Re P (A Child) (Financial Provision: s 423 Insolvency Act 1986) [2025] EWHC 1460 (Fam)

Judgment date: 4 June 2025

https://caselaw.nationalarchives.gov.uk/ewhc/fam/2025/1460

Harrison J. A Schedule 1 application and connected application under s 423 Insolvency Act 1986. Order for provision of a housing fund; periodical payments; security for maintenance and school fees. The court came just short of making an order under s 423, but made relevant findings.

The parties’ positions; [1]–[7]

M made her application under Schedule 1, seeking for the benefit of the child (‘P’):

• a housing fund of £1,050,000 so that she could purchase a home, to be held on trust for P’s benefit;
• a lump sum to discharge liabilities and fund capital expenses such as the purchase of a car;
• a further lump sum for legal services so that she could be represented in the welfare proceedings;
• discharge of rent pending purchase of the home;
• child maintenance of £6,000 pm;
• a school fees order.

F argued that he had disposed of his assets into a trust (‘the T Trust’), which was founded by F’s father – he simply could not meet M’s claims. M argued that the T Trust had been deliberately used/set up as a vehicle to defeat her claims. F had made an open proposal ahead of the final hearing, to the effect that a capital sum for M to purchase a house for P would be made available by the sale of a home owned by F’s father. The net capital from the sale of this property would have been around £550,000; [6].

The parties & background; [8]–[24]

The parents had met in 2015 and started a relationship not long after; they were never married. They lived together until 2019 in the Czech Republic, their home country. P is the parties’ only child – he was aged 7 at the time of the hearing.

P and M moved to England in August 2020, with F’s consent and financial support. F told the court that he sent them £3,000 pm for the first year, reducing to £2,500 in the second year. M and P returned to the Czech Republic in August 2022, where she learned that F had started a new relationship – the parties’ relationship formally ended at this point, and F reduced his financial support to £400 pm.

M and P moved back to England in January 2023, with F continuing to make (on M’s case) ‘sporadic’ payments of £400 pm.

In January 2024, M made an application for a child arrangements order, including a ‘lives with’ order. F cross-applied for a lives with order, including a provision permitting him to permanently remove P to the Czech Republic. At the time of the Schedule 1 hearing, the welfare proceedings were still ongoing.

The Schedule 1 proceedings were instigated by M on 13 March 2024. At the outset, M made an application for F to provide her with monies to meet legal fees; on 23 May 2024 Cobb J made an order that F should do so, to the sum of £200,688. By the time of the Schedule 1 hearing, F had paid only £15,000. At the same hearing, Cobb J made a freezing order against F with respect to several properties in South West London. It later transpired that F had already transferred his interest to his father, which he failed to tell the court.

At a further hearing on 19 July 2024, Cobb J made a ‘pound-for-pound’ order – alas, it did not have the intended effect and, rather than complying, F further reduced maintenance paid to £150 pm.

The unsuccessful FDR was heard on November 29; the post-FDR hearing was again before Cobb J, who varied the pound-for-pound order to apply to both the welfare and finance proceedings. Harrison J then heard the pre-trial review, where he: increased the sum payable by F by a further £62,500 (which remained unpaid); made an order for interim child maintenance of £1,000 pm (which F did comply with); and made various procedural directions. F made an application to adjourn the final hearing, which was refused.

The law; [25]–[39]

Children Act 1989, Schedule 1

Harrison J summarised the law and core principles relating to Schedule 1 applications, noting the key principles summarised by Peel J in Y v Z [2024] EWFC 4 and Mostyn J’s decision in Seymour v James [2023] EWHC 844.

As M made allegations of significant non-disclosure on F’s part, the court also considered the principles in Al-Khatib v Masry [2002] 1 FLR 1053 and NG v SG (Appeal Non-Disclosure) [2012] 1 FLR 1211.

Insolvency Act 1986, s 423

Section 423 is headed ‘Transactions Defrauding Creditors’. In summary, to ‘trigger’ the jurisdiction under s 423, an applicant must establish on the balance of probabilities that:

• the respondent has entered into the transaction at an undervalue (including a gift or a transaction for no consideration);
• the purpose of the transaction was:
  • to put assets beyond the reach of a person who is making or may make a claim against them; or;
  • otherwise to prejudice the interests of such a person in relation to the claim which that person is making or may make; and
• the applicant is a ‘victim’ of the transaction per s 423(5).

Harrison J explored some of the key case law illustrating this jurisdiction, including the question of the purpose of the person entering a transaction, and the powers possessed by the court to restore a position once the jurisdiction is engaged.

F’s resources; [52]–[104]

Much of the judgment is spent exploring F’s resources – as F had not been forthcoming with his financial disclosure, ‘the court is left in the invidious position of having to do its best to estimate his overall wealth on the basis of the limited information available’.

The sale of G business

F had been responsible for founding and developing ‘G’ company, shares in which were sold to a European company, generating F’s substantial wealth. As F had failed to provide the court with ‘incontrovertible evidence of the sum received’, the court was entitled (and indeed, obliged) to ‘do its best to ascertain the figure’. Harrison J found that sale of the G business generated approximately €73m, of which €16.7m was received by F.

