before the court

The Trustees sought to challenge various transactions which were entered into prior to Mr Dixon being made bankrupt, specifically:

• The six DoTs executed by Mr Dixon on 9 September 2010; and

• Two property transactions that Mr and Mrs Dixon entered into after the DoTs but before the making of bankruptcy order, concerning properties in Cambridge and Barbados.

As a result of the DoTs, Mr Dixon asserted that from 9 September 2010, he had no assets and that any monies he may have had were either held or applied for the benefit of Mrs Dixon, paid to her, or were lent back to him by Mrs Dixon pursuant to a loan agreement. 

The Trustees’ position was that the six DoTs and the loan agreement were a sham which were entered into by Mr Dixon at an undervalue for the statutory purpose of putting assets beyond the reach of a person or persons who may at some time make a claim against him or of otherwise prejudicing the interests of a person in relation to the claim which he may make, contrary to section 423 of the Insolvency Act 1986 (“the Act”). They sought declarations that the DoTs and the loan agreement were void and ineffective and for orders setting the DoTs aside, along with consequential relief. They also sought to set aside the two property transactions.

The Dixons’ defence was that the DoTs were executed, following receipt of professional legal advice, for a number of reasons, not least of all inheritance tax planning, investing in Mrs Dixon’s business and providing financial help and assistance for their children, one of whom required specialist care.  Further, that consideration was provided for the DoTs in the form of the loan agreement between Mrs Dixon and Mr Dixon. The fallback position adopted was that Mrs Dixon should be entitled to retain half of the assets as Mr Dixon’s spouse, that she had acted in good faith and that there had been a change of position (in other words, a change in her circumstances) which meant it would now be inequitable to order relief against her. 

The Dixons represented themselves at trial and gave evidence, though the judge had reservations about their evidence and felt it should be treated with caution.

The judge referred to the legal principles concerning both shams and section 423 of the Act and undertook a thorough review and consideration of case law authorities dating back a number of years.  The judge noted that the court had very wide discretionary powers of relief, and whilst a defence of change of position could arise in claims of this nature, this would be unlikely to be successful where a party seeking such benefit acted in bad faith. 

Outcome

Based on the evidence heard and read, the judge held that Mr Dixon had entered into each of the DoTs (i) on terms that provided for him to receive no consideration and (ii) for the statutory purpose under section 423 of the Act.  The loan agreement was rejected as an afterthought. The defence of relying upon professional legal advice was unsuccessful, due to the solicitors not having been given the full facts.

The judge was therefore satisfied that the Trustees’ section 423 claims in relation to the DoTs were made out and she therefore did not need to address whether they were shams.

The applications in respect of the two property transactions were also successful, the judge finding that the Barbados property sale was at an undervalue and the Cambridge property sale was caught by section 284 of the Act, as it was sold between the presentation of the bankruptcy petition and making of the bankruptcy order. 

The judge rejected Mrs Dixon’s claim for entitlement to half of the assets, as no such entitlement had been applied for or ordered by the Family Court.

Mrs Dixon’s reliance upon the defence of change of position was also rejected as she had not acted in good faith and had adduced no persuasive documentary evidence to the contrary.

The judge granted the declarations sought by the Trustees in respect of the DoTs and ordered that the DoTs be set aside. She also granted declarations (i) that the purchase by Mr Dixon of the Barbados property in the name of Mrs Dixon in November 2014 was a transaction at an undervalue within meaning of section 339 of the Act and (ii) that 50% of the net proceeds of sale of the Cambridge property belonged to the bankruptcy estate.  Orders for relief which reflected those declarations were made.

Comment

A factually interesting case, which provides a useful review of section 423 authorities and shows how the court may approach commonly raised defences to such claims.   

Content courtesy of IPA principal sponsor Manolete Partners PLC.

Manolete Partners PLC is an investment business focused on dispute finance. It is not a law firm and does not provide legal advice.

Please note that guest articles do not necessarily represent the views of the IPA.