TAQA Bratani Limited & Ors v Fujairah Oil & Gas UK LLC & Ors

The claim concerned the validity of a US$84 million dividend declared by UKCS8 on 24 December 2020 and a near-simultaneous sale of the company to a wholly state-owned UAE entity (FIOGC). The Claimants invoked sections 238 and 423 of the Insolvency Act 1986 and, alternatively, an unlawful means conspiracy in relation to the dividend and the sale.

The court found that UKCS8 was balance-sheet insolvent at the relevant time but that the dividend formed part of a wider, bona fide commercial transaction to sell the company to FIOGC to resolve a deadlock with TAQA and to procure decommissioning security. The defendants (the company managers and group entities) acted in good faith, for the purpose of carrying on the company’s business, and had reasonable grounds to believe the transaction would benefit UKCS8, so the statutory defence in s.238(5) succeeded.

Because the s.238 defence succeeded, claims under s.423 and the unlawful means conspiracy also failed. The court therefore dismissed the claims.

This commercial dispute arose from the declaration of an US$84 million dividend by UKCS8 and the sale of UKCS8 to Fujairah International Oil & Gas Corporation (FIOGC) shortly before deadlines to provide decommissioning security under joint operating and decommissioning security agreements. The Claimants (creditors/partners under the joint ventures) sought reversal of the dividend under s.238 and s.423 of the Insolvency Act 1986 and claimed unlawful means conspiracy.

• Parties and factual background: UKCS8 (Delaware company) held interests in the Brae complex. RockRose (part of the Viaro group, controlled by Mr Mazzagatti) had acquired RockRose in 2020. A long-standing strategic deadlock with TAQA over further investment and COP dates, together with a shortfall in decommissioning security, led Viaro/RockRose to arrange a sale of UKCS8 to FIOGC. The SPA was cash-and-debt-free; a dividend was declared just prior to completion to remove an inter-company balance, and a pension liability write-off was recorded contemporaneously.
• Relief sought: (i) restitution/reversal under s.238 (transactions at an undervalue); (ii) relief under s.423 (transactions defrauding creditors); (iii) unlawful means conspiracy alleging a concerted scheme to strip assets.
• Key issues before the court:
  1. Whether UKCS8 was insolvent at the relevant time (cash-flow and balance-sheet tests under s.123).
  2. Whether the dividend (or the wider sale-and-dividend arrangement) was a transaction at an undervalue and, if so, whether the defendants could establish the statutory defence under s.238(5) (good faith, for the purpose of carrying on the company’s business, and reasonable grounds to believe the transaction benefited the company).
  3. Whether the same facts supported a s.423 claim (purpose to put assets beyond reach of creditors) or an unlawful means conspiracy.
• Court’s reasoning and findings:
  • Evidence and witnesses were assessed carefully; the court accepted key testimony from Viaro directors and management as credible on motive and belief.
  • On insolvency, the court accepted that UKCS8 was balance-sheet insolvent at the date of the dividend (contingent decommissioning liabilities were material and properly taken into account). Cash-flow solvency was more finely balanced (short-term liquidity pressures existed but parental support and alternative funding were realistically available) but the balance-sheet test was determinative given the presumption in s.240(2).
  • The dividend was one step in a wider commercial arrangement (the cash-and-debt-free sale to FIOGC). The court treated the transaction as the wider arrangement rather than isolating the dividend. Consideration for the wider arrangement included the pension liability write-off and the prospect of state-backed parent support and improved relations with TAQA.
  • The defendants genuinely and reasonably believed the sale (and related arrangements) would secure compliant decommissioning security and a better operating future for UKCS8; reliance on a parent company guarantee from a wholly government-owned FIOGC was reasonable in the circumstances (the so-called "chicken and egg" timing issue explained why completion and guarantee were structured as they were).
  • Accordingly, s.238(5) applied: the company entered the transaction in good faith, for the purpose of carrying on its business, and there were reasonable grounds for believing it would benefit UKCS8. As a consequence the s.238 claim failed. The s.423 and unlawful means conspiracy claims likewise failed for lack of requisite bad purpose/intent.

The court noted a contested Delaware law point (distribution legality under Delaware law) but found it unnecessary to resolve that issue for the English statutory claims since local counsel had not advised that the dividend was unlawful, and the defendants reasonably believed the dividend was lawful.

The claims are dismissed. Although UKCS8 was balance-sheet insolvent at the time of the dividend, the court held that the sale-and-dividend arrangement was entered into in good faith, for the purpose of carrying on UKCS8's business, and there were reasonable grounds to believe it would benefit the company; therefore the statutory defence in s.238(5) succeeds. For the same reasons, the s.423 claim and the unlawful means conspiracy claim fail.