The “ancient” Fraudulent Assignments Act 1736 reviewed by Isle of Man High Court in Mazurov

Deemster Corlett has just delivered judgment on the substantive issues in the long-running VTB Bank (PJSC) & another v Mazurov & others (ORD 19/0042) litigation.

At §§ 4-5, Deemster Corlett summarised the background.

The dispute concerned the ultimate beneficial ownership of a Manx company, Campino Ltd (D3). The Claimants claimed that D3 was owned by Mr Mazurov (D1). D4-D6 said that they owned D3 and that legal ownership was validly transferred to D4 by at least 13th September 2019, with beneficial ownership transferred earlier, in March 2019. C1 and C2 had judgments against D1 and, as part of enforcement, wished to trace D1’s assets, including the one issued share in D3, a company which owns a Bombardier executive jet, located in Moscow since February 2022. Mr Mazurov was said still to be detained in prison in Russia and was adjudicated bankrupt in Russia on 16th June 2020.

The Court (at § 115) set out the following issues for determination:

• “there is no factual or legal basis for the Claimants’ claims that [D1] was and/or remains the ultimate beneficial owner of [D3] after 13 September 2019;
• that the transactions purporting to transfer ownership of [D3] were sham transactions for the sole purposes of transferring [D1’s] assets in an attempt to defraud his creditors or fraudulent assignments contrary to the [Fraudulent Assignments Act 1736];
• that the Defendants conspired with [D1] to similar effect;
• that the Defendants hold [D3] on constructive trust for [D1];
• and that the Defendants dishonestly assisted or knowingly participated in the transactions”.

All the Claimants’ claims were dismissed, Deemster Corlett concluding (at § 108):

“… the sale of [D3] was part of a transaction (and the culmination of a series of transactions) which had a sound commercial basis and where a proper price was paid. Indeed I am particularly satisfied on two matters, namely not only were [D4-D6] acting honestly, but also that it has not been proven to the requisite demanding civil standard that [D1] was acting fraudulently… it is established law that cogent evidence is required to justify a finding of fraud or other discreditable conduct. Similarly, as confirmed by Silber J in CEF Holdings v Mundey [2012] IRLR 912, at paragraph 74, the tort of conspiracy to injure “is a very serious tort, which requires clear evidence”. … the claim that [D1]  was acting fraudulently when he or companies controlled by him entered into the transactions appears to rely on a contention that he is not an honest person and so he must have acted fraudulently. I agree that is not enough. In any event a conclusion about [D1’s]  allegedly fraudulent intentions is not required in order for me to conclude that the sale of [D3] was valid. I am satisfied that [D4-D6]  were bona fide purchasers for valuable consideration and were acting in good faith…”.

Barring an appeal, this decision substantively determines the issues in this long-running saga (the Claimants’ previous litigation conduct “in effectively delaying the progress of this litigation by two years” was itself earlier described as a “shambles” and “worthy of condemnation”).

Along the twists and turns of Mazurov – as mustard-keen regular users of Coren Law’s CLICK portal will already know – the High Court and Appeal Division have offered extensive learning on many areas of Manx civil procedure, including:

• asset disclosure orders – relevant principles for (see § 28)
• enforcement of other orders – the Court’s inherent jurisdiction to make ancillary orders (see § 30)
• freezing injunctions – the Court’s inherent jurisdiction to make ancillary orders (to ensure their effectiveness) (see § 36)
• extension of time applications, as distinguished from a relief from sanctions applications (see § 20)
• indemnity costs orders – the threshold to obtain (see § 54)
• freezing injunctions – the scope of the ‘ordinary and proper course of business’ exception (see § 18)
• sanctions regime – the interplay with a litigant’s right of access to the Court (see § 36) and
• unless orders – the timing of a strike-out on non-compliance with (see § 11).

Fraudulent Assignments Act 1736

Of perhaps particular interest, in the latest judgment of 28th May 2026, is the Court’s substantive consideration of the Fraudulent Assignments Act 1736 – possibly the first since the late Deemster Cain’s in Re Heginbotham 1999-01 MLR 53.

