Vol 16 (2019) - Issue 2

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Transactions Defrauding Creditors: A New Approach to the Prohibited Purpose Requirement under Section 423 of the Insolvency Act 1986

Synopsis

The applicant bank sought to claw-back a GBP 1.1 million gift under section 423 of the Insolvency Act 1986 as a transaction defrauding the debtor’s creditors. In a significant departure from previous case law, the Court of Appeal held that it is sufficient simply to ask whether the transaction was entered into by the debtor for the prohibited purpose of putting assets beyond the reach of his creditors. It is no longer necessary to prove that this purpose was dominant or even substantial.

Factual background

The appeal in Ablyazov comprises the latest chapter in the ongoing legal saga between the Kazakh BTA Bank and its former controller, Mr Ablyazov. At the time of writing, this dispute spans some 66 cases reported over the last nine years.