Importers Service Corporation & Anor v Mario Aliotta & Ors

Section 423 of the Insolvency Act 1986 applies where a debtor enters into a transaction at an undervalue for a purpose that includes putting assets beyond the reach of a person who may bring a claim. The purpose need not be dominant, fraudulent or directed towards an identified creditor. It may be inferred from the proved facts, but an undervalue alone does not establish the statutory purpose.

The court must assess the substance of connected arrangements when determining the consideration received. Benefits obtained through a wholly owned company may be relevant where the company is economically indistinguishable from the debtor. Moral obligations do not constitute valuable consideration, and parties cannot retrospectively deem an agreement rectified so as to prejudice a claimant.

The claimants were pursuing substantial claims against Mr Aliotta and Aliotta Holdings Limited in the United States and England. They alleged that transfers of shares in WSA Construction Limited were transactions at an undervalue intended to prejudice their ability to enforce any judgment.

The challenged transactions occurred in 2024 and 2025. The 2024 transactions transferred shares from Aliotta Holdings to Mr Aliotta’s wife and business associates. The 2025 transactions transferred further shares from Mrs Aliotta to two co-investors as part of a wider refinancing and exit arrangement.

The court had to determine whether the transactions were gifts or transactions at an undervalue, whether they were entered into for the statutory purpose, how the consideration should be valued, and what remedies should follow.

1. 2024 transactions. The transfers of 34 shares to Mr Sleater and 18 shares to Mr Whitehead were transactions for no consideration. The alleged surrender of claims under the shareholders’ agreement did not provide valuable consideration. The relevant contractual claim was of negligible value, no compromise or release had been proved, and the agreement had not been rectified.
2. The Settlement did not create a common-intention constructive trust. The shareholders’ agreement governed the parties’ rights and contained no arrangement separating legal and beneficial ownership. There was also no detrimental reliance. A constructive trust could not be imposed to rewrite the contractual framework.
3. A moral obligation to rebalance the shareholdings was not valuable consideration. Nor did the Settlement create a specifically enforceable contractual obligation to transfer the shares.
4. The transfer of 64 shares to Mrs Aliotta was a voluntary transfer. The alleged children’s trust was unsupported by sufficient common intention or detrimental reliance. The transfer was intended, at least in part, to put assets beyond the claimants’ reach and was therefore within section 423.
5. Mr Aliotta had the requisite purpose in relation to the 2024 transactions. The purpose need not be dominant, fraudulent, or directed towards the particular claimant. It was sufficient that putting assets beyond the claimants’ reach was one purpose. The inference was drawn from the chronology and surrounding communications, not merely from the fact of undervalue.
6. 2025 transactions. The court considered the connected arrangements as a whole. Benefits paid or provided through the company were relevant because Mr Aliotta and Aliotta Holdings formed a single economic unit for this purpose. The total value received was £380,832, against shares valued at £240,128. The transaction was therefore not at an undervalue, and section 423 was not engaged despite the existence of a prejudicial purpose.
7. The appropriate remedy for the 2024 transactions was reversal of the transfers of 34 and 18 shares. No separate order was required concerning the transfer to Mrs Aliotta because restoring the position would not alter the evaluation or outcome of the 2025 transactions. The 2025 transfers of 36 and 28 shares stood.

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