Three collatory cases are available here:

(1) in Algie v Hutcheson [2025] EWHC 1893 (Ch), ICC Judge Prentis, under the heading 'The Law' and subheading 's.423', said, at paragraphs 17 to 25:

'17. Although headed “Transactions defrauding creditors”, s.423 is not founded in fraud; neither, though it is in the IA86, is it concerned with insolvency.

18. By s.423(1):

This section relates to transactions entered into at an undervalue; and a person enters into such a transaction with another person if-

(a) he makes a gift to the other person or he otherwise enters into a transaction with the other on terms that provide for him to receive no consideration;…

(c) he enters into a transaction with the other for a consideration the value of which, in money or money’s worth, is significantly less than the value, in money or money’s worth, of the consideration provided by himself.

19. s.423(3) describes the necessary purpose:

In the case of a person entering into such a transaction, an order shall only be made if the court is satisfied that it was entered into by him for the purpose-

(a) of putting assets beyond the reach of a person who is making, or may at some time make, a claim against him, or

(b) of otherwise prejudicing the interests of such a person in relation to the claim which he is making or may make.

20. s.425 provides examples of orders which may, in the court’s discretion, be made if the undervalue and purpose are satisfied, s.423(2) allowing the court to:

make such order as it thinks fit for-

(a) restoring the position to what it would have been if the transaction had not been entered into, and

(b) protecting the interests of persons who are victims of the transaction.

21. By s.423(5) a victim is “a person who is, or is capable of being, prejudiced by” the transaction.

22. A victim is also one of those with standing to bring a s.423 application: s.424(1)(c).

23. In Re Ethos Solutions Limited; Purkiss v Kennedy and others [2025] EWCA Civ 268, following the recent decision of the Supreme Court in El-Husseiny v Invest Bank PSC [2025] UKSC 4, Newey LJ at [18] stated as follows:

“Case law establishes the following propositions as regards section 423 of the 1986 Act:

i) In construing section 423, the Court must look at the relevant wording “in the context in which it appears in the section and in the Act as a whole, bearing in mind the purpose for which it was enacted”: see R (O) v Secretary of State for the Home Department [2022] UKSC 3, [2023] AC 255, paras 29 to 31”: El-Husseiny v Invest Bank PSC [2025] UKSC 4, [2025] 2 WLR 320 (“El-Husseiny”), at paragraph 32, per Lady Rose and Lord Richards;

ii) It is “unquestionably the debtor’s subjective purpose that must be established”: El-Husseiny, at paragraph 28, per Lady Rose and Lord Richards. The Judge has to be satisfied that the debtor “actually had the purpose, not that a reasonable person in his position would have it”: Hill v Spread Trustee Co Ltd [2006] EWCA Civ 542, [2007] 1 WLR 2404 (“Hill”), at paragraph 86, per Arden LJ. “There can be no doubt but that section 423(3) requires the person entering into the transaction to have a particular purpose” and “[i]t is not enough that the transaction has a particular result”: Hill, at paragraph 130, per Arden LJ;

iii) Section 423 will apply “if the statutory purpose can properly be described as a purpose and not merely as a consequence, rather than something which was indeed positively intended”: Inland Revenue Commissioners v Hashmi [2002] EWCA Civ 981, [2002] BCC 943, at paragraph 23, per Arden LJ. Thus, “where the transaction was entered into by the debtor for more than one purpose, the court does not have to be satisfied that the prohibited purpose was the dominant purpose, let alone the sole purpose, of the transaction”: JSC BTA Bank v Ablyazov [2018] EWCA Civ 1176, [2019] BCC 96 (“Ablyazov”), at paragraph 13, per Leggatt LJ. “It is sufficient simply to ask whether the transaction was entered into by the debtor for the prohibited purpose” and, “[i]f it was, then the transaction falls within s.423(3), even if it was also entered into for one or more other purposes”: Ablyazov, at paragraph 14, per Leggatt LJ. In paragraph 17 of his judgment in Ablyazov, Leggatt LJ said that the first instance judge had been “correct” to ask whether the debtor had “positively intended” to put funds beyond the reach of a creditor;

