Placing properties in trust to avoid mortgage debt
The recent appearance before the High Court by Charles Allen of the Rodolphus Allen Private Family Trust, wherein he purged his contempt for breaching a court order by interfering with two property repossessions, has thrown into sharp focus the manner in which the court will deal with debtors attempting to place their properties beyond their creditors.
In 2012 meetings began to be held wherein debtors were being advised to put their properties into a private trust to avoid the assets being made available to creditors and financial institutions in particular.
By September 2103 it was reported that more than 1,000 businessmen, developers and farmers had availed of the scheme – it was alleged that one of the more high profile businessmen was Bill Cullen. Very little detail emerged of the private trust nor was it known how the trust would protect the assets placed in the trust save for the following:
- The trust was being run by Charles Allen, a Kilkenny based businessman, on an allegedly philanthropic basis
- The “owners” must relinquish their property to the trust and rent the property back on a 999 year lease with a nominal rent
- The “owners” must prove that they own the properties and that they have not been sold.
- Regarding pre-existing loans or the prior rights of any such mortgagee and the commitments made in the mortgage documentation the promoters claim to have spotted a legal loophole
- People participating were charged a small administrative fee of €250.
- Borrowers putting commercial properties in the trust were asked to make a donation proportionate to their borrowings.
- The “trust deed” allegedly transferring the property to the trust was notarised by a Notary Public.
The scheme fell apart on the first challenge made to the High Court when receivers appointed by a financial institution sought a warrant against Charles Allen for trespass. Mr Justice Ryan of the High Court said that notices purported to be served by the Trust may have been done to give “some colourable justification” to unlawful trespass. He further noted that the notices were being used to intimidate people into believing there was some justification for actin g on them.