JSC BTA Bank v Ablyazov & Anor

For Insolvency Act 1986 section 423, the statutory prohibited purpose need not be the debtor’s sole, dominant or “substantial” purpose. The question is simply whether the debtor entered into the transaction for that purpose. A foreseeable, even foreseen, consequence of putting assets beyond creditors’ reach is not itself a purpose. The inference of purpose depends on all the facts.

There is no presumption that a debtor who knows of impending claims and makes a gift acted for the prohibited purpose. On appeal, an evaluative finding of fact may be disturbed only if it is plainly wrong: there must be a material error in the reasoning process or a conclusion which no reasonable judge could reach.

The appellant bank sought to recover £1.1 million transferred by its former controller, Mr Mukhtar Ablyazov, as a gift to his son, Madiyar. The funds enabled the son to obtain an investor visa and were later paid into court.

The Commercial Court dismissed the bank’s trust claim and its claim to set aside the gift as a transaction defrauding creditors under Insolvency Act 1986 section 423: [2016] EWHC 3071 (Comm). The finding that the payment was a gift was not challenged. The bank appealed the finding that the transfer lacked the statutory prohibited purpose. By a respondent’s notice, Madiyar contended that the section 423 claim was time-barred.

The central questions were whether the trial judge had erred in assessing purpose and whether Madiyar was claiming through his father for the postponement provisions in the Limitation Act 1980.

1. Appeal dismissed. The judge was entitled to find that the transfer was not made for the purpose specified in Insolvency Act 1986 section 423(3). A gift may have more than one purpose. The prohibited purpose need not be dominant or sole, but section 423 does not require it to be described as “substantial”.

2. Following the essential approach in Inland Revenue Commissioners v Hashmi [2002] EWCA Civ 981, the court held that the correct inquiry is whether the debtor positively intended to put assets beyond the reach of actual or potential claimants. A consequence is not a purpose merely because it was foreseeable or foreseen. Evidence that the debtor desired that consequence may support an inference of purpose, but the inference depends on all the circumstances.

3. The trial judge had not adopted a legal presumption or imposed an evidential burden on the debtor. The observation in Hashmi that a court should not infer purpose “too readily” where the transaction might have occurred anyway was a caution about factual evaluation, not a rule of law. Parliament had enacted presumptions for certain preferences, but none in section 423.

4. The trial judge considered the evidence pointing towards concealment, but also found that the investor-visa process began before the immediate crisis, proceeded without interruption, and would probably have led to the transfer even without a claim by the bank. The Court of Appeal could not reweigh those matters simply because it might have reached a different conclusion. Applying McGraddie v McGraddie [2013] UKSC 58 and Henderson v Foxworth Investments Ltd [2014] UKSC 41, the finding was neither affected by a material error nor outside the range of reasonable conclusions.

5. Although unnecessary to the disposition, Leggatt LJ held that the limitation point was correctly decided below. A recipient whose bank-account credit arises through the payer’s act is “claiming through” the payer under Limitation Act 1980 sections 32(1) and 38(5), notwithstanding that a bank transfer creates a new chose in action rather than transferring the payer’s property. Accordingly, if the section 423 claim had succeeded, it would not have been time-barred.

• Court of Appeal (Civil Division): appeal dismissed. The court upheld the Commercial Court’s dismissal of the section 423 claim and expressed agreement with its conclusion on limitation.

• Commercial Court (QBD): dismissed the bank’s trust claim and its claim to set aside the gift under section 423: [2016] EWHC 3071 (Comm).