iv) “The fact that lawyers may have advised that the transaction is proper or can be carried into effect does not by itself mean that the purpose of the transaction was not the [section 423(3)] purpose”: Arbuthnot Leasing International Ltd v Havelet Leasing Ltd (No. 2) [1990] BCC 636, at 644, per Scott J. See also National Westminster Bank plc v Jones [2001] 1 BCLC 98, at paragraph 107, per Neuberger J;

v) For the purposes of section 423(3)(b), “[t]he ‘interests’ of a person are wider than his rights”: Hill, at paragraph 101, per Arden LJ;

vi) The transaction at issue need not have been directed at the “victim” making the claim. In Hill, Arden LJ explained in paragraph 101: “For a person to be a ‘victim’ there is no need to show that the person who effected the transaction intended to put assets beyond his reach or prejudice his interests. Put another way, a person may be a victim, and thus a person whose interests the court thinks fit to protect by making an order under section 423, but he may not have been the person within the purpose of the person entering into the transaction. That person may indeed have been unaware of the victim’s existence”; and

vii) The fact that the debtor denies having had a section 423(3) purpose need not bar the Court from inferring that he had such a purpose: see Hill, at paragraph 86, per Arden LJ”.

24. To draw out s.423’s relationship with solvency, there is also this quotation from Singh LJ in El-Husseiny [2023] EWCA Civ 555 at [67]:

“The important point for present purposes is that, although section 423 finds itself in the same Act as those provisions which are concerned with bankruptcy or corporate insolvency, its scope is wider. There is no need for there to be any insolvency.

The unfortunate reality of life is that even very wealthy debtors are sometimes unwilling, rather than unable, to pay their debts. They may well make strenuous efforts to use various instruments, including a limited company, for the purpose of putting their assets beyond the reach of a person who is making, or may make, a claim against them; or otherwise prejudicing the interests of such a person”.

25. [Counsel for the Respondent] also drew my attention to Calver J’s remarks as to the pleading of s.423 in another iteration of the El-Husseiny litigation, Invest Bank PSC v El-Husseini [2024] EWHC 2976 (Comm), especially at [23]-[31] and [37]-[39].'

As ICC Judge Prentis said, the above largely repeats what he said in an earlier judgment of his, Re Roderic Alexander Innes Hamilton [2025] EWHC 756 (Ch).

(2) in Sayers v Dixon [2025] EWHC 1886 (Ch)('Sayers'), ICC Judge Barber heard an application, wherein (amongst other things) trustees in bankruptcy alleged that certain declarations of trust, were contrary to s.423 IA 1986. Under the heading 'Legal Principles: Section 423 IA 1986', ICC Judge Barber said, at paragraphs 48 to 65 (Mr Dixon was the bankrupt; Mrs Dixon was his wife):

'48. The material parts of section 423 provide:

(1) This section relates to transactions entered into at an undervalue; and a person enters into such a transaction with another person if –

(a) he makes a gift to the other person or he otherwise enters into a transaction with the other on terms that provide for him to receive no consideration …

(2) Where a person has entered into such a transaction, the court may, if satisfied under the next subsection, make such order as it thinks fit for –

(a) restoring the position to what it would have been if the transaction had not been entered into, and

(b) protecting the interests of persons who are victims of the transaction.

(3) In the case of a person entering into such a transaction, an order shall only be made if the court is satisfied that it was entered into by him for the purpose-

(a) of putting assets beyond the reach of a person who is making, or may at some time make, a claim against him, or

(b) of otherwise prejudicing the interests of such a person in relation to the claim which he is making or may make.

…

(5) In relation to a transaction at an undervalue, references here … to a victim of the transaction to a person who is, or is capable of being, prejudiced by it’

49. Section 436(1) provides that (unless the context requires otherwise) ‘transaction’: ‘includes a gift, agreement or arrangement, and references to entering into a transaction shall be construed accordingly.’ 

50. To satisfy s 423(3), it is only necessary to establish that putting assets beyond the reach of a person who is making or may make a claim, or otherwise prejudicing the interests of such a person in relation to the claim which he is making or may make, was a purpose of the transaction. It does not have to be the sole, substantial, or dominant purpose, but it is not sufficient if it is merely a by-product or consequence of the transaction: JSC BTA Bank v Ablyazov [2018] EWCA Civ 1176 at [8]-[16]; Malik v Messalti [2024] EWHC 2713 at paras [33]-[36].

