Background

On 19 February 2025, the Supreme Court handed down judgment and dismissed an appeal in El-Husseini and another v Invest Bank PSC [2025] UKSC 4. 

The appeal concerned the construction of section 423 of the Insolvency Act 1986 ("IA")("s.423"), which provides creditors with protection against transactions entered into by debtors on terms that provide for the debtor to receive no consideration or consideration worth less than that which the debtor provides (known as transactions at an undervalue). 

Invest Bank PSC ("the Bank") had secured a judgment against Mr Ahmad El-Husseini in Abu Dhabi for approximately £20 million. The Bank was seeking to enforce that judgment against valuable UK assets, including properties in central London, and the companies which owned such properties. The Bank alleged that Mr El-Husseini arranged for these assets to be transferred to other people to move them beyond reach of the Bank or reduce the value of the companies which owned them. 

A focal point was the transfer of a property at 9 Hyde Park Garden Mews ("9 Hyde Park"), worth about £4.5 million, by Marquee Holdings Limited ("the Company"). At the time of the transfer, Mr El-Husseini was the beneficial owner of all the shares in the Company, and he arranged for the legal and beneficial title of 9 Hyde Park to be transferred to his son, Ziad, for no consideration.  As the Company was stripped of its only asset, the value of Mr El-Husseini’s shares, the Company was reduced to such an extent that the Bank was seriously prejudiced in its efforts to enforce its judgment against Mr El-Husseini.

Legal Issues

At first instance, it was held that the fact that the assets were not legally or beneficially owned by Mr El-Husseini (but by a company owned or controlled by him) did not prevent the transfer from falling within the scope of s.423. However, it was ruled that the transferor in this context must be an individual for s.423 to apply. As the transfers of the assets were made by companies beneficially owned by Mr El-Husseini, the transfers could not be challenged or set aside under this section. The Court of Appeal later ruled that the transfers of the assets were capable of being considered transactions at an undervalue under s.423, despite being entered into by a company, determining that s.423 could apply where Mr El-Husseini had procured the Company to transfer the property for no consideration, rather than transferring an asset which he owned.

On appeal, the Supreme Court had to decide whether s.423 applies solely to transactions involving the transfer of an asset legally or beneficially owned by the debtor or whether it can apply where an asset owned by a debtor's company is transferred at an undervalue. The appellants (El-Husseini and another) argued that s.423 should only apply where the debtor personally owns the transferred asset.

Decision

The Supreme Court dismissed the appeal, concluding that s.423 does not require the transferred asset to belong to the debtor. The Court ruled that s.423 encompasses transactions where a debtor arranges for a company that they control to transfer assets at an undervalue. This decision was grounded in the language of section 423(1) IA, the purpose of this section, and the broader context of the IA. The ruling clarifies the definition of "transaction" and scope of section 423(1) IA, ensuring it covers arrangements designed to dilute the asset pool of a debtor to the disadvantage of creditors, irrespective of the direct ownership of the assets involved in the transaction.