McLiberty v Corozal Free Zone Development et Al

• Jurisdiction: Belize
• Judge: Shanks, J.
• Judgment Date: 17 March 2000
• Court: High Court (Belize)
• Docket Number: 302 of 1999
• Date: 17 March 2000

High Court

Shanks, J.

302 of 1999

McLiberty

and

Corozal Free Zone Development et al

Appearances:

Mr. Denys Barrow, S.C. for the plaintiff.

Mr. Jeremy Courtenay for the defendant.

Real property - Application to avoid a transfer of land — Section 149 of the Law of Property Act — Judgment obtained against first defendant for US$345,000 — Conveyance executed by first defendant after issue of writ against them — Agreement contained no completion date or enforcement mechanism — Second defendant/purchaser was small company with no assets — Whether the transaction had been effected to defraud creditors — Finding that on account of the facts of the case and the nature of the transaction the transfer of the parcel of land had been made with the intention to defraud creditors — Transfer set aside — Land Register rectified.

Shanks, J.

1 This is an application by originating summons under s.149 of the Law of Property Act to avoid a transfer of 110 acres of land known as Parcel 440 in Block 1 of the Santa Elena Registration Section from Corozal Free Zone Development Ltd. (GFZDL) to Best Lines Ltd. The Application is brought in effect to enforce a judgment debt for US$345,000 with interest at 60% arising from a loan made by the plaintiff in June 1994. The judgment was given by the Court of Appeal on 28 June 1999 after a writ was issued on 17 July 1998 and an application for summary judgment made on 15 September 1998. Since it seemed to me that the affidavit evidence produced by the parties disclosed a prima facie case of a transfer with intent to defraud creditors, it seemed right that I should hear the summons on live evidence. I have therefore heard evidence from Michael Arnold, Curtis Arnold and Ernest Gallego who were called by the defendants.

2 S.149 provides as follows:

• “(1) Except as provided in this section, every transfer of property made … with intent to defraud creditors, shall be voidable, at the instance of any person thereby prejudiced.

• (3) This section shall extend to any estate or interest in property transferred for valuable consideration and in good faith or upon good consideration and in good faith to any person not having at the time of the transfer, notice of the intent to defraud creditors.”

The law on s.149 has been helpfully summarized in a judgment of Meerabux, J. to which Mr. Denys Barrow referred me in the case of Gardiner v. Hoare (279/96) The judge referred in particular to a passage in Halsbury's Law 4th Ed. Vol. 18 at para. 365 which states:

“in an action to set aside a conveyance … the onus of proof of intent to defraud rests upon the plaintiff where the conveyance is for valuable consideration. Where, however, the conveyance is voluntary, and even perhaps where it is for valuable consideration short of full consideration, then on proof that at the time of its execution … the natural consequence of the conveyance was to defraud creditors, or that the circumstances under which the conveyance was effected bore one of the indications or badges of fraud subsequently mentioned, the onus of disproving an intent to defraud passes to the defendant.”

The badges of fraud referred to include that the conveyance has been made after a writ has been issued against the transferor and that the conveyance includes a false recital (see para. 366.)

3 The transfer document is question here is dated 27 November 1998. It records the consideration for the transfer as having been $550,000 “receipt of which is acknowledged”. In fact the only payment or other consideration alleged to have been actually received so far by CFZDL was $55,000, which was the proceeds of a cheque dated 20 November 1998 made payable to Mr. Michael Arnold, the major shareholder and controlling mind of CFZDL. Mr. Arnold stated in evidence that the cheque was cashed by him and that the cash was used to pay company debts and the balance was paid into the Company's account. However, although it was obviously of central importance and they were specifically requested by the plaintiff to disclose records evidencing such payments, nothing was produced to substantiate this evidence. I am not satisfied on the balance of probabilities that the $55,000 ever...