51. Provided that the statutory purpose was a purpose of the transferor in entering into the transaction, the fact that he might also have had some other purpose does not prevent s.423(3) being engaged.

52. The prohibited purpose is a question of fact to be proved, not a matter of presumption. It is a question of subjective intention: the court has to be satisfied that the person entering into the transaction actually had the relevant purpose, not that a reasonable person in their position would have had it.

53. When considering whether the threshold under s.423(3) is cleared, the court is not limited to direct evidence of intention of the person entering into the transaction. The court can also draw inferences from the surrounding facts of the case. It can infer from the evidence as a whole that such a purpose existed even if that person denies it: Hill v Spread Trustee Co Ltd [2006] EWCA Civ 542 at [86]; IRC v Hashmi [2002] EWCA Civ 981: Purkiss v Kennedy [2025] EWCA Civ 268 at [18].

54. Relying on ‘professional advice’ in entering the transaction does not exclude the transferor having the purpose specified in s.423(3)(a) IA1986: Henderson and Jones Ltd v Ross [2023] EWHC 1276 at para [397], following National Westminster Bank v Jones [2000] BPIR 1092 at page 1123 (per Neuberger J) and Arbutnoth Leasing International Ltd v Havelet Leasing Ltd [1990] BCC 636 at page 644 and cited with approval in Purkiss v Kennedy [2025] EWCA Civ 268.

55. The mental state of the recipient is not relevant in determining the purpose of the transferor when entering the transaction, the crucial question being what the transferor’s purpose was: Moon v Franklin [1996] BPIR 196 at page 202.

56. There is no statutory requirement in s.423(3) IA 1986 for the transferor to have had any particular knowledge of persons making a claim or who may a claim at the time he entered into the transaction: Malik v Messalti [2024] EWHC 2713

57. The class of “victims” (as defined in s.423(5) IA1986) is not limited to those who were within the compass of the transferor’s purpose when entering into the transaction: Gordian Holdings Ltd v Sofroniou [2021] EWHC 235 at [16(2)-(3)]. 

58. A party can in principle invoke s.423 IA1986 to challenge a transaction entered into many years previously if the substantive requirements of the section are met. The fact that the particular claimant was not in the contemplation of the transferor at the time of the transaction is immaterial. All that is required is that the claimant was prejudiced by the transaction, albeit at some later date: Sands v Clitheroe [2006] BPIR 1000.

59. Mr and Mrs Dixon also referred me to comments of Rose J at first instance in the case of BAT Industries v Sequana [2016] EWHC 1616 at [517], to which I shall return.

60. By section 424, an application for an order under section 423 may be made by a trustee in bankruptcy or a victim of the transaction.

61. Section 425 sets out various types of orders which may be made under s423. Section 425(2)(3) provide:

‘(2) An order under section 423 may affect the property of, or impose any obligation on, any person whether or not he is the person with whom the debtor entered into the transaction; but such an order-

(a) shall not prejudice any interest in property which was acquired from a person other than the debtor and was acquired in good faith, for value and without notice of the relevant circumstances, or prejudice any interest deriving from such an interest, and

(b) shall not require a person who received a benefit from the transaction in good faith, for value and without notice of the relevant circumstances to pay any sum unless he was a party to the transaction.

(3) For the purposes of this section the relevant circumstances in relation to a transaction are the circumstances by virtue of which an order under section 423 may be made in respect of the transaction.’

62. The court has very wide discretionary powers of relief, which should be exercised to achieve restoration to the extent appropriate to protect the interests of creditors. The relief granted should seek to restore the original pre-transaction position: Chohan v Saggar [1994] BCC 134 (CA) at pp140B-C to 141C-D, 4Eng Ltd v Harper [2010] 1 BCLC 176 at [9]. When the position cannot be restored in the literal sense, it can be appropriate to require payment of a sum to compensate for the transaction at an undervalue: Allen v Hurst [2023] BPIR 1 (where it was observed that one of the reasons for the court’s wide jurisdiction as to remedy is to allow it flexibility in fashioning relief which is tailored to the justice of the case). 

