Officeserve Technologies Ltd & Anor v Annabel's (Berkeley Square) Ltd & Ors

Payments made after presentation of a winding-up petition may be void under section 127 of the Insolvency Act 1986 even where the recipient acted in good faith and lacked knowledge of the petition. A claim for repayment of money paid under such a disposition is ordinarily restitutionary and may be framed as unjust enrichment, subject to insolvency-sensitive limits on available defences.

The recipient bears the burden of proving change of position or estoppel. Spending the money on ordinary living expenses is insufficient without a causal connection showing detrimental reliance. A settlement with directors does not bar claims against recipients unless, on its proper construction, it provides full satisfaction for the same loss; the settlement in this case expressly preserved claims against recipients.

The company was compulsorily wound up after a petition had been presented. Between presentation of the petition and the winding-up order, it made payments to numerous third parties, including payments for goods, services, business entertainment, employees or consultants connected with other companies.

The liquidators sought recovery from the recipients under section 127 of the Insolvency Act 1986. The respondents did not attend the hearings and only three made substantive representations. The liquidators had separately settled claims against the company’s directors. The principal issues were the nature of the recovery claim, the availability of good faith, change of position and estoppel defences, and whether the settlement barred recovery from recipients.

1. Disposition. The claims succeeded against all respondents still pursued. None established a valid defence.
2. Section 127 of the Insolvency Act 1986 makes a disposition after commencement of the winding up void unless validated by the court. Good faith and lack of knowledge of the petition do not create exceptions. Validation is a separate matter, and no respondent had applied for it or shown exceptional circumstances justifying an order. The policy of the section protects the pari passu distribution to creditors.
3. The appropriate claim for recovery of money paid under an avoided disposition is, in principle, the modern equivalent of money had and received, namely unjust enrichment. The statutory insolvency context may modify the ordinary characteristics of that claim, particularly the defences. The claimant must prove the constituent elements of the claim; the recipient bears the burden of proving any defence.
4. A recipient may in principle rely on change of position in good faith and reliance on the payment. Reliance may be anticipatory, but there must be a causal connection between the payment and the detrimental change. Mere expenditure, ordinary living expenses, repayment of an existing debt, or coincidental misfortune is insufficient. Relative fault has no role in the defence.
5. Estoppel by representation and change of position remain distinct defences. Payment alone ordinarily does not represent that the payer owed the money. An estoppel also cannot be used to defeat the statutory effect of section 127.
6. The settlement with the directors did not bar the claims. Payments for the company’s own debts or goods and services were not closely analogous to the directors’ liability for loss caused by dispositions. Other payments might be closely analogous, but clause 5.2 showed that the parties intended the claims against recipients to continue. The respondents had not proved that the settlement extinguished their liabilities.

The judgment was a first-instance determination of the liquidators’ application. The judgment records earlier preliminary-issue litigation concerning Mr Anthony-Mike, but that dispute was settled before the present application was finally determined.