Ingram & Anor v Ahmed & Ors

A disposition avoided by Insolvency Act 1986, s. 284 may give rise to proprietary and personal remedies under the general law. Where shares are wrongfully retained and the trustee in bankruptcy is under a duty to realise them, restoring the shares does not necessarily exhaust the remedy. The estate may recover the diminution in value caused by the breach, assessed by comparing the value at transfer with the value on return. The transferee becomes trustee of the shares immediately on the transfer. Equitable compensation requires loss caused by the breach, assessed using hindsight and common sense, but the court may use the value of the asset as the appropriate starting point. The respondents were jointly liable, and only simple interest could be considered on the evidence.

The joint trustees in bankruptcy applied for relief after shares belonging to the bankrupt had been transferred to family members during the period governed by Insolvency Act 1986, s. 284. The respondents initially sought validation of the transfers but ultimately accepted that they were void and returned the shares shortly before trial.

The remaining issue was whether the trustees could recover the value lost during the period of wrongful retention, notwithstanding restoration of the shares, and, if so, how that loss should be valued. The court also considered the commencement of the transferee’s trusteeship, the liability of the later recipients and the appropriate interest.

1. Relief under s. 284. Section 284 avoids the relevant disposition but does not itself prescribe the remedy. The right of recovery is determined by the general law and is restitutionary in character. Restoration of the asset is the usual remedy, but it is not the only remedy.
2. Trust and causation. The transfer of title was effective to pass the legal estate, subject to the statutory avoidance, and the second respondent became trustee of the shares immediately on transfer. The trusteeship did not await the bankruptcy order or appointment of a trustee in bankruptcy. The trustee’s duty under s. 305 was to get in, realise and distribute the shares. The respondents could not avoid liability by appropriating the shares and returning them only after their value had fallen.
3. Assessment of loss. The principle in Brandeis Goldschmidt & Co Ltd v Western Transport Ltd was inapplicable because the trustee was under a duty to sell the shares. Equitable compensation required proof of loss caused by the breach, but the loss could be assessed by hindsight and common sense. The shares were therefore to be valued at the transfer date, with credit for their value on return. The appropriate basis was fair value between informed family insiders, rather than market value for an arm’s-length sale.
4. Application. The court found that the respondents knew of the bankruptcy petition, lacked good faith for the purposes of s. 284(4), and that the second to fifth respondents were jointly liable. The shares were provisionally valued at £2.216 million at the transfer date, subject to a further valuation of their value on return.
5. Interest. Although compound interest may be available in restitutionary proceedings, there was no evidence that the respondents obtained a benefit from the use of money. Only simple interest could therefore be considered, with the rate and period to be determined after further submissions.