63. The discretion is wide enough to enable the court, if justice so requires, to make no order against the other party to the transaction: Re Paramount Airways [1993] Ch 223.

64. In certain claims based on restitution, a defence of ‘change of position’ may be available. As explained in Lipkin Gorman v Karpnale Ltd [1992] 2 AC 548 at 580F-G per Lord Goff:

‘the defence is available to a person whose position has so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively restitution in full. I wish to stress however that the mere fact that the defendant has spent the money, in whole or in part, does not of itself render it inequitable that he should be called upon to repay, because the expenditure might in any event have been incurred by him in the ordinary course of things.’

65. It is uncertain whether, as a matter of law, a ‘change of position’ defence is relevant to the exercise of the court’s discretion under s.423 (see 4Eng Ltd v Harper [2010] 1 BCLC 176, Skandinaviska Enskilda Banken AB v Conway [2019] UKPC 36 at paras [113] to [117], Bucknall v Wilson [2021] EWHC 2149). Even if a change of position is a relevant factor to be taken into account in the context of a s.423 claim, however, it is plain that it is not open to one who has changed his position in bad faith, such as where the defendant has paid away the money with knowledge of the facts entitling the claimant to restitution: Lipkin Gorman at 580C per Lord Goff; the defence has to be one based on “good faith”: 4Eng (supra) at paras [13]-[14].'

At paragraph 59 of Sayers, there is a reference to BAT Industries v Sequana [2016] EWHC 1616 at [517], and returning to this later. ICC Judge Barber in Sayers did return to this case, at paragraph 179 of Sayers. At paragraph 178, ICC Judge Barber recorded that Mr Dixon had argued that he had not had a prohibited purpose, when making the impugned declarations of trust ('DoTs'), as, 'Mr Dixon commanded a high income at the time that the DoTs were created' (paragraph 178), and that therefore it was inconceivable that, at the date of DoTs, '...Mr Dixon was in any way considering bankruptcy or indeed transferring assets to avoid a claim by HMRC given his financial position at the time the Trusts were created’ (paragraph 178). As to this, ICC Judge Barber said, at paragraph 179:

'In this regard reference was made to the comments of Rose J (as she then was) in BAT Industries v Sequana [2016] EWHC 1616 at [517], in which the judge had said:

‘The first limb of the s 423 purpose – putting assets beyond the reach of a person who is making or may at some time make a claim against him – has inherent in it the assumption that following the transaction, the person does not have sufficient funds remaining with him to satisfy the actual or potential claim made against him. If a person … has plenty of assets left with which to meet the claim, then however many additional assets are gifted to people, he … cannot have the s 423 purpose.’'

At paragraphs 181 to 183, ICC Judge Barber in Sayers said:

'As noted by Joanne Wicks KC sitting as a High Court judge in Lemos v Church Bay Trust [2023] EWHC 2384 (Ch), however, when taken to the comments of Rose J in BAT Sequana at [517], ‘the enquiry into the purposes for which a transaction is entered into is highly factspecific and generalising from the facts of any other case should be avoided.’ I respectfully agree.

To the extent that the Dixons were seeking to argue that Rose J in BAT Industries was seeking to establish or acknowledge a threshold or gateway condition to s.423, to the effect that the statutory test cannot be satisfied in a situation where, after the impugned transaction, the debtor is left with sufficient assets to meet the liability owed to the victim, I reject that contention. It does not accord with prevailing authority: see for example the observations of Singh LJ in El-Husseiny [2023] EWCA Civ 555 at [67]:

‘The important point for present purposes is that, although section 423 finds itself in the same Act as those provisions which are concerned with bankruptcy or corporate insolvency, its scope is wider. There is no need for there to be any insolvency. The unfortunate reality of life is that even very wealthy debtors are sometimes unwilling, rather than unable, to pay their debts. They may well make strenuous efforts to use various instruments, including a limited company, for the purpose of putting their assets beyond the reach of a person who is making, or may make, a claim against them; or otherwise prejudicing the interests of such a person.’

