El-Husseiny v Invest Bank PSC [2025] UKSC 4 (19 February 2025)

The Bank sought to enforce Abu Dhabi judgments against Mr El-Husseini by claiming under section 423 of the Insolvency Act 1986 that he arranged for a company he owned to transfer valuable London property to his son for no consideration. The Supreme Court held that section 423 does not require the debtor to transfer his own property; arrangements depleting assets through company transfers can fall within the provision.

Facts

Invest Bank PSC obtained judgments in Abu Dhabi against Mr El-Husseini for approximately £20 million arising from personal guarantees. The Bank sought to enforce these judgments in England and identified valuable London properties, including 9 Hyde Park Garden Mews, worth approximately £4.5 million. This property was legally and beneficially owned by Marquee Holdings Limited, a Jersey company in which Mr El-Husseini was the beneficial owner of all shares. Mr El-Husseini arranged for Marquee to transfer 9 Hyde Park to his son Ziad for no consideration, thereby reducing the value of his shareholding in Marquee and prejudicing the Bank’s ability to enforce its judgment.

Issues

The Beneficial Interest Point

The central issue was whether section 423 of the Insolvency Act 1986 applies only where a transaction involves the transfer of an asset beneficially owned by the debtor, or whether it can apply to a transaction whereby a debtor agrees to procure a company he owns to transfer a valuable asset for no consideration, thereby reducing the value of his shares to the prejudice of his creditors.

Judgment

The Supreme Court unanimously dismissed the appeal, holding that section 423(1) does not contain any requirement that a transaction must involve a disposal of property belonging to the debtor.

Lady Rose and Lord Richards (with whom Lord Hodge, Lord Hamblen and Lord Stephens agreed) delivered the judgment. The Court found that on a straightforward reading of section 423(1), together with the broad definition of ‘transaction’ in section 436(1) which includes ‘a gift, agreement or arrangement’, the transaction involving 9 Hyde Park fell within the terms of section 423(1).

The Court rejected the appellants’ argument that the word ‘gift’ in section 423(1)(a) limited all transactions to transfers of proprietary interests by the debtor. The Court noted that while a gift by definition involves the transfer of an asset, transactions providing for the debtor to receive no consideration do not necessarily entail the transfer of an asset.

The Court emphasised that the purpose of section 423, as made apparent by subsection (3), is to provide redress where transactions at an undervalue are entered into with the purpose of putting assets beyond the reach of creditors or otherwise prejudicing their interests. The Court stated that there was no reason to read into section 423(1) an implied restriction which would undermine this purpose.

The Court distinguished Clarkson v Clarkson [1994] BCC 921, holding that Hoffmann LJ’s analysis in that case was focused on its particular facts and did not lay down a universal test requiring the debtor to transfer his own property.

Key Reasoning

The Court observed that section 423(3)(a) refers to ‘putting assets beyond the reach of’ the creditor rather than ‘his assets’, and section 425(1)(a) and (b) refer to ‘any property’ rather than the debtor’s property. The appellants’ construction would require important words to be read into the section which are simply not there.

Implications

This decision significantly clarifies the scope of section 423 of the Insolvency Act 1986. It confirms that creditors can pursue claims under section 423 where debtors use corporate structures to defeat their claims by arranging for companies they own to transfer valuable assets at an undervalue. The decision prevents debtors from sheltering behind the separate legal personality of companies to avoid the consequences of section 423 when the requisite fraudulent purpose is established. The ruling recognises the reality that wealthy debtors may use various instruments, including limited companies, to put assets beyond the reach of creditors.

Verdict: Appeal dismissed. Section 423 of the Insolvency Act 1986 does not require that a transaction must involve a disposal of property belonging to the debtor; it extends to arrangements whereby the debtor procures a company owned by him to transfer a valuable asset for no consideration or at an undervalue.

Source: El-Husseiny v Invest Bank PSC [2025] UKSC 4 (19 February 2025)