HONOUR FINANCE CO LTD v. POON TING CHAU AND ANOTHER

Headnote

Fraudulent disposition of property - s.60 Conveyancing and Property Ordinance, Cap.219 - defence by transferee under s.60(3) that property disposed of to her for valuable consideration and in good faith without her having notice of transferor's intent to defraud creditors - upon whom lies burden of establishing all the requirements to satisfy s.60(3) - whether misdirection on burden fatal to judge's finding in favour of transferee.

BETWEEN

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JUDGMENT

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Clough, J.A. :

1. This is the judgment of the court.

2. The plaintiff company appeals from the order of Godfrey J. made on the 10th January 1990 dismissing its action against the second defendant ("the wife") claiming an order declaring to be void under section 60 of the Conveyancing and Property Ordinance (Cap. 219) the Assignment dated the 24th December 1987 whereby her husband had assigned to her their matrimonial home, a flat in Kowloon of which he had been the owner. The plaintiff claimed such declaration as an unpaid creditor of the husband to the extent of the sum of $924,763.91 plus interest and fixed costs. The husband was joined as the first defendant in the action but he had absconded to another jurisdiction before the writ was issued in the action on the 17th March 1988 and he is not concerned with this appeal.

3. The relevant provisions of section 60 of the Ordinance are contained in sub-sections (1) and (3) which provide :

"         60. (1)    Subject to subsections (2) and (3), every disposition of  property made, whether before or after the commencement of this section, with intent to defraud creditors, shall be voidable, at the instance of any person thereby prejudiced.

 

        (3)     This section does not extend to any estate or interest in property disposed of for valuable consideration and in good faith or upon good consideration and in good faith to any person riot having, at the time of the disposition, notice of intent to defraud creditors."

In sub-section (3) "property" was substituted for "land" by section 22 of the Conveyancing and Property (Amendment) Ordinance 1988 (No. 31 of 1988), but this amendment is of no materiality in the circumstances of the present case.

4. At the hearing of the appeal leave was granted to the plaintiff to amend its notice of appeal by adding a third ground to the original two grounds of appeal. In the event the first two grounds (contending that the judge erred in believing the wife's evidence and that his decision in her favour was against the weight of the evidence) were not argued by the plaintiff's counsel, Mr. Sujanani.

5. The argument on the plaintiff's behalf rested on the third ground of appeal which was concerned with the burden of proof under section 60(3) of the Ordinance. The substance of the issue raised on the appeal by the plaintiff was that whereas it was for the plaintiff to prove for the purposes of section 60(1) of the Ordinance that the Assignment had been made with intent to defraud creditors, it was for the wife to prove for the purposes of section 60(3) that, in the circumstances of this case, she had taken the benefit of the Assignment for valuable consideration and in good faith without notice of the intent to defraud creditors. It was contended that judgment should be entered for the plaintiff or at least there should be an order for a new trial because, even on the erroneous footing that the onus was on the plaintiff under section 60(3), the judge had had difficulty in deciding upon the credibility of the wife. It was contended that if he had put the relevant onus on her the decision would or might have gone the other way.

6. The wife appeared in person at the trial and on appeal.

7. The husband was evidently of Philippine Chinese origin. He had acquired the flat on the 22nd June 1974. He married the wife on the 8th December 1974. At that time he was an office manager in a trading company but he later became a partner in a trading business. He also dealt on the stock market. This was known to the wife. She had been a midwife for 20 years prior to the trial.

8. The husband's relevant indebtedness arose out of his liabilities incurred when dealing on the stock exchange on a margin account with Hung Kai Financial Company Limited ("Hung Kai") an associated company of the plaintiff. On the 14th October 1987, when the husband owed Hung Kai $2,971,834.86 (and the 1987 stock market crash was imminent) Hung Kai assigned the benefit of the debt to the plaintiff. Letters addressed to the husband at tine flat on the 10th and 20th November respectively by the husband's solicitors, giving notice of the assignment and demanding payment of the then outstanding debt, were not returned and produced no response. On the 3rd December 1987, when the husband's outstanding debt had been reduced to $1,893,843.18 with interest accruing, the plaintiff issued a writ for that amount against the husband and served it by posting it on the 4th December to him at the flat.

