Pathania v Tashie-Lewis & Anor

Relief under Insolvency Act 1986, section 423 requires proof of a transaction at an undervalue and of the statutory purpose and victim requirements. A collusive or suspicious sale does not, by itself, establish an undervalue. Where the purchaser personally provides part of the consideration, the claimant must prove that any remaining funds were provided by or on behalf of the debtor and were returned to, or otherwise involved, the debtor. The legal burden remains on the claimant to establish those matters. Unreliable evidence and suspicious circumstances cannot substitute for documentary proof where the alleged payment trail is central to the claim.

The claimant sought relief under section 423 of the Insolvency Act 1986 concerning the sale of a property by the first defendant to the second defendant. The claimant alleged that the sale was at an undervalue because £38,000 of the purchase monies, said to have been advanced by Mahmood Properties, was provided on behalf of the first defendant or was later returned to him. The second defendant maintained that the sale was legitimate and that the £38,000 was a gift or arose from his own financial dealings. The court also considered the effect of related proceedings concerning another property and the parties’ documentary and oral evidence.

1. Claim dismissed. The claimant failed to establish that the sale was at an undervalue for the purposes of section 423 of the Insolvency Act 1986.
2. The court accepted that the second defendant personally paid £14,587 towards the purchase and that the full purchase price was paid to the first defendant’s solicitors. The balance of £38,000 came from Mahmood Properties.
3. The claimant bore the legal burden of proving that the £38,000 was paid by or on behalf of the first defendant and was subsequently returned to him. No documentary evidence established either part of that alleged transaction.
4. The circumstances supported a finding that the linked property sales were collusive. That finding did not itself establish an undervalue under section 423. Suspicious circumstances, poor recollection and contradictory oral evidence could not replace proof of the relevant payment trail.
5. The claimant’s alternative case, that the £38,000 was repaid to Mahmood Properties, was also unsupported. The court found that the suggested transfers could not safely be attributed to Mahmood Properties or treated as proof of an undervalue.
6. Because the claimant failed on the undervalue issue, it was unnecessary to determine the remaining issues, including statutory purpose, victim status, discretionary relief and limitation.

First-instance decision. The judgment records related proceedings concerning the sale of another property, but no appellate history for the present claim.