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Tribe v Tribe [1996] Ch 107

Presumption of advancement rebutted by father transferring shares to son

Facts

The plaintiff operated a company which sold clothing from a number of shops. The landlord served schedules of dilapidations in relation to two of the shops. To safeguard his interests, the plaintiff transferred his remaining shareholding in the company to the defendant, his son, for a consideration which was not, and was not intended to be paid. The defendant surrendered one lease to the landlord and purchased the reversion of the lease in relation to another shop. The plaintiff thereafter requested that the defendant retransfer the shareholding in the company to him.

Issue

The plaintiff sought an order that the defendant was required to transfer the shares back to him. At first instance, it was held that the transfer had been made for the illegal purpose of deceiving the plaintiff’s creditors. However, there had been an agreement that the defendant would hold the shares on trust for the plaintiff until such time as the dilapidation claims were settled and so the plaintiff was entitled to the relief sought. The defendant appealed.

Held

The appeal was dismissed. The presumption of advancement applied between the parties which would usually require the transfer to be treated as a gift. Although the plaintiff had transferred the shares for an illegal purpose, he was entitled to withdraw from the transaction before any part of the illegal purpose had been conducted. The plaintiff was entitled to give evidence of the illegality to rebut the presumption and recover the property. He was able to do so and was therefore entitled to recovery of the property. This case was an exception to the general rule that a court will not assist a plaintiff who has founded his action on an illegal act.


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