Section 4 of the 1736 Act – one of several pre-Revestment statutes confirmed by the Pre-Revestment Written Laws (Ascertainment) Act 1978 as continuing in force – provides:

“Fraudulent Assignments void

(4) And that all fraudulent Assignments or Transffers of the Debtor’s Goods or Effects shall be void and of no Effect against his just Creditors, any Custome or Practice to the contrary notwithstanding”

Noting this “ancient” (at § 103) and “outdated” (at § 104) provision, Deemster Corlett agreed (at § 104) with submissions:

• querying “how the court could have the jurisdiction to declare void a whole series of transactions from 2017 to 2019 (and not just that concerning the share in Campino) which have no connection with the Isle of Man” (§ 104);
• that the 1736 Act can only apply to debtors within the jurisdiction of the Isle of Man (at § 75);
• querying whether the Claimants can be regarded as “just creditors” in light of their litigation conduct and their actions which “have directly wiped out the value of [D3’s] sole asset” (at § 75); and
• that ““… [the Claimants] are seeking to set aside multiple transactions involving multiple parties and multiple jurisdictions”… that to confine, as the Claimants now seek to do, the relief to setting aside a single share transaction is to ignore all the other linked transactions” (§ 78).

There are, Deemster concluded (at § 104): “… probably impossible hurdles for the Claimants to overcome in light of the transactions encompassing many jurisdictions and involving many persons who have never been served with these proceedings”. He added (at § 105): “If however I assume (without in any way deciding) that this court has the jurisdiction to set aside the transfer of the share in the Manx company [D3], it is plain that this (doubtful) jurisdiction could not on these facts possibly be validly and properly exercised”.

Deemster Corlett reviewed the somewhat finite case-law on the 1736 Act, including Re Heginbotham (above) and Re Corlett [1860] 15 ER 251.

In Heginbotham, Deemster Cain had held (per the headnote) that: “For the 1736 Act to apply, there must be an intent to defraud creditors… This intent applies only to present debts, not contingent or future debts which may never materialise… Present debts include known and ascertained debts which are to fall due on a date in the future…”. Of particular significance to Mazurov, Deemster Cain had held (per the headnote) that the relevant transfers in Heginbotham were “bona fide and not contrived to defraud creditors”.

Deemster Corlett in Mazurov noted (at § 105) that: “the Manx courts, as surely every common law court worldwide, have always afforded protection to bona fide purchasers for value”. D4-D6: “were bona fide purchasers for valuable consideration and were acting in good faith. The matter need be taken no further” (at § 108).

At § 107, Deemster Corlett also agreed with the following submission:

“The legal disposition of assets is not a fraud under the 1736 Act, it may be a preference, but such matters must be dealt with in the context of the insolvency provisions contained in the Companies Act 1931 or in the case of [D1] per s.31 of the Bankruptcy Code 1892 (the Code) and the protection of bona fide purchasers at s.32 of the Code.”

Tort of conspiracy

As noted above, Deemster Corlett (at § 108) noted the requisite standard for a finding of fraud or other discreditable conduct. At § 102, he also concluded, as to the tort of conspiracy:

“… the transactions culminating in the transfer of the legal and beneficial ownership of [D3] are valid and not sham agreements and were entered into in good faith and for valuable and proper consideration. There was no conspiracy to harm creditors. Applying the test set out at paragraph 10 of the Supreme Court decision of JSC BTA Bank v Khrapunov [2018] UKSC 19, the parties were entitled to and did prefer their own commercial interests and there was no intention thereby to harm third parties”.

Note for practitioners: Deemster Corlett’s recent decision in Mazurov illustrates that parties who dispose of assets without a proven intent to defraud creditors – “to the requisite demanding civil standard” – and indeed bona fide purchasers for value of such assets, will not fall foul of the 1736 Act.

Disclaimer: professional advice should be sought before applying any information in a given case.

For advice on Isle of Man civil procedure or litigation relating to civil fraud or insolvency, contact Coren Law.

See also Coren Law’s Isle of Man civil procedure portal: Click On | Coren Law.