The assets of group of companies were sold, and it then went into insolvent liquidation. The liquidator claimed that the sale was at an undervalue, and appliied to continue an interlocutory injunction.
Held: There was a triable issue as to whether the sale was at an undervalue. The court considered what remedy might be granted if the liquidator succeeded, and whether it was seriously arguable that the court would set aside the sale and order the re-vesting of the assets. The purchaser had submitted that, given events which had occurred since the sale, the only remedy would be the shortfall between the agreed consideration and a fair price, and hence that no further interlocutory relied should be granted. Applying Chohan v. Saggar: ‘I accept that in broad terms the function of section 238 is . . . to restore fair value to creditors. But to pass from that proposition to the proposition that in any case where subsequent events have intervened so as to alter or vary the assets transferred, the court will invariably order monetary compensation rather than the revesting of the assets, is to lose sight of the express wording of section 283(3). Section 283(3) says, in effect, that the purpose of any order under section 241 is ‘for restoring the position to what it would have been if the company had not entered into the transaction. . . . The task of the court is to restore the status quo ante so far as is practicable. Assets which have been lost in the normal course of business since the date of the transaction can be ignored as being irretrievable . . . Post-acquired rights can also be protected . . . So, provided that there are no intractable and insuperable difficulties, and none are suggested in this case, the court does not start with the presumption that, unless the assets remain wholly or largely intact, the court will order payment of compensation rather than vesting of the assets back in the administrator or liquidator. The court will look to see what orders the justice of the case requires in order to achieve restoration of the status quo ante. To my mind, the court would be slow to allow a transferee, who has entered into a transaction with an insolvent company when on notice that the transaction may be challenged by the liquidator as being at an undervalue, to retain his purchase simply by means of paying a further sum at a later date. I suggest that the court would look carefully at allowing a transferee in these circumstances to buy his way out of the problem if the court were to consider that he went into the transaction with his eyes open and took a calculated risk.’
Judges:
His Honour Judge Havelock-Allan QC
Citations:
[2002] BPIR 621
Citing:
Applied – Chohan v Saggar and Another CA 27-Dec-1993
The word ‘and’ in sections 423(2)(a) and 423(2)(b) is to be read conjunctively not disjunctively. Section 238(3) is to be interpreted as requiring restoration of the former position ‘as far as possible’ or ‘as far as practicable’, and that . .
Cited by:
Cited – Ramlort Ltd v Michael James Meston Reid CA 8-Jul-2004
The company sought to claim under a life policy. The deceased had died in Scotland insolvent. The trustee of the policy had declared that he held it on trust for the claimant, but the defendant, the judicial factor of the estate, said the . .
Lists of cited by and citing cases may be incomplete.
Insolvency
Updated: 09 May 2022; Ref: scu.213660