9. On the 17th December the husband and wife entered into an Agreement for the sale and purchase of the flat with vacant possession for a price of $320,000. The Agreement provided for the payment of a deposit of $120,000 by the wife and for payment of the balance of the purchase price on completion on the 24th December 1987. The husband was obliged by clause 18 of the Agreement to discharge before completion a then existing mortgage in favour of the Hang Seng Bank to secure general banking facilities to the extent of $118,000 and interest. The Agreement was duly completed on the 24th December 1987 when the wife paid the balance of the purchase price with the aid of a loan of $180,000 from the Hang Seng Bank secured by a charge on the flat.

10. The transaction was handled by a firm of solicitors whose fees were paid by the wife. In the Agreement and the Assignment the husband's address was given as being in the Philippines and that of the wife was given as the flat. However the execution of both instruments by the husband was witnessed by a solicitor in Hong Kong.

11. On the 9th January 1988 the plaintiff obtained a default judgment against the husband for the sum of $1,893,834.18 with interest and fixed costs of $1,005. On the 24th February 1988, by which time the plaintiff had exercised its right to sell securities of the plaintiff in its possession and had thereby reduced the amount of the husband's judgment debt to $924,763.91 with interest, the plaintiff obtained a charging order nisi on the flat in respect of that debt. However, at this stage the plaintiff's search in the Land Registry disclosed the Agreement and the Assignment and the Hang Seng Bank's charge on the flat created by the wife.

12. Having come to terms with the Hang Seng Bank (who claimed $174,495.81 on their mortgage loan to the wife) the plaintiff issued its writ in the present action against the husband and wife on the 17th March 1988. By its statement of claim filed on the 3rd June 1988 the plaintiff alleged inter alia that at all the material times both the husband and the wife knew of the plaintiff's claims on the husband and that the Assignment had been made with intent to defraud the husband's creditors and, in particular, the plaintiff. Paragraph 22 of the statement of claim was in the following terms:

"22. The 2nd Defendant accepted the said assignment also with the said intent; alternatively, the 2nd Defendant accepted the said assignment in bad faith for no consideration with notice of the said intent."

 

13. The wife's professionally drawn defence consisted mostly of non-admissions and denials, but in paragraph 11, which included a denial of paragraph 22 of the statement of claim, it was positively pleaded on her behalf that the Assignment was -

"....a bona fide transaction and the 2nd Defendant purchased the said property for valuable consideration without notice of the alleged indebtedness owed by the 1st Defendant to the Plaintiff and without notice of any intention to defraud on the part of the 1st Defendant as alleged or at all."

14. On the first day of the trial on the 9th January 1990 the plaintiff called a solicitor, Mr. Luk Hok Ming, who gave a non-controversial narrative of the sequence of events to which I have already referred leading up to the issue of the writ. The other witness called for the plaintiff was Mr. Hung Chui Fan, a marketing officer of Hung Kai, who had been responsible for the husband's account which he said had been opened on the 26th November 1985. Mr. Hung said that the husband's address had always been the flat and that his accounts had always been sent there. His evidence was that Hung Kai had not dealt with the husband since the October 1987 stock market crash.  He said he had visited the flat two or three times in October and November 1987, but, although he understood the husband was still living there and neignbours and caretakers told him he would return every day or so, Mr. Hung could get no answer at the door.

15. The trial was adjourned on the first day because in the course of her evidence the wife had indicated that she had 4 documents at home, and those documents had not been disclosed on discovery. The judge told her to bring the documents to court on the neat day.

