El-Husseiny and another v Invest Bank PSC

This appeal concerned the construction of section 423 of the Insolvency Act 1986, and in particular whether that provision is confined to transactions by which the debtor transfers property which he beneficially owns. The Court held that section 423(1), read with the definition of "transaction" in section 436(1) and the purpose in section 423(3), is not so confined: a debtor may "enter into a transaction" by arranging that a company he owns transfers a valuable asset for no consideration or at an undervalue, thereby diminishing the debtor's interest in the company and prejudicing creditors.

The Court reached that conclusion by (i) construing the plain language of section 423(1) and section 436(1); (ii) having regard to the purpose identified in section 423(3); (iii) rejecting arguments based on the wording of sections 423–425 (including the bona fide purchaser protection in section 425(2)) that would import an implied requirement that the asset belong to the debtor; and (iv) considering the relationship between section 423 and the related insolvency provisions in sections 238 and 339. The Court distinguished and rejected reliance on Clarkson v Clarkson [1994] BCC 921 as establishing a general rule that a transaction at an undervalue must involve property beneficially owned by the debtor.

Background and parties: The first respondent, Invest Bank PSC (the Bank), obtained judgments in Abu Dhabi against Mr Ahmad El-Husseini for AED 96 million. The Bank issued proceedings in England seeking enforcement of those judgments and relief under section 423 of the Insolvency Act 1986, alleging that Mr El-Husseini had arranged transfers of valuable assets (including London property held by companies he owned) to third parties, thereby reducing the value of his shareholdings and frustrating enforcement.

Nature of the claim and relief sought: The Bank sought declarations and orders under section 423 to restore the position or protect victims where transactions at an undervalue were entered into by Mr El-Husseini for the purpose of putting assets beyond creditors' reach or otherwise prejudicing their interests.

Procedural history and issues: The proceedings began in July 2021. Andrew Baker J determined preliminary points in May 2022 ([2022] EWHC 894 (Comm)), holding that (a) the fact that assets were owned by a company owned or controlled by the debtor did not prevent section 423 applying (the "Beneficial Interest Point"), but (b) a debtor does not "enter into a transaction" for section 423 purposes if all relevant acts were carried out solely in his capacity as an organ of the company (the "Capacity Point"). The Bank amended its particulars and appeals followed. The Court of Appeal ([2023] EWCA Civ 555) dismissed the appellants' appeal on the Beneficial Interest Point and allowed the Bank's appeal on the Capacity Point. The appellants obtained permission to appeal to the Supreme Court only on the Beneficial Interest Point. The case was heard in May 2024 and judgment was given on 19 February 2025. There had also been a trial before Calver J in July 2024, and judgment in November 2024 ([2024] EWHC 2976 (Comm)) dismissed the Bank's claims on a ground not raised on this appeal.

Issues framed by the Court: (i) Whether section 423(1) requires that the transaction involve a disposal of property beneficially owned by the debtor; and (ii) related statutory construction questions including the meaning of "transaction" in section 436(1), the relevance of section 423(3) (the requisite purpose), the scope of the bona fide purchaser protection in section 425(2) and the interrelationship with sections 238 and 339.

Court’s reasoning and conclusion: The Court concluded that a straightforward reading of section 423(1) together with section 436(1) supports the view that a debtor may enter into a transaction by arranging for a company he owns to transfer assets at an undervalue. That arrangement diminishes the value of the debtor's shareholding and can prejudice creditors, and the mental element in section 423(3) can be satisfied in such a case. The Court rejected the argument that words must be read into section 423 to limit it to disposals of the debtor's own property, rejected the contention that the wording of section 425(2) implies such a limitation, and distinguished earlier decisions relied upon by the appellants (notably Clarkson v Clarkson). The Court therefore dismissed the appeal.

Wider context: The Court noted the historical background of the statutory provisions and the distinction between the general (non‑insolvency) remedy in section 423 and the insolvency‑linked remedies in sections 238 and 339, but considered those distinctions compatible with the conclusion that section 423(1) has the breadth the Bank contended for.

Appeal dismissed. The Supreme Court held that section 423(1) of the Insolvency Act 1986 is not confined to transactions involving a disposal of property beneficially owned by the debtor; a debtor may "enter into a transaction" by arranging that a company he owns transfers a valuable asset for no consideration or at an undervalue, thereby diminishing the value of his shares and prejudicing creditors. This conclusion followed from the ordinary language of section 423 read with the definition of "transaction" in section 436(1), the statutory purpose in section 423(3), and consideration of related provisions and authorities.

High Court (Commercial Court) preliminary ruling: Andrew Baker J, [2022] EWHC 894 (Comm) (determining Beneficial Interest and Capacity Points); Court of Appeal: [2023] EWCA Civ 555 (appeal on those points); permission to appeal to the Supreme Court granted (appellants limited their appeal to the Beneficial Interest Point) and appeal heard in the Supreme Court, judgment given [2025] UKSC 4. There was a subsequent trial before Calver J resulting in judgment ([2024] EWHC 2976 (Comm)) dismissing the Bank's claims on a ground not raised on this appeal.