In this case, the first appellant and judgment debtor, Mr El-Husseiny caused the legal and beneficial title of multiple assets, including a property worth £4.5 million which was owned by one of his companies, to be transferred to his sons for no consideration. Consequently Mr El-Husseiny’s shareholding in that company was reduced in value, and the respondent bank’s ability to enforce the judgments was adversely affected to this extent.

The Court held that section 423(1) contains no requirement that the transaction must involve a disposal of property which directly belongs to the debtor. A transfer by a solvent company, owned by a debtor, of a valuable asset for no consideration necessarily resulted in a diminution in the value of the debtor's shares in the company. It prejudiced the creditor's ability to enforce the judgment. It also removed an asset of the company that might otherwise have become available for enforcement.

The Court rejected a range of construction arguments which were advanced by the appellants and found that the appellants’ submission that it was an essential element of any transaction falling within section 423 that it directly involved property owned by the debtor would involve a significant limitation on the operation of the provision and an impermissible interpretation of section 423.

The Court considered (albeit obiter) the interrelationship of section 423 with sections 238 and 339 of the Insolvency Act. Those sections were enacted to provide remedies where the debtor had subsequently entered administration or liquidation or bankruptcy (and no mental element was required unlike in section 423). However, the Court found there was no good reason to give a different meaning to transactions at an undervalue in those sections.

Harneys does not advise on the law of England and Wales, but this judgment will be of significant jurisprudential importance in a busy insolvency and restructuring community where asset recovery and insolvency often intersect.

The BVI equivalent to section 423 is section 81 of the Conveyancing and Law of Property Act 1961, which provides that “every conveyance of property made … with intent to defraud creditors shall be voidable at the instance of any person thereby prejudiced”.