16. In her evidence the wife claimed that she had bought the flat with her own money for a price which was roughly the market price. Her evidence was that she had received a sum of $186,757.51 when her fixed deposits with the Banque Nationale de Paris matured. She produced a B.N.P. cashier order for that amount dated the 4th November 1987 and said that she used $140,000 of this money to effect the purchase together with a mortgage loan of $180,000 from the Hang Seng Bank.

17. According to the wife the husband had asked her for a loan of $3-400,000 in July or August 1987 but she did not agree. She said that she then formed the opinion that if he were to sell her the flat she would have something "to hand" and he would have money for his "cash flow". Her evidence was that she thought he needed money to pay off a bank overdraft. She denied there was any fraud involved. She said that at the husband's suggestion they had agreed on the terms of a letter of intent recording the proposed terms of sale and purchase. In the course of her evidence in chief she produced, for the first time, the letter of intent, the B.N.P. cashier's order for $186,737 dated the 4th November 1987 and various solicitors' receipts and documents evidencing fees paid by her to them in respect of the transaction and the payment by her to them on the 24th December 1987 of £20,000 being the balance of the purchase price due after allowing for her deposit of $120,000 and the Hang Seng Bank mortgage loan of $180,000.

18. The letter of intent was dated the 22nd August.It was written in English and purported to be signed by the husband and wife. The wife's signature appears to be different from her signature on the Agreement and the Assignment but she was not asked to explain this under cross-examination or at any stage of her evidence. The full text of the letter of intent is as follows:

"LETTER OF INTENT

(PRIVATE AND CONFIDENTIAL, RETAINED

BY SELLER & BUYER ONLY)

Date : 22/8/1987

MEMORANDUM"

19. Under cross-examination the wife insisted that she did not know precisely for what reason the husband wanted money from her. She only knew that he needed money to meet his cash flow problems and that he had tried without success to sell the flat on the open market. She said that he gave her homekeeping money but told her nothing about his finances. She admitted knowing that he dealt on the stock market but claimed that she did not know he needed money because of the October 1987 stock market crash.   Her evidence was to the effect that he did not tell her much about himself and she did not know what he did outside the home.

20. In her evidence the wife gave the impression of the husband as being an introvert who was not close to her although she still cared for him. She described the marriage as a "very plain" one. She said that she worked on shift duty and they occasionally quarrelled. He was, she said, a Philippine Chinese and went abroad very often. According to her they had started to live apart in May 1987 when she returned to her mother's home to look after her. They evidently disagreed about emigration. She said he intended to emigrate at the end of 1987 but she did not want to give up her job and the marriage deteriorated when she tried unsuccessfully to get him to change his mind. She said that she had left in a fit of pique, but they still communicated.

21. The wife claimed that after he had left Hong Kong she could not contact him, that he had told her he intended to emigrate to Australia and that she did not at the time of the trial knew where he was. According to her she had not seen him since he came from the Philippines to execute the Agreement and the Assignment, but she admitted that he had telephoned once or twice in January 1988 and that she had written to him in the Philippines about these proceedings.

22. As to the letter of intent, which was in English, the wife acknowledged that she and the husband spoke and wrote Chinese but said the letter being in English was "our usual practice" and that the husband had explained the contents to her. She claimed that the letter was "not to be used as proof" and maintained that they had made a private agreement to go to solicitors for the formalities in the future. She said she had never disclosed the letter of agreement to anyone until she gave her evidence because it was not necessary and the letter had been superseded by the formal solicitors' Agreement.

23. The wife insisted under cross-examination that she did not know in December 1987 that the husband was in difficulties and about to go into hiding to defeat his creditors. She maintained that if she had known that she would not have bought the flat from him with her own money.

