Disgraced former solicitor Phil Shiner tried to offload assets worth nearly half a million pounds to family members before declaring himself bankrupt, it emerged today.
“The Insolvency Service said in a notice that Shiner, the former director of human rights firm Public Interest Lawyers, gifted away his assets before asserting he would be unable to pay creditors.”
Not only has Mr. Shiner disgraced the profession by his conduct, he also seems to have been embarrassingly oblivious of the ordinary powers of a trustee in bankruptcy.
You cannot avoid your creditors by making gifts or entering into dodgy deals or stuffing it all in your pension before you go bankrupt.
Otherwise we could all borrow a very large sum of money, gift the house to the partner, take a loan from our mate with a sufficiently large interest rate clause to swallow up our income, put the rest of the spare cash, if any, into the pension, and with one bound – your own bankruptcy petition – you are free.
When a person has been declared bankrupt, certain types of antecedent transaction (a transaction entered into by the bankrupt before the start of the bankruptcy) may be challenged under provisions in the Insolvency Act 1986 (IA). Collectively, these are known as reviewable transactions.
The various ways in which a transaction may be challenged are:-
- Transactions at an undervalue (section 339);
The bankrupt transferred an asset to someone else as a gift for no consideration or for significantly less than the asset’s true value.
- Preferences (section 340);
Any transaction that put another person in a better position than the bankrupt’s other creditors.
- Excessive pension contributions (section 342A);
Speaks for itself really, but the trustee in bankruptcy must show an intention of the bankrupt to put assets beyond the reach of creditors and an unfair prejudice to creditors.
- Extortionate credit transactions (section 343);
The terms of a loan require the bankrupt to make grossly exorbitant payments or otherwise contravene the ordinary principles of fair dealing.
- Transactions defrauding creditors (section 423).
Any transaction the bankrupt enters into as an undervalue in order to put assets beyond the reach of their creditors and frustrate their creditors’ claims.
Mr Shiner also seems to have been blissfully unaware of the presumption he was not acting in good faith when transacting with an associate or person who had notice of his bankruptcy.