Giles v Rhind & Anor

For a claim under section 423 of the Insolvency Act 1986, a person may be capable of being prejudiced even before becoming a judgment creditor. An accrued contractual claim may suffice where the breach presents a real prospect of substantial damage. Claims under section 423 are subject to limitation under the Limitation Act 1980. Deliberate wrongdoing engaging section 423 can constitute deliberate concealment for section 32(2), postponing limitation until discovery or reasonable discoverability.

The claimant sought permission to amend proceedings challenging a deed under section 423 of the Insolvency Act 1986, alternatively alleging that it was a sham. The proposed amendments changed the alleged execution date from 1998 to 1994, alternatively 1992, and added a section 423 case based on the financial position and alleged purpose in 1992. A further proposed claim concerned adjoining land, the Paddock.

The defendants opposed the amendments on credibility, prejudice, limitation and merits grounds. The central issues were whether the amended claims had a reasonable prospect of success, whether they arose from the same or substantially the same facts for the purposes of section 35 of the Limitation Act 1980 and CPR Part 17.4, and whether section 32 postponed limitation by reason of deliberate concealment.

1. Amendments concerning the deed. Permission was granted to replace the pleaded 1998 execution case with claims alleging execution in 1994, alternatively 1992. Although there had been serious delay and credibility concerns, the proposed case was not so incredible as to be unsustainable. The issues were also likely to arise in defending the existing case.
2. Victim under section 423(5). A person whose contract had been breached and who therefore had an accrued cause of action was capable of being prejudiced by a transaction at an undervalue. The statutory wording did not require an existing debt, judgment or claim already within the defendant’s contemplation. By the end of November 1993 the claimant was capable of being prejudiced.
3. Limitation. A section 423 claim challenging the deed was an action upon a speciality under section 8(1) of the Limitation Act 1980, attracting a 12-year period. The sale of the property and payment of proceeds into court did not convert it into an action to recover money under section 9(1). The claim remained a challenge to the transfer.
4. Section 32. The court held that deliberate commission of a section 423 wrong was a deliberate commission of a breach of duty within section 32(2). In this context, breach of duty meant legal wrongdoing giving rise to a right of action. Section 32(1)(b) could therefore postpone limitation until discovery or reasonable discoverability of the relevant facts. The concealment was attributable against the second defendant because she claimed through the first defendant, and section 32(3) did not apply to her contemporaneous acquisition.
5. Other claim. Permission was refused for the Paddock claim to be added to the existing proceedings. It was to proceed, if pursued, as a new claim.