24. At the trial it was common ground that the market value of the flat in December 1987 was $320,000.

25. There can be no doubt that the judge conducted the trial on the basis that the burden of proof under both subsections (1) and (3) of section 60 of the Conveyancing and Property Ordinance was on the plaintiff. he made this clear in the following passage at p.3 of his judgment:

26. Having found that the fraudulent intent of the husband was established the judge went on to consider the issue under subsection (3) which he decided in favour of the wife, concluding ".... that the plaintiff has failed in an essential element of its case". This was a re-affirmation that the onus under subsection (3) was on the plaintiff.  Mr. Sujanani (who did not appear below) argued on behalf of the plaintiff that this was a fatal error made by the judge. We observe at this stage that it is hard on the judge to be accused of such an error on appeal where the plaintiff by its pleading in paragraph 22 of the statement of claim, referred to above, expressly accepted the onus under subsection (3). Indeed the trial seems to have been conducted on this basis and no question was raised on onus under subsection (3) in the original Notice of Appeal settled by counsel for the plaintiff at the trial and filed on the 25th January 1990. However the issue is one of substance properly taken by different counsel in the new ground of appeal which we have permitted to be introduced, and subject to the question of costs, it must be determined.

27. Section 60 is in pari materia with and clearly derived from the former section 172 of the Law of Property Act 1925. Subsections (1) and (3) of section 172 provided:

28. These provisions have to be read in conjunction with the following definition of "Conveyance" in section 205(1) (ii) of the Act:

"(ii) 'Conveyance' includes a mortgage, charge, lease, assent, vesting  declaration, vesting instrument, disclaimer, release and every other assurance of property or of an interest therein by any instrument, except a will; 'convey' has a corresponding meaning;"

29. Section 172 of the Law of Property Act 1925 was derived from but was substantially differently worded from and not a mere consolidation of the polix preamble to and sections 1 and 5 of the former 1571 Act of Elizabeth (13 Eliz. c. 5 : An Act against fraudulent Deeds, Giftes, Alienations etc.) which recited and provided as follows:

30. In the absence of any Hong Kong authority on the incidence of the burden of proof under section 60(3) of the Ordinance we consider it appropriate to have regard to English authorities concerned with the same incidence under section 5 of the Statute of Elizabeth or section 172(3) of the 1925 Act. Surprisingly, there appears to be no reported English case in which this question has been directly in issue. The relevant law is helpfully stated in Halsbury's Laws of England, Vol. 18, 4th edition, at paragraph 371 in a passage dealing with what the editors refer to as the "exception" under section 172(3). They comment:

"The better view seems to be that the burden of proof in establishing all the requirements for this exception rests upon the person seeking to uphold the conveyance, although there is some support for the view that, at any rate where valuable consideration is given for the conveyance, the burden of proving that the party in whose favour the conveyance was made had notice of the intent to defraud rests upon the person seeking to avoid the conveyance."

31. We have no hesitation in following the "better view" there referred to and based on the dicta of Parker J. (as he then was) in Glegg v. Bromley [1912] 3 KB 474 (C.A.) and upon Lloyds Bank Ltd. v. Marcan [1973]1 WLR 339. In Glegg v. Bromley no issue arose concerning the incidence of the burden of proof under section 5 of the Statute of Elizabeth but, when distinguishing between the operative part of the Statute and the proviso contained in section 5, Parker J. observed at p.492:

"The only remaining point is, I think, that which was argued under the statute of 13 Eliz. c. 5. Now the scheme of that statute is this: By it all conveyances and assignments made with intent to hinder and delay creditors are rendered void against all creditors hindered or delayed by their operation. There is, however, a proviso for the protection of a purchaser for good consideration without notice of the illegal intention. In the authorities which deal with the statute it is not always clear whether the judges are dealing with the operative part of the Act or with the proviso. The illegal intent under the operative part is a question of fact for the jury or the judge sitting as a jury. On the one hand the want of consideration for the conveyance or assignment is a material fact in considering whether there was any illegal intent, but it is not conclusive that there existed any such intent. In the same way consideration was by ho means conclusive that there was no illegal intent. When, however, one comes to deal with the proviso, it is quite clear that any person relying on the proviso must prove both good consideration and the fact that he had no notice of the illegal intent."

