Agreements to Defeat Creditors under the Property (Relationships) Act 1976

Abstract

Section 47(2) of the Property (Relationships) Act 1976 provides that agreements with the effect of defeating creditors are void against those creditors and the Official Assignee. In Johnson v Felton the Supreme Court considered an issue concerning the interpretation of that provision: Is any remedy of those creditors barred two years after the agreement is made? Despite the narrowness of the issue, much of the Court’s reasoning is concerned with whether such agreements are voidable rather than void (concluding that they are in fact only voidable). Focusing on this aspect of the reasoning, the article considers the historic authorities relied upon by the Court, and the conceptual basis of claims to set aside voidable (or void) transfers. The writer ultimately concludes that the void/voidable distinction is not supported by most authority, and is, in any case, too blunt a distinction. In discussing these issues the article also considers matters of relevance to other creditor avoidance provisions; for example protection of third parties, the remedies available, and the applicability of general limitation statutes.