Insolvency Act 1986, section 284

Restrictions on dispositions of property

Part IX Bankruptcy

(1)Where a person is [F712madeF712] bankrupt, any disposition of property made by that person in the period to which this section applies is void except to the extent that it is or was made with the consent of the court, or is or was subsequently ratified by the court.

(2)Subsection (1) applies to a payment (whether in cash or otherwise) as it applies to a disposition of property and, accordingly, where any payment is void by virtue of that subsection, the person paid shall hold the sum paid for the bankrupt as part of his estate.

(3)This section applies to the period beginning with the day of the [F713making of the bankruptcy application or (as the case may be) the presentation of the bankruptcy petitionF713] and ending with the vesting, under Chapter IV of this Part, of the bankrupt’s estate in a trustee.

(4)The preceding provisions of this section do not give a remedy against any person—

(a)in respect of any property or payment which he received before the commencement of the bankruptcy in good faith, for value and without notice that the [F714bankruptcy application had been made or (as the case may be) that the bankruptcyF714] petition had been presented, or

(b)in respect of any interest in property which derives from an interest in respect of which there is, by virtue of this subsection, no remedy.

(5)Where after the commencement of his bankruptcy the bankrupt has incurred a debt to a banker or other person by reason of the making of a payment which is void under this section, that debt is deemed for the purposes of any of this Group of Parts to have been incurred before the commencement of the bankruptcy unless—

(a)that banker or person had notice of the bankruptcy before the debt was incurred, or

(b)it is not reasonably practicable for the amount of the payment to be recovered from the person to whom it was made.

(6)A disposition of property is void under this section notwithstanding that the property is not or, as the case may be, would not be comprised in the bankrupt’s estate; but nothing in this section affects any disposition made by a person of property held by him on trust for any other person.

Definitions used in section 284 1

consent

(3) But where the administrator has made a statement under paragraph 52(1)(b) “consent” means—

(a) consent of each secured creditor of the company, or

(b) if the administrator thinks that a distribution may be made to preferential creditors, consent of—

(i) each secured creditor of the company, and

(ii) the preferential creditors of the company.

Defined in Sch.B1 para.108(3) · see it in the full Act

Cases considering section 284 58

Ahmed & Ors v Ingram & Anor

[2018] EWCA Civ 519 · 19 March 2018Interprets

Section 284 only avoids a post-petition disposition. It creates no freestanding recovery remedy, which is supplied by general law. It did not make the transferee an immediate bare trustee upon transfer. (see paras [29]-[30]; [43]-[46]) Cited only.

National Westminster Bank Plc v Lucas & Ors

[2014] EWCA Civ 1632 · 16 December 2014

The Court upheld ratification of expenditure despite the possibility of insolvency. The estate was not shown to be insolvent, significant future expenditure had already been put before the court, and later scrutiny of solicitors’ bills remained available. (see paras [99]-[105])

Pathania v Adedeji & Ors

[2014] EWCA Civ 681 · 21 May 2014

The provision restricts dispositions of the bankrupt’s property between presentation of the petition and vesting in the trustee. Any possible application to the merger of a cause of action in a judgment could be overcome by consent or ratification. (see paras [8]; [59]) Even assuming that obtaining judgment disposed of the underlying cause of action, the court could consent to or ratify the disposition. In view of the benefit to creditors, the trustee’s adoption and the later assignment, the court would ratify the judgment if necessary. (see para [59])

38 more judgments, and what each says about section 284, are in the case-law panel in the full Act.

Amendments and notes

9 notes from legislation.gov.uk

Amendments

  1. F712Word in s. 284(1) substituted (6.4.2016) by Enterprise and Regulatory Reform Act 2013 (c. 24), s. 103(3), Sch. 19 para. 15(2); S.I. 2016/191, art. 2 (with art. 3)
  2. F713Words in s. 284(3) substituted (6.4.2016) by Enterprise and Regulatory Reform Act 2013 (c. 24), s. 103(3), Sch. 19 para. 15(3); S.I. 2016/191, art. 2 (with art. 3)
  3. F714Words in s. 284(4)(a) inserted (6.4.2016) by Enterprise and Regulatory Reform Act 2013 (c. 24), s. 103(3), Sch. 19 para. 15(4); S.I. 2016/191, art. 2 (with art. 3)

Modifications

  1. C976S. 284 applied with modifications by S.I. 1986/1999, art. 3, Sch. 1 Pt. II
  2. C977S. 284 excluded (25.4.1991) by Companies Act 1989 (c. 40), ss. 154, 155, 164(3), 175(4), 182(4), Sch. 22 para. 11(4); S.I. 1991/878, art. 2, Sch. ( with art. 3(4)).
  3. C978S. 284 restricted (25.4.1991) by Companies Act 1989 (c. 40), s. 182(4), Sch. 22 para. 7(2); S.I. 1991/878, art. 2, Sch. .
  4. C979S. 284 applied (with modifications) (1.12.1994) by S.I. 1994/2421, arts. 8(3)(9), 10(6), Sch. 4 Pt. II para. 29
  5. C980S. 284 modified (1.12.1994) by S.I. 1994/2421, art. 11(2)(3), Sch. 7 para. 8
  6. C981S. 284 excluded (11.12.1999) by S.I. 1999/2979, regs. 16(3), 19(3) (as amended (2.2.2006) by The Financial Markets and Insolvency (Settlement Finality) (Amendment) Regulations 2006 (S.I. 2006/50), reg. 2(8)(10) and as amended (1.10.2009) by The Financial Markets and Insolvency (Settlement Finality) (Amendment) Regulations 2009 (S.I. 2009/1972), reg. 6(a))