32. In Marcan's case the plaintiff appears to have accepted the burden of proof under section 172(3) in its pleadings (see p.340H) but at the trial Pennycuick J., who indicated at p.345B that he had derived much assistance from the dictum of Parker J. in Glegg v. Bromley cited above, observed at p. 345H) in relation to section 172(3):

"So, it seems to me, a transferee seeking to take advantage of this subsection must establish both the requirements of the subsection, i.e. there must be conveyance for valuable or for good consideration in either case in good faith, and the person must not have notice of intent to defraud."

33. We emphasise that this proposition seems to have been common ground between the parties at the trial because Pennycuick J. commented later in his judgment at p. 346E:

"It is accepted on both sides that the burden of proof under section 172(1) lies on the person seeking to avoid the conveyance, and that under subsection (3) lies on the transferee."

Pennycuick J.'s decision in Marcan's case was upheld on appeal (see [1973] 1 WLR 1387), but the incidence of the burden of proof under section 172(3) was not in issue.

34. We are wholly persuaded by the opinions of Lord Parker and Pennycuick J. on this issue and respectfully adopt them. Moreover those opinions seem to us consistent with the general principle that he who claims the benefit of an exemption or exception must bring himself within it and establish his case.

35. The dicta relied upon in the passage in Halsbury referred to above as providing support for a contrary view where the disposition is made for valuable consideration (as in the present case), seem to us to consist of mere passing observations which were not directly concerned with the question of onus. Thus in Re Hirth, ex parte Trustee [1899] 1 QB 612 (C.A.) at p.620 Sir Nathaniel Lindley M.R. said of the transaction in question that:

"To reach it under the Statute of Elizabeth it must be strewn that the sale was of the whole, or substantially the whole, of Mr. Hirtn's property; and it must be shown that the company had notice that he was cheating his creditors."

These observations were made in proceedings on motion in bankruptcy in which no argument was raised on the incidence of onus under section 5 of the Statute of Elizabeth and where the learned Master of the Rolls was not purporting to comment directly on the incidence of onus.

36. In Re Reis, ex parte Clough [1904] 2 KB 769 (C.A.) the court was concerned with a marriage settlement (made pursuant to the settlor's previous covenant to settle after acquired property) challenged by the trustee in bankruptcy of the settlor. Cozens-Hardy L.J. said at p.776 of one of the trustee's contentions:

"In order to succeed upon the first contention - that is, that the covenant was void, under the statute of Elizabeth, against creditors - it is necessary to show that the wife was party or privy to the fraud. Of this there is, and can be, no direct evidence."

Again, as in Hirtn's case, this was another instance of dicta uttered in a case where no issue had been raised on the incidence of onus and the observation was not directed directly to that question.

37. The third case cited in Halsbury is Re Fasey, ex parte Trustees [1923]2 Ch 1. That was another bankruptcy case where the bankrupt's sale of the assets of his building business to a company, of which he and his solicitor were the directors and the only shareholders, was challenged by his trustee in bankruptcy under the Statute of Elizabeth. Lawrence J., in rejecting the argument that no fraudulent intent on the part of the company had been shown and that such intent was essential to enable the court to declare the agreement for sale void under the Statute, said as at p. 9:

"What is required by the Act to be shown, where there is a conveyance for valuable consideration, is that the purchaser had notice or knowledge of the fraudulent intent."

38. In our opinion Lawrence J. was not here intending to deal with any question concerning the incidence of onus under section 5 of the Statute of Elizabeth but seeking to make it clear that it was not sufficient for a transferee who invoked section 5 to prove that he was not actually implicated in the fraudulent intention of the transferor, he had to go further and show absence of notice or knowledge of that intention. This was certainly how Pennycuick J. in Marcan's case understood this dictum and the observations which preceded and followed it: see Marcan's case at p.346 C-E. Fasey's case was upheld on appeal ([1923]2 Ch at p.10) but without any views being expressed by the Court of Appeal on the dicta of Lawrence J. cited above.

