I am not sure that this can be said with certainty. There are plenty of cases following re Yagerphone [1935] Ch 392 which state that the fact that an asset has been charged to a third party does not prevent it being recovered by a liquidator from a preferred creditor. I have only found one case on lexis where the asset was held on trust. The bankrupt used trust money to pay off his overdraft. It was argued that as the money was held on trust and would not have been available to the general body of creditors it should not be capable of recovery as a preference. This argument was rejected: Richardson v Commercial Banking Co of Sydney Ltd (1952) 85 CLR 110. The court seemed to be concerned that the beneficiary may not pursue her claim against the recipient bank but merely prove in the bankruptcy. The bank would therefore be preferred at the expense of the general body of creditors.

R

-----Original Message-----
From: Lionel Smith
Sent: 14 December 2000 16:59
Subject: [RDG:] Cass (Trustee in Bankruptcy) v. Karpnale?

Here is a question for anyone interested, especially insolvency buffs.

In Lipkin Gorman v. Karpnale (let's say it all together: [1991] 2 AC 548) the rogue Cass misappropriated money of the plaintiff and gambled it away at the casino operated by the defendant. One crucial element in the plaintiff's success was that under English gaming law, the gambling transactions were treated as executed gifts so that the defendant could not claim to be a good faith purchaser for value.

Question: what would have happened if Cass's trustee in bankruptcy brought a proceeding against the defendant to recover all of the money as a "transaction at an undervalue" under ss 339 ff of the Insolvency Act 1986 (or: fill in the provisions of your national law which allow insolvency officers to get back gifts made by bankrupts on the eve of bankruptcy)? Let us assume for the purposes of s 341 that Cass was adjudged bankrupt on a petition presented within two years of his gambling spree (or: within the relevant time limit in your system).

Lionel

PS I know I am home because we have had 18 inches of snow in the last two days.