I would add that the issue whether Mr Dixon had HMRC in mind when entering the DoTs is irrelevant. The fact that the ultimate claimant was not in the contemplation of the transferor at the time of the transaction is immaterial; the class of “victims” (as defined in s.423(5) IA1986) is not limited to those who were within the compass of the transferor’s purpose when entering into the transaction: Gordian Holdings Ltd v Sofroniou [2021] EWHC 235 at [16(2)-(3)]. There is no statutory requirement in s.423(3) IA 1986 for the transferor to have had any particular knowledge of persons who may make a claim at the time he entered into the transaction: Malik v Messalti [2024] EWHC 2713.'

At paragraph 186, ICC Judge Barber in Sayers said (obiter):

'...relying on ‘professional advice’ in entering a transaction does not exclude the transferor having the purpose specified in s.423(3)(a) IA 1986: Henderson and Jones Ltd v Ross [2023] EWHC 1276 at para [397], following National Westminster Bank v Jones [2000] BPIR 1092 at page 1123 (per Neuberger J) and Arbutnoth Leasing International Ltd v Havelet Leasing Ltd [1990] BCC 636 at page 644 and cited with approval in Purkiss v Kennedy [2025] EWCA Civ 268. For similar reasons, an absence of professional advice not to enter a transaction does not exclude the transferor having the purpose in s.423(3)(a) IA 1986.'

ICC Judge Barber in Sayers: (a) rejected an argument Mrs Dixon was entitled, by reason of being Mr Dixon's spouse, to 50% of his assets anyway (paragraph 189); (b) considered and rejected a 'change of position' defence (paragraph 197); and (c) held that it was possible for the court to find transactions to be both '...shams and to have fallen foul of section 423.' (paragraph 215)

(3) in Importers Service Corp v Aliotta [2026] EWHC 533 (Ch) ('Aliotta'), Mr Simon Gleeson (sitting as a Deputy High Court Judge) considered a s.423 IA 1986 application. Under the heading 'Section 423 of the Insolvency Act 1986', the Deputy Judge said, at paragraphs 40 to 45 (Mr Aliotta was alleged to have made the wrongful transaction):

'There are a number of relevant provisions as regards the interpretation of s.423. The section itself reads as follows:

“423 Transactions defrauding creditors.

(1) This section relates to transactions entered into at an undervalue; and a person enters into such a transaction with another person if-

(a) he makes a gift to the other person or he otherwise enters into a transaction with the other on terms that provide for him to receive no consideration;

(b) he enters into a transaction with the other in consideration of marriage or the formation of a civil partnership; or

(c) he enters into a transaction with the other for a consideration the value of which, in money or money’s worth, is significantly less than the value, in money or money’s worth, of the consideration provided by himself.

(2) Where a person has entered into such a transaction, the court may, if satisfied under the next subsection, make such order as it thinks fit for-

(a) restoring the position to what it would have been if the transaction had not been entered into, and

(b) protecting the interests of persons who are victims of the transaction.

(3) In the case of a person entering into such a transaction, an order shall only be made if the court is satisfied that it was entered into by him for the purpose-

(a) of putting assets beyond the reach of a person who is making, or may at some time make, a claim against him, or

(b) of otherwise prejudicing the interests of such a person in relation to the claim which he is making or may make. …

(5) In relation to a transaction at an undervalue, references here and below to a victim of the transaction are to a person who is, or is capable of being, prejudiced by it; and in the following two sections the person entering into the transaction is referred to as “the debtor.”

Other relevant sections are

“424 Those who may apply for an order under s. 423.”

(1) An application for an order under section 423 shall not be made in relation to a transaction except….

(c)… by a victim of the transaction.

(2) An application made under any of the paragraphs of subsection (1) is to be treated as made on behalf of every victim of the transaction.”

Also “425(2) An order under section 423 may affect the property of, or impose any obligation on, any person whether or not he is the person with whom the debtor entered into the transaction; but such an order-”

(a) shall not prejudice any interest in property which was acquired from a person other than the debtor and was acquired in good faith, for value and without notice of the relevant circumstances, or prejudice any interest deriving from such an interest, and

(b) shall not require a person who received a benefit from the transaction in good faith, for value and without notice of the relevant circumstances to pay any sum unless he was a party to the transaction.

