Kuwait Court of Cassation principle number 182

Summary: - An action to declare dispositions ineffective. Its provisions are regulated by Articles 310-312 of the Civil Code. A creditor’s use thereof. Its conditions: his right must be due for payment; the disposition must diminish the debtor’s rights or increase his obligations and result in the debtor’s insolvency or increase his insolvency; and there must be fraud by the debtor and knowledge thereof on the part of the transferee. What suffices in this regard. An example of proof of fraud by the debtor—the first respondent—and knowledge thereof on the part of his son—the fourth respondent, the transferee—and proof of collusion between them, satisfying the conditions necessary for admitting an action to declare a disposition ineffective. Rule: It is established in the jurisprudence of this Court that, for a creditor to be able to bring an action to declare dispositions ineffective, the provisions governing which are set out in Articles 310, 311, and 312 of the Civil Code, his right must be due for payment and the debtor’s challenged disposition must prejudice the creditor. This requires that the right have existed before that disposition, that the disposition have diminished the debtor’s rights or increased his obligations, and that it have resulted in the debtor’s insolvency or increased his insolvency. In addition, fraud by the debtor and knowledge of that fraud on the part of the transferee are also required if the disposition is for consideration. In this case, under Article 311 of the Civil Code, it suffices for the creditor to establish that the debtor knew at the time of the disposition that he was insolvent for fraud, namely the intention to prejudice the creditor, to be presumed on his part. It likewise suffices to establish that the transferee knew that the debtor was insolvent, or ought to have known this, for knowledge of the fraud to be presumed on his part. That being so, it is established from the papers that the appellant, in his capacity, has a debt due for payment owed by the first respondent pursuant to appellate judgment No. 1700 of 1998, Commercial, dated 22/3/2003. The certificates issued by the Enforcement Department at the Ministry of Justice established that the debtor had no assets, whereby he is deemed insolvent. It is established from registered contract No. 4379 dated 20/4/2003 that the first respondent owns a one-sixth share in the property subject to that contract, valued by the expert appointed in the action—whose two reports this Court trusts and adopts together with their reasons—at 91666.97 dinars. He sold it to his son, the fourth respondent, for 30000 dinars after the right arose and the debt was established. The papers contain no evidence that the first respondent received the sale price, thereby increasing his insolvency and diminishing the appellant’s rights. From this, the Court infers fraud by the debtor, knowledge thereof on the part of his son, the transferee, and established collusion between them. Thus, the conditions necessary for admitting the action to declare the disposition ineffective are satisfied in respect of the aforementioned registered contract alone, and not the other contracts under which the other properties were disposed of on dates preceding the arising of the debt. Since the judgment under appeal departed from this view and ruled that the action was inadmissible because it was brought by a person lacking standing, it must be set aside and a fresh judgment rendered declaring the disposition made by the first respondent to the fourth respondent and registered under No. 4379 on 20/4/2003 ineffective against the appellant in his capacity, and restoring the prior state of affairs by retaining ownership of the property subject to that contract in the ownership of the transferor.