A transaction under section 238 of the Insolvency Act 1986

United Kingdom

The Court of Appeal gave judgment today (15 November 2013) in favour of licensed insolvency practitioner Andrew Hosking (D), unanimously upholding a strike out judgment of Peter Smith J made on 22 February 2013.

Stephen Hunt, liquidator of Ovenden Colbert Printers Limited (“OCP”), had sued D and 8 other defendants. His claim against D was brought pursuant to sections 238 and 241 Insolvency Act 1986. He alleged that D had received or benefited from payments made by OCP which constituted transactions at an undervalue.

The strike out application was brought on the basis that OCP did not, in fact, enter into a transaction with D (or anyone else in the relevant time) in relation to the payments.

At first instance, Peter Smith J held that the claim had no prospect of success.

Mr Hunt’s appeal was heard on 17 October 2013 by Elias, Kitchin and McCombe LJJ.

The appeal court agreed: (1) that a claim against D under section 241 could only succeed if a claim under section 238 was first established; (2) that an essential ingredient of any claim under section 238 was that the company itself entered into a transaction. There had to be a transaction; and the transaction had to be something which the company itself had entered into. The expression “entered into” meant the taking of some step or act of participation by the company.

Stephen Robins of South Square appeared for Mr Hosking at first instance; Antony Zacaroli QC (also of South Square) and Stephen Robins, appeared for Mr Hosking in the Court of Appeal.

CMS Cameron McKenna LLP (Duncan Aldred, Charlotte King, Lorna Bramich) acted as solicitors for Mr Hosking.

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