42. As the Claimants point out, the title ‘transactions defrauding creditors’ is a misdescription. There is no need for any creditors to have been prejudiced: it suffices that a step has been taken with the purpose of prejudicing the interests of someone who might make a claim; a “victim” does not need to be a creditor (see Clydesdale Financial Services v Smailes [2009] EWHC 3190 (Ch) at [73] per David Richards J). Equally, it is not necessary to prove that the debtor acted fraudulently or with dishonest intent: Arbuthnot Leasing v Havelet Leasing [1990] BCC 636 at 644 B.

In order to reverse a transaction under s.423, what needs to be shown is that:

i) There was a ‘transaction’. This is defined very broadly (and non-exhaustively) under section 436(1) of the Act as including gifts, agreements and arrangements;

ii) The transaction was a gift or at an undervalue; and

iii) A purpose of the debtor was to put assets beyond the reach of someone who was making or might make a claim against him, or otherwise prejudicing the interests of such a person.

Thus what I have to determine is whether some part of Mr Aliotta’s motivation for entering into the transactions was to put assets beyond the reach of potential creditors.

I think the appropriate criteria to be applied here were well summarised by Miles J in Credit Suisse Virtuoso Sicav-Sif and ano’r v Softbank Group Corp [2025] EWHC 2631 (Ch) at [616-618]

“616. It is not necessary for the claimant to demonstrate that the transfer would not have been made but for the improper purpose: Akhmedova v Akhmedov [2021] 4 WLR 88 at [81]. It is possible for a person genuinely to desire to benefit a third party but also to act with the prohibited purpose: ibid at [82]. On the other hand the relevant outcome or consequence must be “positively intended”: see Ablyazov at [17] ”

617. It is not necessary to show that the relevant transaction was entered into for the purpose of prejudicing the particular person now bringing the claim: Fortress Value Recovery Fund I LLC v Blue Skye Special Opportunities Fund LP [2013] 1 All ER (Comm) 973 at [108]-[111]. Nor is it necessary for the debtor to know the identity of any or all actual or potential creditors who may be prejudiced by the impugned transaction, although the debtor’s knowledge of the presence of a particular creditor or potential creditor may shed light on its purpose in entering into the transaction: Malik v Messalti [2025] BPIR 91 at [64].

618. The claimants submitted that a person is generally assumed to intend the consequences of his acts, and referred to Swift Advances v Ahmed [2015] EWHC 3265 (Ch) and Pena v Coyne [2004] EWHC 2684 (Ch) at [126]. It appears to me that the proper approach, exemplified by those cases, is that the court is required to assess all of the evidence, find the primary facts, and determine, by a process of inference, whether the relevant person has the necessary subjective state of mind. The relevant facts from which inferences may be drawn may include the transaction’s obvious or self-evident consequences. However, the terms of the statute and the cases referred to above show it is not enough simply to allege and prove that the transaction had the relevant prejudicial consequences.["]'

At paragraph 46, the Deputy Judge in Aliotta said:

'The only evidence put forward by the Claimants is a witness statement of Mr Iverson, a solicitor, setting out the course of the litigation to date. The First to Third Defendants take a point that the Claimants therefore offer no direct evidence as to the state of mind of Mr Aliotta, and rely exclusively on inference from the facts. That seems to me to be a reasonable approach for the Claimants to take - in cases of this kind it is usual that the Claimants cannot give any evidence at all in relation to the underlying facts, and the truth or otherwise of the Defendants’ evidence is the only thing in issue. The requisite purpose may be inferred despite the fact that the debtor denies having had it (Moon v Franklin [1996] BPIR 196 at 204).

