Edwards v Aurora Leasing Ltd & Anor

The Trustee applied under section 284 of the Insolvency Act 1986 to recover payments made by the bankrupt between presentation of the petition and vesting of the estate. The central legal issue was the meaning of the single word "value" in section 284(4)(a), and whether the recipients — Aurora Leasing Limited and Howard de Walden Estates Limited — had a defence as persons who received payments "before the commencement of the bankruptcy in good faith, for value and without notice".

The court found that the challenged transfers and payments were dispositions or payments within section 284 but that the recipients satisfied the three limb defence in section 284(4)(a): they received the payments in good faith, without notice of the petition, and for value. "Value" in section 284(4)(a) was construed by reference to the statutory text and purpose and does not require that the value remain within the bankrupt's estate; a recipient need only have given value (commercial consideration) and need not have preserved that value for the estate. The court also found, on the facts, that an intermediary (ART) acted as agent for the bankrupt in respect of one payment. The Trustee's application against Aurora and de Walden was dismissed.

Background and parties: The Trustee in bankruptcy of Jagdev Singh Wasu applied under section 284 of the Insolvency Act 1986 to recover payments made by the bankrupt following presentation of the bankruptcy petition and prior to vesting of the estate. The application concerned multiple respondents; this judgment determines the application against Aurora Leasing Limited (lessor of dental equipment) and Howard de Walden Estates Limited (landlord of premises at 29 Weymouth Street).

Nature of the application: The Trustee sought recovery of specified payments as void dispositions or payments under section 284(1) and (2) unless protected by section 284(4). The amounts challenged included an initial rental payment to Aurora which led to purchase of equipment, and three payments to the landlord (one via an agent).

Issues framed by the court:

• Whether each challenged transfer or payment was a disposition or payment within section 284(1) or (2).
• Whether an intermediary (ART) acted as agent for the bankrupt in relation to a transfer to the landlord.
• The proper meaning of "value" in section 284(4)(a): whether the defence requires value to have been received into the bankruptcy estate (or measured from the bankrupt's point of view) or whether it is satisfied where the recipient gave commercial consideration.

Facts found: The lease of the equipment was activated only after clearance of the initial payment made by the bankrupt; Aurora purchased the equipment and executed the lease thereafter. WPL (a company associated with the bankrupt and his family) held the property lease; payments to the landlord were made by the bankrupt directly and by an intermediary (ART), which the court concluded likely acted as agent for the bankrupt.

Court's reasoning and outcome: The court analysed the text and purpose of section 284, compared the provision to the corporate equivalent and related authorities but emphasised that section 284 must be read on its own terms. Section 284(4)(a) is a protective defence akin to the bona fide purchaser rule and requires good faith, lack of notice and provision of value. "Value" is not explicitly qualified to require that the value remain in the bankrupt's estate, and the court rejected the Trustee's narrower construction requiring that the estate itself receive an equivalent countervailing benefit. The payments were commercial and conferred the value the bankrupt intended (for example, triggering Aurora's purchase of equipment and maintaining availability of the property). As the recipients acted in good faith, without notice and for value, the Trustee's application against Aurora and de Walden was dismissed.

Procedural posture: First-instance determination of the Trustee's application under section 284; the court treated factual disputes largely as resolved and found no breach of the statutory defence elements on the facts before it.

The Application as against Aurora Leasing Limited and Howard de Walden Estates Limited is dismissed. The court held that although the payments fell within section 284 as dispositions or payments made in the relevant period, the third and sixth respondents satisfied the defence in section 284(4)(a): they received the payments before commencement of the bankruptcy, in good faith, for value and without notice. "Value" was interpreted to mean commercial consideration given by the recipient and did not require that the value be retained in the bankrupt's estate.