Anti-deprivation rule

"[2] It arises from the general principle (known as the "rule against repugnancy" in property law) that a grantor may not derogate from his own grant by giving an absolute interest in an asset and then providing for it to be clawed back otherwise than for fair value in stated eventualities, including (but not limited to) bankruptcy and winding up.

In his judgment, Richards J, relying on Belmont Park, declared:[10] With respect to the anti-deprivation rule, Patten LJ has observed that "the individual bankrupt or insolvent company may not contract at any time, either before or after the making of the bankruptcy or winding-up order, for its property subsisting at that date to be disposed of or dealt with otherwise than in accordance with the statute.

[12] These subrules target two distinct strategies that a debtor might pursue:[12] All these anti-avoidance rules are, however, subject to the very large exception that creditors remain able to jump up the priority queue, through the creation of a security interest.

There is no suggestion that it was formulated in order to avoid the effect of any insolvency law or to give the non-defaulting party a greater or disproportionate return as a creditor of the bankrupt estate.

[25] The SCC departed from the UK Supreme Court's judgment in Belmont Park, in holding that an effects-based test must be used in applying the rule, as that was a logical consequence of the requirement of Canada's Bankruptcy and Insolvency Act that the bankrupt's property must "immediately pass to and vest in the trustee".