Swift Advances Plc v Ahmed & Anor

Relief under Insolvency Act 1986, section 423, requires an undervalue transaction, entered into for the purpose of putting assets beyond the reach of, or prejudicing, potential claimants, with that purpose being real and substantial. The purpose is a question of fact. The court may infer it from documentary evidence, the obvious consequences of the transaction, and the failure to disclose or register a beneficial ownership change. Failure to register dealings with beneficial ownership may be a significant factor. Where the statutory conditions are met, the court may restore the position to that which would have existed had the transaction not been entered into.

Swift Advances Plc applied under section 423 of the Insolvency Act 1986 to set aside trust deeds executed by Mr Anjum Ahmed in favour of Mrs Parveen Ahmed. The deeds purported to transfer the beneficial ownership of property and shares while leaving Mr Ahmed publicly appearing to be the owner. Swift had lent money to Mr Ahmed and contended that the 2006 deed was intended to prejudice potential creditors. The respondents disputed that purpose and relied on family-protection explanations. The central issue was whether a real and substantial purpose of the 2006 deed was to place assets beyond the reach of, or otherwise prejudice, persons who might make claims against Mr Ahmed.

1. Application granted in relation to the 2006 deed. The court set it aside under section 423 of the Insolvency Act 1986, restoring the beneficial ownership of High Elm and Hilltop to Mr Ahmed.
2. It was common ground that the 2006 deed was a transaction at an undervalue. The remaining question was purpose. Swift did not have to prove that Mr Ahmed specifically had creditors in mind: Fortress Value Recovery Fund v Blue Skye [2013] EWHC 14 (Comm).
3. Purpose was a question of fact to be determined from oral and written evidence, documents, and proper inferences. The documentary history showed that Mr Ahmed understood the importance of beneficial ownership to lenders, yet placed the beneficial ownership privately in his wife shortly before seeking further borrowing.
4. The absence of restrictions or other public registration of the trust was highly significant. Public registers exist to inform third parties about ownership, and the court was entitled to infer that the transaction was kept private to preserve Mr Ahmed’s ability to appear to the outside world as owner. This approach was supported by Hashmi [2002] EWCA Civ 981.
5. The obvious prejudicial effect of the deed supported an inference that prejudice was intended. The court rejected the explanation that the deed merely updated the earlier deed to include after-acquired property and concluded that placing assets beyond creditors, or otherwise prejudicing potential claimants, was a substantial purpose.
6. The court admitted a late-discovered transfer concerning High Elm. Excluding it would have offended common sense and justice, applying Mulholland v Mitchell [1971] AC 666. The respondents’ failure to correct the misleading impression created by their evidence was relevant under Vernon v Bosley (No.2) [1999] QB 18.
7. The question whether the 1996 deed should also be set aside was not adjudicated. Swift was given permission to apply for relief concerning it within six months after final disposal of the possession proceedings.

First-instance decision. The judgment records related possession proceedings but gives no citation for an earlier judgment.