FA v OA [2023] EWFC 21311 September 2023

Published: 13/12/2023 23:21


HHJ Vincent. Unsuccessful application under s 37 MCA 1973 to set aside loan agreement as being a sham.

H (61) and W (39) married in Nigeria in 2004 and worked in H’s hotel business. The parties relocated to England in 2009 and H purchased the FMH in his sole name for £1.35m. In 2015 the parties separated and H returned to Nigeria where he petitioned for divorce. H returned to England in 2017.

In March 2018 H’s brother’s company (‘L’) commenced proceedings against H for enforcement of a loan agreement. L asserted that in 2009 it agreed to loan £1.6m to H for the purpose of developing his business and, instead, H had used these funds to purchase the FMH. It was found that the terms of the loan were of no benefit to the company; [76]. L was seeking a return of the £1.6m or repossession of the FMH.

In October 2018 W issued an application for her Nigerian divorce to be recognised in this jurisdiction and for financial relief under MFPA 1984. In March 2019, following proceedings in the High Court of Justice of Nigeria, H was required to pay £1.6m to L plus judgment interest of 21%. In his Form E filed in 2019 H then asserted that whilst the FMH was worth c.£1.8m, £1.6m of the equity was held on trust for L due to the loan L had provided. This was the first W, or her representatives, had heard of the loan.

In October 2019 L applied to the High Court in England for a charging order over FMH to secure the Nigerian judgment debt of £1.6m. An interim charging order was granted. W applied to the court under s 37 MCA 1973 to set aside the loan agreement, arguing that the loan agreement was a sham created only after the breakdown of the parties’ marriage. In 2021 L joined the proceedings as an intervenor and W applied to intervene in the application for a charging order in the KBD of the High Court. In November 2022 the interim charging order was made final.

HHJ Vincent referred to the law on sham transactions set out by Mostyn J in Bhura v Bhura [2014 EWHC 727 (Fam); [58]. The burden of proof was on W to establish that on the balance of probabilities the loan agreement was a sham; [77]–[78]. The fact that there were suspicious elements in relation to the loan agreement was not sufficient ([77]) to find that it was a sham on the balance of probabilities. In particular, HHJ Vincent preferred H’s evidence about his financial status and level of success when he moved to England; H was accepted into the UK on a Tier 1 Entrepreneur Visa rather than an Investor visa, as put forward on behalf of W; the lack of charge on the FMH was due to H failing to be straightforward with his brother about how he used the £1.6m loaned to him rather than being evidence of a sham; the amounts and timings of transfers by L through foreign exchange services were consistent with H’s account of receiving the monies from L in instalments in line with the loan agreement; and there was no evidence that the Nigerian documents presented to the court were fabricated only after H’s separation from W. Moreover, L’s application was properly served on W.

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