39. Preferring, as we do, the opinions of Lord Parker in Glegg v. Bromley and of Pennycuick J. in Marcan's case, we accordingly conclude that in the present case Godfrey J. was wrong to place upon the plaintiff the onus of proof of the relevant factors under section 60(3), albeit with the apparent acceptance of the plaintiff's counsel at the trial. The judge's reference to Shell at p.132 is clearly not of assistance in respect of section 60(3). It is only in point as regards section 60(1).

40. Mr. Sujanani contended on behalf of the plaintiff that the judge's decision in favour of the wife was faulted by his misdirection regarding the incidence of the onus of proof under section 60(3). This contention has to be considered in the light of the judge's findings on the issues arising under subsection (3). We do not consider that the misdirection on onus must necessarily be fatal in a civil case. It must depend on the nature of the evidence and the weight attached to it by the judge in any particular case.

41. In the present case the plaintiff's case depended upon the prima facie inference of fraudulent intent on the part of the husband for the purposes of section 60(1). It was common ground at the trial that the market value of the flat in December 1987 was $320,000. It followed that for the purposes of section 60(3) not only valuable but full consideration had been given by the wife. It remained for the wife to establish on the balance of probabilities that she purchased the flat in good faith and without notice of the husband's intent to defraud. In fact the plaintiff assumed the burden of proof on this issue, relying on the inferences to be drawn from the circumstances of the case including the relationship of husband and wife. The credibility of the two witnesses for the plaintiff was not in question. They gave undisputed evidence of facts giving rise to the relevant inferences relied upon by the plaintiff. It was the credibility of the wife, who denied those inferences, which was crucial at the trial.

42. The letter of intent was clearly of importance in assessing the credibility of the wife. The judge agreed with counsel for the plaintiff that it was a "very strange document" and one of which the court "ought to be suspicious". He said of this document:

"It is written in a formal, semi-legal, English, yet brought into existence for the private use of two Chinese parties, neither of whom (presumably) would naturally use the English language, although both of them are apparently capable of speaking it. Nevertheless, it does evince, if it is to be accepted at its face value, an intention on the part of the husband and the wife to enter into this transaction sometime before the stock exchange crash of October 1987, and I cannot, I think, just dismiss it from the picture as a sham."

This was an important finding. The judge's decision not to dismiss the letter of intent as a sham can only have been wade as a result of his assessment of her veracity as a witness. She was the only witness called who had knowledge of the circumstances under which the letter was signed by the husband and wife.

43. Having nevertheless found that the plaintiff had established fraudulent intent on the part of the husband, the judge went on to deal with the question whether the wife had notice of that fraudulent intent at the material time. We find it necessary to set out in extenso the following passage at pp. 7 and 8 in the judgment which related to this issue and contains the reasons given by the judge for his conclusion that the plaintiff had failed in an essential element of its case:

"The next question presents the plaintiff, in the present case with a much greater difficulty. The wife, as I have said, has demonstrated that the marriage between the husband and wife here was not by any means the most close or warm of relationships. Although she was hesitant in giving her evidence (and although such hesitancy is sometimes an indication of a lack of desire to tell the truth) I did not form an unfavourable view of the wife in the present case. I am satisfied that she was endeavouring to tell the court the truth; and that she did so when she said that she was not aware that the husband's intention in entering into the transaction of December 1987 was to defraud his creditors. She knew, it is clear, that from time to time he needed money; and no doubt from time to time needed it urgently; and that certainly, is one factor which supports the plaintiff's case. She knew, also that the disposition of the property was designed to provide financial assistance to the husband. The difficult question in the case is whether, having that knowledge, she did know further that his intention was to defraud his creditors (something which she has denied in evidence) or that even if she did not know, she was wilfully shutting her eyes to the obvious.

