Supreme Court rules on debtor who dispersed assets at undervalue

The Supreme Court has ruled against a debtor who dispersed his assets at an undervalue while owing millions of pounds to his bank. The case involved El-Husseiny and another v Invest Bank PSC.

Mark Aspin Director and Head of Dispute Resolution reports on this recent case.

The judgment confirms that section 423 of the Insolvency Act 1986 applies even when assets are transferred through a company owned by the debtor, rather than directly by the debtor himself. The court found that such transactions can still be deemed as attempts to put assets beyond the reach of creditors.

The case centred on Ahmad El-Husseini, who owed Invest Bank PSC approximately £20 million under guarantees he had provided for credit facilities extended to two companies connected to him.

The bank sought to enforce its claim against valuable properties in London, which it argued had been transferred in a deliberate effort to frustrate debt collection.

One key transaction involved a property at 9 Hyde Park Garden Mews, which was owned by a Jersey company, Marquee Holdings Limited. El-Husseini was the beneficial owner of Marquee, and in 2017, arranged for it to transfer ownership of the property to his son, Ziad El-Husseiny, for no consideration.

Invest Bank PSC argued that this transaction fell within the scope of section 423, which prevents debtors from disposing of assets to avoid satisfying creditors. The bank alleged that the transfer was designed to deplete the value of El-Husseini’s holdings and hinder its ability to recover the debt.

The High Court originally ruled against the bank in November 2024, finding that there was insufficient evidence that the transfers were made with the specific purpose of frustrating creditors. However, the Court of Appeal later overturned this decision on the basis that the law does not require a debtor to personally own an asset for section 423 to apply.

The Supreme Court upheld the Court of Appeal’s ruling, stating that transactions structured through a debtor’s company, rather than directly by the debtor, can still be challenged under section 423. Lady Rose and Lord Richards, giving the joint judgment, emphasised that “persons must be just before they are generous and that debts must be paid before gifts can be made.”

The ruling is expected to have significant implications for asset protection strategies, particularly where individuals attempt to shield assets from creditors through corporate structures.

If you would like more information about the issues raised in this article or any aspect of company law and insolvency please contact Mark on 01228 516666 or click here to send him an email.