121Transfers to defeat creditors

121  Transfers to defeat creditors

 (1) A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor’s bankruptcy if:

 (a) the property would probably have become part of the transferor’s estate or would probably have been available to creditors if the property had not been transferred; and

 (b) the transferor’s main purpose in making the transfer was:

 (i) to prevent the transferred property from becoming divisible among the transferor’s creditors; or

 (ii) to hinder or delay the process of making property available for division among the transferor’s creditors.

Note: For the application of this section where consideration is given to a third party rather than the transferor, see section 121A.

Showing the transferor’s main purpose in making a transfer

 (2) The transferor’s main purpose in making the transfer is taken to be the purpose described in paragraph (1)(b) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become, insolvent.

Other ways of showing the transferor’s main purpose in making a transfer

 (3) Subsection (2) does not limit the ways of establishing the transferor’s main purpose in making a transfer.

Transfer not void if transferee acted in good faith

 (4) Despite subsection (1), a transfer of property is not void against the trustee if:

 (a) the consideration that the transferee gave for the transfer was at least as valuable as the market value of the property; and

 (b) the transferee did not know, and could not reasonably have inferred, that the transferor’s main purpose in making the transfer was the purpose described in paragraph (1)(b); and

 (c) the transferee could not reasonably have inferred that, at the time of the transfer, the transferor was, or was about to become, insolvent.

 (4A) For the purposes of this section, a rebuttable presumption arises that the transferor was, or was about to become, insolvent at the time of the transfer if it is established that the transferor:

 (a) had not, in respect of that time, kept such books, accounts and records as are usual and proper in relation to the business carried on by the transferor and as sufficiently disclose the transferor’s business transactions and financial position; or

Refund of consideration

 (5) The trustee must pay to the transferee an amount equal to the value of any consideration that the transferee gave for a transfer that is void against the trustee.

What is not consideration