Use of the G proceeds

F’s case was that he had spent the €16.7m he received, and he provided a breakdown of his spending in his Form E. Within this spending included €5m of loans to BX companies (below); €4m spent on ASIC hardware to mine Bitcoins (which F said he later gifted to his sister and father); €2.6m ‘loaned’ to his father (including one loan that was referred to as a donation); and various smaller sums (albeit still substantial).

Harrison J accepted that these transactions took place, though (as addressed below) did not accept his case on the ASIC hardware being gifted, nor the ‘loan’ to his father that was referred to as a donation.

The BX companies

Whilst the sale of G was the principal reason for F’s wealth, he continued to have success in other endeavours – the ‘BX companies’. They were a series of companies operating under BH s.r.o as a holding company. F’s case was that BH s.r.o was his father’s company.

Harrison J did not accept this. The company had been restructured, with all shares in the company (held by F, F’s company, F’s father, F’s mother, and F’s sister) eventually being transferred to the T Trust, from March to April 2024. Harrison J saw that as a step that had been taken to ‘create the illusion that the T Trust was a family trust, created by the paternal grandfather for the benefit of the family as a whole, and to conceal the reality which is that it was set up as a vehicle to hold wealth, as I find, substantially created by the father’.

The holding company for the BX structure held net assets ‘in the region of’ £100m, and Harrison J determined that he could be confident that ‘there is more than sufficient liquidity within the business to enable funds easily to be raised to meet the mother’s claims at their highest’.

Summary of conclusion: F’s dispositions

Harrison J conclusively found that, with regard to:

• the disposition of 49% of F’s shares in BH s.r.o. on 18 March 2024 to his family;
• the disposition of 49% of BC Limited’s shares in BH s.r.o. on 18 March 2024 to F’s family;
• the transfer of F’s assets into the T Trust and onward transfer to a Liechtenstein foundation;
• the disposition of F’s 50% interest in the South West London property to his father; and
• the gift of the ASIC hardware to F’s father and his sister.

These transactions were characterised by ‘a purpose or the purpose … to defeat the claims of creditors, including the mother’.

Harrison J also found that M was a victim of these transactions.

M’s resources; [105]–[106]

Much less consideration was required of M’s resources. Harrison J noted that M ‘does not have any capital of significance’, with a ‘low six figure mortgage capacity’ (plus her parents’ loan, albeit less any sums payable for legal fees). She earned around £3,300 pm.

F’s standard of living; [107]–[112]

Harrison J found that F had been ‘essentially truthful in characterising his lifestyle as being relatively modest albeit, in my judgement, very comfortable’. F legitimately did not want his children to be exposed to great wealth, though he ensured his older children were privately educated. However, Harrison J considered that F had ‘tailored’ his Form E budget to be consistent with what he claimed was his limited income: ‘while these proceedings have been ongoing he had maintained an artificially low level of expenditure for presentational purposes’.

The order; [137]–[152]

In summary, the order made was:

• Housing: a fund of £960,000 was necessary. Having regard to the scale of F’s resources as compared to M’s, it was not appropriate for M to contribute by borrowing. M and P would live in the house rent-free until P completed tertiary education, at which point the property would revert to F (which would also happen if M died, or ceased using the property as a home for P).
  • F would have liberty to apply in the event of M’s remarriage or cohabitation for six months or more. The realistic impact of this was not that M and P would be expected to vacate the home – rather, that M’s new partner would make a contribution by paying a 1/3 share of the market rental value of the property, and some of the outgoings.
  • M would be responsible for routine maintenance and decoration; F for structural repairs and building insurance.
  • If F failed to comply with purchase of the property, then the default alternate order would be that he pays M a lump sum of £960,000 subject to M agreeing undertakings on application of the money.
• Other capital: F was to pay a lump sum of £29,250 for P’s other capital needs; £173,500 in respect of M’s liabilities, and the order should provide for the purchase of a new car every five years with the trade in of the old car.
• Child periodical payments: from M’s income, £1,650 pm was to be ring-fenced for her own use. The shortfall of £5,050 pm was to be rounded down and payable by F. Until the new property is purchased, F was also to pay M’s rent of £1,500 pm. Harrison J also made a school fees order, including provision for reasonable extras.
• Security: as F was in breach of various court orders and in substantial arrears in meeting the legal services order, Harrison J considered It appropriate to require F to put in place security for maintenance and school fees. £600,000 (approx. 10 years’ worth of maintenance) was appropriate.
• s 423: Harrison J had made findings that would enable the making of orders under s 423, but stopped short of actually making such orders in the hope that F, ‘who undoubtedly loves his son, will be able to see the benefit of bringing this unhappy litigation to an end and complying with the court’s decisions’.
• Further legal funding: M sought £150,000 to fund her representation in the welfare proceedings. Harrison J refused to deal with this in the absence of a proper indication.
• Freezing order: the order made by Cobb J was to remain in place until capital orders were complied with.