JSC BTA Bank v Ablyazov & Anor

A transaction at an undervalue falls within section 423 of the Insolvency Act 1986 if putting assets beyond a claimant’s reach was a purpose of entering into it. That purpose need not be sole or dominant. Foreseeing that consequence, even while desiring it, does not necessarily establish the prohibited purpose. The inference depends on all the circumstances, including whether the transaction would have occurred anyway.

Knowledge of impending claims creates no legal presumption or evidential burden requiring the debtor to disprove that purpose. Lies likewise impose no obligation to draw adverse inferences. An appellate court may interfere with the trial judge’s factual evaluation only where it is plainly wrong, through a material reasoning error or a conclusion incapable of reasonable justification.

JSC BTA Bank, a Kazakhstan bank formerly controlled by Mukhtar Ablyazov, obtained substantial judgments against him following allegations that he had misappropriated its assets. The bank sought to recover the remaining proceeds of £1.1 million which he had paid to his son, Madiyar Ablyazov. The payment enabled Madiyar, then a school pupil in England, to obtain an investor visa.

Laurence Rabinowitz QC, sitting as a deputy High Court judge, dismissed the bank’s claims in [2016] EWHC 3071 (Comm). He found that the payment was a gift and that putting the money beyond the bank’s reach was not a purpose of making it. The bank appealed against the dismissal of its claim under section 423 of the Insolvency Act 1986. Its challenges concerned the approach to multiple purposes, adverse inferences from false evidence and the weight given to factual findings.

By a respondent’s notice, Madiyar argued that the claim was also time-barred. That issue concerned whether he claimed through his father for the purposes of postponing limitation under the Limitation Act 1980.

The appeal was dismissed unanimously. Leggatt LJ’s reasons were agreed with by Coulson and Gloster LJJ.

1. For section 423 of the Insolvency Act 1986 to apply, the prohibited purpose had to be a purpose of entering into the transaction. It need not be the sole or dominant purpose. Describing it as a substantial purpose introduced a potentially confusing gloss which the statutory language did not warrant. The distinction identified in Inland Revenue Commissioners v Hashmi [2002] EWCA Civ 981 was between a purpose and a consequence. Foreseeing, or even desiring, the consequence of putting assets beyond creditors’ reach could support an inference of purpose, but did not compel it (paras 8–16).

2. A finding that the debtor would have entered into the transaction anyway was relevant to that factual inference. The warning in Hashmi against drawing the inference too readily urged caution; it established no separate legal rule. Knowledge of impending claims created neither a legal presumption of prohibited purpose nor a true evidential burden to rebut it. Any burden to produce further evidence was tactical. The judge was entitled to evaluate the evidence as a whole (paras 24–29).

3. The judge was entitled to give the donor’s evidence no weight. He was under no legal obligation to infer the prohibited purpose from lies or omissions. Their significance was for the fact-finder, and lies might reflect an attempt to improve a case which was nevertheless sound on the actual facts (paras 30–37).

4. Appellate restraint applied to evaluative findings and inferences as well as primary facts. Under McGraddie v McGraddie [2013] UKSC 58 and Henderson v Foxworth Investments Ltd [2014] UKSC 41, interference required a material reasoning error or a conclusion which could not reasonably be explained or justified. The bank identified neither. The judge had considered the relevant evidence, including the continuing visa arrangements and the likelihood that the gift would have been made anyway. Although another inference was possible, his conclusion remained within the bounds of reasonable disagreement (paras 38–46, 69).

5. On limitation, which was unnecessary to decide, a recipient of a bank payment could claim through the payor under sections 32(1) and 38(5) of the Limitation Act 1980. Although the payment created a new bank debt rather than transferring an existing chose in action, the recipient acquired the right through the payor’s act. The innocent-purchaser proviso did not justify restricting those provisions to transfers of existing property. Had the section 423 claim otherwise succeeded, it would not have been time-barred (paras 47–66).

• Court of Appeal (Civil Division): [2018] EWCA Civ 1176 . Dismissed the bank’s appeal against rejection of its section 423 claim. The trial judge’s factual conclusion was upheld. The court also expressed the view, unnecessary to the disposition, that limitation would not have defeated an otherwise successful claim.
• Commercial Court (Queen’s Bench Division): [2016] EWHC 3071 (Comm) . Laurence Rabinowitz QC, sitting as a deputy High Court judge, dismissed the trust claim and the claim under section 423 of the Insolvency Act 1986. He found that the payment was a gift without the prohibited purpose, but rejected the limitation defence.