Cage Consultants Ltd v Iqbal & Anor (Re Totalbrand Ltd and the Insolvency Act 1986)

Insolvency Act 1986 section 246ZD permits an office-holder to assign an office-holder right of action together with its proceeds. The assignment may be outright, so that the assignee becomes solely entitled to pursue the claim and receive its proceeds. The statutory provisions creating the underlying claims must be read purposively to give that power practical effect. Accordingly, references to an application by the office-holder can include an application by the assignee, and relief can be directed to the assignee rather than the company. The assignee need not preserve the dissolved company merely so that recovered sums can be paid through the insolvency estate. Creditors may benefit through the price paid for the assigned rights.

The applicants appealed, and renewed their application for permission to appeal, against an order of District Judge Matharu dated 7 January 2020. The District Judge had dismissed their application to dismiss or stay claims brought by Cage Consultants Ltd, assignee from the liquidator of Totalbrand Ltd.

The claims included misfeasance, fraudulent trading, transactions at an undervalue and preferences. The company had been dissolved after the assignments. The central issue was whether an assignee of office-holder rights under section 246ZD could pursue the claims and retain their proceeds, or whether the company had to remain in existence so that any relief could be paid into its assets.

1. Permission to appeal refused. The District Judge was plainly right, and the claims were to proceed.
2. Section 246ZD(2) expressly permits assignment of a right of action, including the proceeds of an action. Its unqualified language permits an outright assignment of the entire right of action and all proceeds. The terms of a particular assignment may provide for a different sharing arrangement.
3. The legislative materials supported that construction. An assignee may take the litigation risk and costs while obtaining the potential benefits. Creditors can benefit from the price paid for the assigned rights, which becomes an asset available for distribution in the insolvency.
4. The claim-creating provisions must be interpreted purposively. Although sections 238 and 239 refer to an application by the office-holder, those references must include an assignee following an assignment under section 246ZD. The same purposive approach permits relief to be directed to the assignee rather than to the company or office-holder.
5. The contrary construction would deprive section 246ZD of practical utility. It would require the company and insolvency to remain artificially alive while the assignee funded the litigation, bore the litigation risk and awaited an indirect distribution. Parliament could not sensibly be taken to have intended that impractical result.

• High Court (Chancery Division): Permission to appeal from District Judge Matharu’s order dated 7 January 2020 was refused. The claims were permitted to proceed.
• District Judge: The applicants’ application to dismiss or stay the proceedings was dismissed, and permission to appeal was refused.