Glas Sas (London Branch) v European Topsoho S.À R.L. & Ors

Section 423 of the Insolvency Act 1986 has no territorial limit. Relief may be granted against foreign persons or property where there is a sufficient connection with England and Wales and an order is just and proper. A transaction at a substantial undervalue falls within the provision where a relevant purpose is to put assets beyond a claimant’s reach or prejudice its interests; that purpose need not be dominant. Relief may include compensation after assets are returned.

Under Rome II, English law governed economic torts where the direct damage from non-payment occurred in England and no manifestly closer connection displaced that result. A manager who used company powers contrary to the company’s interests while concealing a conflict was liable under Luxembourg law.

GLAS SAS (London Branch) v European Topsoho S.À R.L. & Ors concerned claims arising from the purported transfer of unpledged shares in a French company. The claimant was trustee of English-law bonds issued by the first defendant, which had defaulted. An earlier partial summary judgment required the return of the shares: [2024] EWHC 1841 (Comm).

The trial concerned claims against three related defendants arising from the purported €1 transfer, the conversion of the shares into bearer form, and reliance on several agreements, notices and an arbitral award. The issues included governing law, validity and purpose of the disposal, relief under section 423 of the Insolvency Act 1986, economic torts, and a Luxembourg-law claim against a company manager.

Held, judgment for GLAS on liability. Declaratory and monetary relief was granted in principle, with the precise consequential orders and quantum to be determined at a subsequent trial.

1. Evidence and governing law. The court could consider the defences and evidence advanced by debarred defendants and could draw adverse inferences from non-disclosure, subject to considering alternative explanations. The claimant nevertheless had to prove its case, and the conclusions did not depend on adverse inferences alone. Section 423 of the Insolvency Act 1986 had no territorial limit. Applying Orexim Trading Ltd v Mahavir Port and Terminal Pte Ltd [2018] EWCA Civ 1660 and Dornoch v Westminster International BV [2009] EWHC 1782 (Admlty), there was a sufficient connection with England and Wales. English-law bond and trust arrangements, English jurisdiction provisions and the enforcement structure justified relief. Under Article 4 of Rome II, the direct damage from non-payment occurred in England, and no manifestly closer connection displaced English law for the economic torts.
2. Validity of the arrangements. The purported 2018 Agreement, Qiu-Xinbo Trust Agreement and October Notices were not genuine or legally valid. The SSA was created to transfer the shares but was unauthorised and pursued an improper purpose. The lack of required corporate authority and consent, its inconsistency with the surrounding documents, and the €1 consideration established that the Disposal was invalid and did not transfer title from ETS.
3. Section 423 relief. The statutory requirements were satisfied because the Disposal was for no consideration or at a substantial undervalue and had the purpose of putting the shares beyond GLAS’s reach or prejudicing enforcement of the bond debt. The purpose need not be dominant or substantial. Formal insolvency proceedings, an insolvency-officeholder claimant and fraudulent conduct were unnecessary. The court could restore the position and protect victims, including by compensating GLAS for the reduction in value during the period before the shares were returned.
4. Economic torts. The agreement between the defendants and ETS to use unlawful means, including the invalid disposal and conduct engaging section 423, constituted unlawful-means conspiracy. The defendants also induced ETS’s breaches of the bond and trust arrangements: they knew of the contracts and their effect, assisted the breaches, intended them as a means to improve the Ruyi Group’s position, and lacked lawful justification. The Beihai Award had no material effect on those conclusions.
5. Luxembourg duties and relief. Under the Luxembourg Law on Commercial Companies, Ms Qiu used ETS’s powers contrary to its interests and for the benefit of related entities while failing to disclose a conflict. She was directly liable to GLAS for resulting damage. The court declared that the Disposal was ineffective, that Dynamic and Xinbo acquired no legitimate interest in the shares, and that the defendants were liable for statutory compensation and tort damages, subject to later assessment.