 

I have not found this an altogether easy question of tact to decide; but in the end, I come down in favour of the wife. This was not, .I find, an ordinary. happy marriage; and it seems to me that there is no sufficient reason to reject her evidence that she did not in fact know of the husband's intention to defraud his creditors. It appears to me further that there is no sufficient reason why I should come to the conclusion that she wilfully shut her eyes to that fact. I do not think it was obvious, having regard to the way in which the husband treated her, that he was intending to defraud his creditors as distinct from simply intending to raise as much money as ire could. The two things are not the same. Nor do I think that she wilfully shut her eyes to the obvious in the hope that she would not see it. I think that she entered into this transaction, using her own money in good faith, with a view to assisting her husband in his financial difficulties but, in this exceptional case, without notice of the intention on his part to defraud his creditors." (Emphasis supplied)

44. The judge concluded his extempore judgment with the following words which we regard as crucial in the circumstances of this case:

"But, in the end, I am not satisfied, in this particular and unusual case, that, on the balance of probabilities, the wife here did know of the husband's intent to defraud his creditors. In fact, having heard the sorry story of the relationship between this husband and this wife, I think the balance of probabilities lies the other way. The claim against the wife must be dismissed with costs."

45. Mr. Sujanani submitted that as, even when wrongly putting the onus of proof on the plaintiff, the judge found the issue difficult to decide, he would have decided it the other way if he had put the onus on the wife under section 60(3).  We are unable to accept this argument. It seems to us that the judge, although he understandably experienced difficulty when assessing the credibility of the wife, indicated clearly in the passages of his judgment we have emphasised above that he believed the wife's evidence that she was not at the material time aware of the husband's fraudulent intent. It is the function of the seeing and hearing judge to determine the credibility of the witness before him. Furthermore the closing remarks in his judgment made it clear that he was satisfied by the wife's evidence that the balance of probabilities was that she did not have knowledge of the husband's intent to defraud his creditors. We therefore conclude that this is not a case where the decision of the court would have been different had the judge not misdirected himself on the incidence of the onus of proof under section 60(3).

46. Mr. Sujanani advanced an argument to the effect that it was illogical for the judge, having refused to dismiss the letter of intent as a sham, to find that there had been a fraudulent disposition in December 1987 by the Agreement and the Assignment. He stressed that, if the letter of intent was genuine it must have had dispositive effect prior to the transactions in December 1987. However, this seemed to us to be a self defeating argument because if the letter of intent was not a sham and there was not a fraudulent intent under section 60(1), in December 1987, as the judge held, the plaintiff's claim must fail in any event. Moreover in our judgment there can be no basis for concluding that, in arriving at his decision that the husband had a fraudulent intent in December 1987, the judge was inadvertently or inconsistently treating the letter of intent as a sham.

47. Finally we mention that, although it was not made a ground of appeal, it has not escaped our attention that the judge made no reference in his judgment to the requirement of good faith when initially indicating the matters of which the court had to be satisfied under section 60(3).  The good faith contemplated by subsection (3) corresponds with "bona fide" in section 5 of the Statute of Elizabeth and seems to be intended to be referable to the transferee for ex hypothesi the transferor intends to defraud creditors: Shell, p.131 citing Re Johnson, Golden v. Gillam (1881)20 Ch. D. 389 at p.394. It is questionable whether, and if so to what extent, the requirement of good faith adds anything to the "notice" provision in subsection (3): see Marcan's case at p. 346A-B where Pennycuick J. cited the dictum of Kay L.J. at p.401 in Mogridge v. Clapp [1892]3 Ch. 382, a case under the Settled Land Act 1882, to the effect that in section 45(3) of that Act (where there was a reference to a "person dealing in good faith") "good faith" must mean or involve ".... a belief that all is being regularly and properly done".

48. Applying that test to the present case, where it was common ground that the wife gave full consideration for the flat and where the judge found that she did not have notice of the husband's fraudulent intent we consider that it is necessarily to be inferred that the wife acted in good faith. Indeed, when assessing the credibility of the wife in the later passage of his judgment cited above he expressly found that she had acted in good faith. We are therefore left in no doubt that the judge did not in fact overlook any requirement of section 60(3).

49. Accordingly we dismiss the plaintiff's appeal and make an order nisi awarding the costs of the appeal to the wife.