Invest Bank PSC v El-Husseini [2022]
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Invest Bank PSC v El-Husseini [2022] EWHC 894 (Comm) is a UK company and insolvency law case concerning fraudulent transactions and creditors' claims. This case addresses the question of whether the disposal of assets by a company, solely owned and controlled by an individual, constitutes a transaction within the scope of Section 423 of the Insolvency Act 1986 (IA 1986).
Invest Bank PSC (the Bank) pursues a claim against the first defendant, a Lebanese businessman, alleging a debt of over £19 million under personal guarantees. The Bank seeks to enforce judgments obtained in the UAE or rely on the personal guarantees. As part of its claim, the Bank contends that the first defendant, along with companies purportedly under his ownership and control, engaged in transactions with other defendants to shield assets from the Bank's reach. The Bank invokes Section 423, alleging fraudulent transactions defrauding creditors and seeks remedies, including the reversal of these transactions.
The High Court, under the jurisdiction of Andrew Baker J, clarified a fundamental legal principle known as the self-dealing fallacy. The court held that the mere disposal of assets by a company, acting through an individual who owns and controls it, does not inherently amount to a transaction entered into by that individual for the purposes of Section 423 of the IA 1986.
Andrew Baker J emphasised the legal distinction between an individual and a company, each possessing a separate legal personality. The judge rejected the notion that a transaction by a company can automatically be attributed to the individual in control. The self-dealing fallacy holds that when a debtor, acting through their company, takes steps that align with actions taken by the company itself, it does not constitute a transaction by the debtor.
However, the judgment clarified that a transaction could fall within the ambit of Section 423 if the individual debtor goes beyond the actions of the company, acting on their behalf rather than on behalf of the company. The determination of whether an individual's actions can be considered a transaction under Section 423 hinges on the specific facts of each case.
In summary, the disposal of assets by a company, solely owned and controlled by an individual, does not, without additional factors, constitute a transaction entered into by the controlling individual for the purposes of Section 423 of the IA 1986. The court's decision underscores the importance of examining the distinct legal personalities of individuals and companies in fraudulent transaction claims.
Invest Bank PSC (the Bank) pursues a claim against the first defendant, a Lebanese businessman, alleging a debt of over £19 million under personal guarantees. The Bank seeks to enforce judgments obtained in the UAE or rely on the personal guarantees. As part of its claim, the Bank contends that the first defendant, along with companies purportedly under his ownership and control, engaged in transactions with other defendants to shield assets from the Bank's reach. The Bank invokes Section 423, alleging fraudulent transactions defrauding creditors and seeks remedies, including the reversal of these transactions.
The High Court, under the jurisdiction of Andrew Baker J, clarified a fundamental legal principle known as the self-dealing fallacy. The court held that the mere disposal of assets by a company, acting through an individual who owns and controls it, does not inherently amount to a transaction entered into by that individual for the purposes of Section 423 of the IA 1986.
Andrew Baker J emphasised the legal distinction between an individual and a company, each possessing a separate legal personality. The judge rejected the notion that a transaction by a company can automatically be attributed to the individual in control. The self-dealing fallacy holds that when a debtor, acting through their company, takes steps that align with actions taken by the company itself, it does not constitute a transaction by the debtor.
However, the judgment clarified that a transaction could fall within the ambit of Section 423 if the individual debtor goes beyond the actions of the company, acting on their behalf rather than on behalf of the company. The determination of whether an individual's actions can be considered a transaction under Section 423 hinges on the specific facts of each case.
In summary, the disposal of assets by a company, solely owned and controlled by an individual, does not, without additional factors, constitute a transaction entered into by the controlling individual for the purposes of Section 423 of the IA 1986. The court's decision underscores the importance of examining the distinct legal personalities of individuals and companies in fraudulent transaction claims.
