Invest Bank P.S.C. v El-Husseini & Ors: Important Commercial Court case providing guidance on pleading and proving cases under s.423 Insolvency Act 1986

On 21 November 2024 the Commercial Court handed down judgment in Invest Bank P.S.C. v El-Husseini & Ors [2024] EWHC 2976 (Comm), a claim brought under s.423 Insolvency Act 1986, following a 4 week trial in July 2024.

The Court determined that the Claimant (“the Bank”) had failed to prove its inferential case in respect of the various transactions that had taken place by which the First Defendant (“Ahmad”) had transferred valuable assets and interests to the other Defendants, who were his family members, companies under their control and the trustees of a discretionary trust of which they were beneficiaries (“Virtue Trustees”).

Mr Justice Calver analysed in particular (1) the relevant legal principles concerning what needs to be pleaded and proved in order to satisfy the statutory requirements of section 423 (2) when the Court may draw an inference that a Defendant had the purpose of putting his assets beyond the reach of a creditor (3) the circumstances in which the Court may draw adverse inferences against a Defendant and his co-Defendants by reason of a failure to engage with the proceedings, to attend trial or to disclose documents and (4) the relevance of contemporaneous documents in assessing where the truth lies in such a dispute.

Mr Justice Calver held that an allegation that a Defendant acted for the s.423 purpose of putting assets beyond reach of creditors amounts to an allegation of serious wrongdoing or discreditable conduct and any inferential case that this was the Defendant’s subjective purpose requires a clear pleading of the primary facts said to give rise to the inference and a case proved by cogent evidence.

Although, as the Judge observed, Ahmad had “haunted the trial like Banquo’s ghost” the Court had not heard from Ahmad himself because he had failed to participate in the proceedings following an unsuccessful jurisdiction challenge. The Judge nevertheless determined that the Bank was not entitled to an adverse inference against Ahmad and his co-Defendants “as of right” and that on a close factual analysis of all the relevant considerations no such inference could be drawn.

Further, although Ahmad had used the phrase “asset protection purposes” in discussions with his financial advisers on various occasions in connection with management of his wealth, the Judge accepted evidence that this phrase did not have one single, well understood meaning. The Court held that Ahmad did not have the alleged purpose of avoiding claims by the Bank when making any of the transfers, and that Virtue Trustees had no reason to think that the transfer of assets by Ahmad into trust was effected for anything other than legitimate tax and estate planning reasons.

Tim Penny KC acted with Marc Delehanty (Serle Court) and Frederick Wilmot-Smith (Brick Court) for the Bank, instructed by PCB Byrne LLP.

Tiffany Scott KC acted with Emma Hargreaves (Serle Court) for Virtue Trustees, instructed by Edwin Coe LLP.

Read the full judgment