In a judgment handed down on 19 February 2025, the Supreme Court (Lord Hodge, Lord Hamblen, Lord Stephens, Lady Rose and Lord Richards) dismissed an appeal in El-Husseiny & another v. Invest Bank PSC [2025] UKSC 4 concerning the scope of section 423 of the Insolvency Act 1986.
Section 423 of the Insolvency Act 1986 provides important protection for creditors from debtors seeking to put assets beyond their reach. The issue in El Husseiny was whether the scope of s.423 was, as the appellants claimed, limited to transactions involving assets in fact beneficially owned by the relevant debtor or whether it extended to transactions involving other assets, not owned by the debtor, but the dealing in which would have an impact on the value of assets which the debtor does beneficially own. On the facts, the issue arose in the context of allegations that the debtor caused companies in which he was the shareholder to enter into transactions involving the transfer of assets owned by the company at an undervalue. Both Andrew Baker J and the Court of Appeal held that s.423 was not restricted to transactions involving assets beneficially owned by the debtor.
The Supreme Court dismissed the appeal, finding that the wording of s423 is sufficiently wide to apply when a debtor causes their company to transfer the company’s assets at an undervalue, resulting in the diminution of the value of the debtor’s shares. Further, the Supreme Court indicated that there was no good reason for adopting a different approach to the meaning of a transaction at an undervalue in relation to sections 238 and 339 of 1986 Act.
A link to the judgment can be found here.
The respondent bank was represented by Paul McGrath KC of Essex Court and Marc Delehanty of Serle Court, instructed by Trevor Mascarenhas, Tom Crisp, David Johnson, Eamon Khorsheed and Emily Hynes of PCB Byrne LLP.
