In Invest Bank PSC v El-Husseini and others [2023] EWCA Civ 555 the Court of Appeal rejected a narrow interpretation of s 423 Insolvency Act 1986 that would have restricted the ability of a victim to obtain relief in cases where the impugned conduct was carried out using a corporate vehicle. The issue before the Supreme Court was whether the Court of Appeal had correctly interpreted the provision in holding, first, that a person can “enter into” a transaction where they act on behalf of a company, and, secondly, that there can be a “transaction” for the purposes of the provision where the asset which was alleged to have been disposed of at an undervalue was not beneficially owned by the “debtor.”
It will be recalled that Invest Bank PSC had obtained a judgment in Abu Dhabi against the appellants’ father, Mr El-Husseini, for some £20 million. It wanted to enforce its judgment against assets in the UK in the form of properties in central London, some owned by companies. It alleged that Mr El-Husseini had arranged for the assets to be transferred to others so as to put them beyond its reach or to reduce the value of the companies which owned them. The reality of the transaction was, put simply, that Marquee Holdings Limited, the company, had disposed of a valuable asset for no consideration, the effect of which was that the value of Mr El-Husseini’s shares in the company was impaired, thus prejudicing the bank’s ability to enforce its judgment.
The bank sought relief under s 423 Insolvency Act 1986.
At first instance Andrew Baker J held that the fact that the relevant assets were not owned by Mr El-Husseini himself but by a company owned or controlled by him did not in law prevent the transfer from falling within the scope of s 423. However, he declined to grant the bank relief, holding that Mr El-Husseini had not acted in his personal capacity but on behalf of the company, Marquee. He held that, where the transfer was caused by the debtor (acting with the relevant statutory purpose of prejudicing his creditors), s 423 could not apply unless the debtor had acted separately in a personal capacity and not simply as the instrument by which his company acted.
The Court of Appeal allowed the bank’s appeal and dismissed a cross-appeal against a former ruling that s 423 could apply where Mr El-Husseini had procured Marquee to transfer the property for no consideration, rather than transferring an asset which he owned.
There was a further appeal to the Supreme Court, which has now given judgment (El-Husseini and another (Appellants) v Invest Bank PSC (Respondent) [2025] UKSC 4), unanimously dismissing the appeal (Lady Rose and Lord Richards, with whom Lord Hodge, Lord Hamblen and Lord Stephens agreed). The Supreme Court found that both the language and purpose of s 423 pointed clearly to the conclusion that a “transaction” within the meaning of s 423(1) was not confined to dealing with an asset owned by the debtor but extended to the type of transaction in issue in this case. It is now clear, then, that a debtor who causes a solvent company which he owns to transfer its assets to another person for no or insufficient consideration, thereby diminishing the value of hiss shares, will be open to liability under s 423(1).
The courts have recently seen a number of cases brought under s 423, among them Integral Petroleum v Petrogat [2023] EWHC 44 (Comm), Lemos & Ors v Church Bay Trust Company Ltd & Ors [2023] EWHC 2384 (Ch) and Purkiss v Kennedy & ors [2024] EWHC 1081 (Ch). The broad approach to the provision taken by the Court of Appeal and now endorsed by the Supreme Court may lead to greater recourse by insolvency practitioners and others (such as the bank in this case) to this provision, in spite of the challenges it will undoubtedly continue to present.