In cases of this kind inference from the facts is the only reasonable approach available to a judge, and the relevant facts from which inferences may be drawn include the transaction’s obvious or self-evident consequences. However, it is accepted that the statutory purpose cannot be inferred from the bare fact that a transaction has been entered into at an undervalue (Royscott v Lovett [1995] BCC 502 , 507 (CA)) - what matters is purpose. Any inference as to intentions must be reached on the balance of probabilities (Henwood v Barlow Clowes [2008] EWCA Civ 577, [68]-[69]). This means that the court must be satisfied that the inference the Claimant seeks to draw as to the Defendant’s purpose is more likely than not on all the relevant and proved facts. If there are ‘conflicting inferences of equal degrees of probability, so that the choice between them is mere matter of conjecture, then the applicant has failed to prove [its] case’. (Richard Evans & Co v Astley [1911] AC 676 , 687 per Lord Robson).

The purpose or bona fides of the transferee is entirely irrelevant in determining whether the elements of the cause of action are made out. All that matters is the purpose of the debtor: Delaney v Chan Chen and another [2010] BPIR 316. It is irrelevant for example that the transferee believed that the debtor was acting lawfully in entering into the transaction (Moon v Franklin at [202]) or that lawyers advised that the transaction was proper and could be carried into effect (Arbuthnot (above) at 644C). Section 423 enables the Court to override the property rights of innocent recipients of property (Invest Bank P.S.C. v El-Husseini & Ors [2024] EWHC 2976 (Comm)). Thus even if Mr Sleater and Mr Whitehead were wholly unaware of any intention by Mr Aliotta to put assets beyond the reach of creditors, that unawareness would not provide them with any defence to an order requiring them to return the transferred property.

In IRC v Hashmi [2002] BCC 943 the Court of Appeal upheld a finding at first instance that there had been a section 423 transaction when the debtor declared that he held the beneficial interest in a property on trust for his son. The requisite purpose to harm creditors was to be inferred even though no proceedings had been brought against the debtor by HMRC at the time of the declaration of trust.

... Hashmi confirms that there is no need for the relevant purpose to have been the debtor’s dominant purpose (in Hashmi the trial judge found that the debtor was a caring parent who had wanted to give his son the security of having the property for the future but that he had also wanted to put it out of the reach of creditors, should creditors emerge: see at [7]. Those mixed motives sufficed for section 423).'

In Aliotta, under the heading 'Remedies' the Deputy Judge said, at paragraphs 160 to 162"

'Under section 425 of the Act, the Court has a wide range of orders that it can make. Generally however the remedy will be to require the relevant property to be transferred back to the transferor where it can be available to claims by creditors. That is an order “restoring the position to what it would have been if the transaction had not been entered into” (section 423(2)(a)); and see also section 425(1)(a) being an order that requires “any property transferred as part of the transaction to be vested in any person, either absolutely or for the benefit of all the persons on whose behalf the application for the order is treated as made”.

The position where an asset has been transferred to an innocent transferee is that the Court will normally simply order the asset to be transferred back to the transferor. See 4Eng v Harper [2009] EWHC 2633 (Ch) per Sales LJ. at [14(2)]:

“…where an asset has been transferred to a transferee who has no knowledge that the transferor acted with a relevant purpose in making the transfer, and then the transferee has simply held the asset while its value has fluctuated in line with market conditions, I think that ordinarily the appropriate order under s. 423(2) and s. 425 should be an order for the transfer of the asset (either to the creditors directly or to the transferee).”

(this last must be a misprint for “transferor”).

Where the transferee is not innocent, the normal order will be as above but potentially with additional orders to protect the transferor’s creditors to the fullest extent. See 4Eng at [14(3)]:

“At the other end of the spectrum, however, if the transferee has taken property knowing that it was transferred to him by the transferor for a relevant purpose, and has sought to further the fraudulent design by lying to the transferor's creditors to shield the property against their claims, the justice of the case will be very different. Then it may well be appropriate to make orders against the transferee to protect the creditors to the fullest extent - perhaps by a combination of orders to transfer property under s. 425(1)(a) or (b) with orders for payment of money under s. 425(1)(d), if the property has gone down in value in the hands of the transferee – by analogy with the approach to damages in cases of deliberate deceit exemplified by Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254.”'

As an complete aside, it is noteworthy that Aliotta confirmed: (1) when legal title to shares, transfers[1]; (2) oral agreements to vary a term, are ineffective, were the contract to be varied, contains a no oral variation clause[2].

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