This case shows that there is no requirement that a company has to be insolvent for a finding that there was a transaction defrauding creditors. The Court will focus on the intentions of the parties at the time of the transaction.
As a company was going out of the business, the managing director and controlling shareholder brought a claim to recover a loan he had secured against NAL. The liquidators of NAL alleged he had breached his duty to the company's creidtors and preferred his own interests to those of NAL.
The liquidators also counterclaimed to set aside or recover compensation for various transactions. The Court took the view that the director's primary intention was to reduce the asset value of NAL and to ensure his debt as a shareholder had priority.
The case shows the thoroughness with which Courts will set aside or undo any attempts to move assets out of the reach of creditors, regardless of whether the company was insolvent at that time or became insolvent as a result.
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