Vol 16 (2019) - Issue 5

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Re MKG Convenience Ltd (in liquidation); Abdulali and Others v NISA Retail Ltd [2019] EWHC 1383 (Ch)

Synopsis
The recipient of a void payment faced with a liquidator's claim for repayment under section 127 Insolvency Act 1986 ('IA 1986') could not show that the transactions in question were for the benefit of the general body of the company's creditors. 'Exceptional circumstances' are required for the Court to validate void dispositions of company assets, and depart from the statutory presumption that these should be available at the outset of a winding-up for pari passu distribution amongst creditors. Equally, the payee was unable to avail itself of the defence of 'change of position', which would be available to defendants in comparable restitutionary claims. This decision strengthens the position of liquidators applying for avoidance of property dispositions. The Court confirmed the high bar for grant of validation orders, and discounted another possible defence for payees if validation was not possible.