Adrian Hyde & Anor v Myck Djurberg & Ors

Property acquired by a bankrupt after the commencement of bankruptcy becomes claimable by the trustee under Insolvency Act 1986, s 307. Once valid notice is served, the property vests in the trustee and the title relates back to acquisition. Protection under s 307(4) requires all three elements: acquisition in good faith, for value, and without notice of the bankruptcy. Absence of value is sufficient to defeat the protection. A transaction at an undervalue under s 423 provides an alternative route to relief, but need not be determined where the s 307 claim succeeds.

The applicants, trustees in bankruptcy, claimed a settlement payment of £217,990.71 made under an agreement involving the bankrupt and his son. The payment was made after the bankruptcy order into an account held in the son’s name and was rapidly distributed among the respondents and other recipients.

The trustees sought declarations and relief under ss 307 and 423 of the Insolvency Act 1986. The principal issues were whether the payment was after-acquired property, whether valid notice was served, and whether any recipient was protected as a purchaser for value in good faith and without notice.

1. Application granted in relation to the Settlement Payment. The applicants proved on the balance of probabilities that the payment was after-acquired property of the First Respondent within s 307 of the Insolvency Act 1986.
2. A valid notice was served within the statutory time limit. Under s 307(3), the payment vested in the trustees on 22 July 2022, the date on which it was acquired, with the trustees’ title relating back to that date.
3. The statutory protection in s 307(4) is unavailable unless the recipient acquired the property in good faith, for value and without notice of the bankruptcy. The requirements are cumulative. None of the respondents established that they had provided value. The protection therefore did not apply, irrespective of whether any recipient had acted in good faith or lacked notice.
4. The evidence showed that the payment was intended for the benefit of the bankrupt, rather than the Second Respondent beneficially. The surrounding circumstances included the bankrupt’s ownership of the property, the use of funds to meet his accommodation costs, rapid dissipation, unexplained transfers, and the respondents’ failure to provide credible explanations.
5. The court did not need to determine the alternative claim under s 423 of the Insolvency Act 1986. The existing proprietary freezing orders remained in force until further order. Further relief and costs were reserved for a later hearing.

First-instance decision. No appellate history was stated in the judgment.