The UK Supreme Court has confirmed the scope of s.423 Insolvency Act 1986 (the Act) - it can apply to transactions where a debtor procures the transfer of an asset they do not personally own. The judgment in El-Husseiny v Invest Bank PSC [2025] UKSC 4 confirms that this accords with the purpose of s.423, which is to stop debtors making themselves “judgment proof” by moving assets out of their creditors’ reach.

Background

Invest Bank PSC (the Bank) had obtained an approximately £20m judgment in Abu Dhabi against Mr Ahmad El-Husseini. The Bank had identified various assets in the UK against which it sought to enforce this judgment, and argued that Mr El-Husseini had arranged for some of these assets to be transferred away, putting them out of the Bank’s reach. This would be contrary to s.423 of the Act.

s.423 provides that if a person gives away property for no consideration, or transfers it away for significantly less than it is worth, and does so for the purpose of putting assets beyond a creditor’s reach or otherwise prejudicing creditors’ interests, then the court can make an order to restore the position and to protect the interests of the “victim” of the transaction.

The Bank’s claim included several transfers of assets. The Supreme Court took as an example the transfer of a central London property, 9 Hyde Park Garden Mews (9 Hyde Park). This property had been owned by a company, Marquee Holdings Limited (Marquee). Mr El-Husseini owned all the shares in Marquee. Mr El-Husseini caused Marquee to transfer 9 Hyde Park to his son, Ziad, for no consideration. This reduced the value of Mr El-Husseini’s shares in Marquee by £4.5m.

The Bank argued that this transaction was within s.423. Mr El-Husseini and Ziad argued that this could not be the case because Mr El-Husseini did not transfer any property that he himself owned. The Bank disputed that there was any such requirement of ownership in s.423. The Court of Appeal agreed with the Bank. Permission was granted to appeal to the Supreme Court, and the appeal was heard in May 2024.

Meanwhile, the substantive trial took place in July 2024, in which all of the Bank’s claims failed because it did not provide sufficient evidence to satisfy the requirement in s.423(3) that Mr El-Husseini’s purpose was to put assets beyond the reach of his creditors (this was because the Bank did not prove that relevant companies were insolvent or that Mr El-Husseini knew that they were insolvent at the time of the transactions). However, the Supreme Court proceeded to give judgment on this appeal because the point was of general public importance. 

What did the court decide?

The Supreme Court agreed with the Bank and dismissed the appeal. Both the wording of the statutory provision and its purpose supported the Bank’s interpretation that it can apply to assets the debtor does not personally own.

On a straightforward reading of s.423 combined with the definition of “transaction” in s.436, the transaction transferring 9 Hyde Park to Zaid fell within s.423. Under s.436, a ““transaction” includes a gift, agreement or arrangement”. Mr El-Husseini had clearly entered into a transaction by arranging that Marquee transfer 9 Hyde Park to Zaid, and regardless whether that was by a gift or by inadequate consideration, that put the transaction within s.423 because it reduced the value of Mr El-Husseini’s shares in Marquee.

The appellants argued that this reading should not be adopted because the words of the statute implied that ownership of the assets transferred was a prerequisite. However, the bases submitted for this argument were not persuasive. The language of s.423 did not state any such requirement, nor did it imply one.

The purpose of the statute also supported the Bank’s position. s.423 is the current incarnation of a law addressing a long-standing need to deal with debtors who attempt to defeat their creditors. Restricting the interpretation of the section only to those transactions involving property owned by the debtor would undermine its purpose; it is right that the statute should be capable of capturing transactions such as this one that diminish the value of the debtor’s assets if this is done deliberately to frustrate creditors’ interests.

What does this mean for me?

The Act provides robust protection for creditors’ interests. The Supreme Court’s confirmation that a transaction can fall within s.423 even if the property transferred away was not owned by the debtor is sensible and helpful. In this case, the transaction reduced the value of the debtors assets – his shares in Marquee. Hence, if the transaction had been carried out with the intention of hurting creditors’ interests, it would have been a s.423 transaction and the court could order its reversal.

Supreme Court authority confirming that s.423 applies where a debtor procures a transaction that will prejudice the position of creditors bolsters certainty for creditors and affirms the UK’s commercial approach to insolvency law.