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Transactions that place assets beyond the reach of creditors: El-Husseiny v Invest Bank PSC [2025] UKSC 4

Published online by Cambridge University Press:  04 June 2026

Jonathan Foo Open the ORCID record for Jonathan Foo [Opens in a new window]  and
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Jonathan Foo*
Affiliation:
Faculty of Law, National University of Singapore , Singapore
Hans Tjio
Affiliation:
Faculty of Law, National University of Singapore , Singapore
*
Corresponding author: Jonathan Foo; Email: jonathanfoosw@u.nus.edu
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Extract

The unique statutory provision that is section 423 of the Insolvency Act 1986,1 offering redress to creditors that have been, or potentially will be, prejudiced by fraudulent transactions entered into by the debtor, has recently been the subject of interpretation by the Supreme Court in El-Husseiny v Invest Bank.2 This asset recovery provision is not strictly confined to insolvency situations.3 The core issue before the Supreme Court was whether the term ‘transaction’ in section 423 applied to a situation where a debtor procures a company which he owns to transfer a valuable asset for no consideration or at an undervalue which diminishes or eliminates the value of his shares in the company, or whether the provision required the debtor to personally own and transfer the asset in question.4 This was a preliminary matter that was found against the debtor in the Court of Appeal which enabled the substantive trial to proceed. While the substantive trial decided that other elements in section 423 were not met, the Supreme Court acknowledged that the parties did not seek to stop it from rendering its judgment, and that in any case the issue was of sufficient importance for it to proceed.5

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Current Developments: Case Comment
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Legal Studies , First View , pp. 1 - 6
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This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
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© The Author(s), 2026. Published by Cambridge University Press on behalf of The Society of Legal Scholars

Introduction

The unique statutory provision that is section 423 of the Insolvency Act 1986,Footnote 1 offering redress to creditors that have been, or potentially will be, prejudiced by fraudulent transactions entered into by the debtor, has recently been the subject of interpretation by the Supreme Court in El-Husseiny v Invest Bank. Footnote 2 This asset recovery provision is not strictly confined to insolvency situations.Footnote 3 The core issue before the Supreme Court was whether the term ‘transaction’ in section 423 applied to a situation where a debtor procures a company which he owns to transfer a valuable asset for no consideration or at an undervalue which diminishes or eliminates the value of his shares in the company, or whether the provision required the debtor to personally own and transfer the asset in question.Footnote 4 This was a preliminary matter that was found against the debtor in the Court of Appeal which enabled the substantive trial to proceed. While the substantive trial decided that other elements in section 423 were not met, the Supreme Court acknowledged that the parties did not seek to stop it from rendering its judgment, and that in any case the issue was of sufficient importance for it to proceed.Footnote 5

1. The El-Husseini line of cases

The debtor in the El-Husseini line of cases was Ahmad El-Husseini who owned two UAE construction companies, Al-Tadamun Glass & Aluminium Co (Tadamun) and Commodore Contracting Company LLC (Commodore UAE). Tadamun and Commodore UAE entered into a credit facility agreement with Invest Bank which Ahmad personally guaranteed for AED 96 million (£20 million), giving rise to judgment debts determined by the Abu Dhabi courts.Footnote 6 To enforce them, Invest Bank sought possession of a London property and shares in other companies, with the substantive trialFootnote 7 finding that Ahmad did not possess the necessary mens rea required under section 423 when transferring them to his family members and companies they controlled. Specifically, there was insufficient evidence on the facts to suggest that Commodore UAE was in financial trouble (in fact the evidence suggested that it was financially sound) and no reason for Ahmad to fear a claim from Invest Bank on his personal guarantee. A particular recipient company, Virtue Trustees (Switzerland) AG, was merely an ‘innocent third party recipient’ in good faith and without notice of any alleged purpose of Ahmad.Footnote 8 Even when taken at its highest, Calver J found that although Commodore UAE’s financial position had later deteriorated due to the cashflow issues, which may have increased risk exposure on its credit facilities with Invest Bank, Invest Bank failed to establish that Ahmad had actual or constructive knowledge of that fact.Footnote 9

For the separate proceedings that reached the Supreme Court, however, the case focused on the allegation that Ahmad, as director and sole shareholder of Marquee Holdings Limited (Marquee), which was the beneficial owner of said London property (and not Ahmad), had intentionally arranged for it to be transferred to one or more of Ahmad’s sons (Ziad El-Husseiny, one of the appellants in the Supreme Court, hereinafter ‘defendant transferees’) to place them beyond the reach of the creditor bank’s judgment debtFootnote 10 and/or reducing the value of Ahmad’s shareholding in Marquee. This preliminary issue had to be settled in Invest Bank’s favour before the trial commenced.

At first instance in the High Court, Andrew Baker J determined that nothing within the wording of section 423 or the definition of ‘transaction’ limited its scope only to transactions of assets beneficially owned by the debtor. It was wide enough to encompass undervalued asset transactions to a transferee from a debtor-owned company (the beneficial interest point).Footnote 11 A debtor, however, does not ‘enter a transaction’ in the context of section 423 when all his actions are carried out as director of the company beneficially owning and transferring the asset. The bank had pleaded that Ahmad acted in his personal capacity and not on behalf of Marquee (the capacity point).Footnote 12

Here, Baker J found that the transfer of the London property fell outside the scope of section 423.Footnote 13 The defendant transferees appealed against the ruling on the beneficial interest point while Invest Bank appealed against the ruling on the capacity point. The Court of AppealFootnote 14 (Singh LJ, with whom Males and Popplewell LJJ agreed) dismissed the defendant transferees’ appeal. The defendant transferees submitted that section 423 should be narrowly construed to apply only where a beneficially owned asset of the debtor was the subject of the transfer. Singh LJ found that the defendant transferee’s submissions required imputing additional words into section 423, and that ‘transaction’ was broadly defined in section 436(1). Further, section 423(3), while not determinative, informed the court not to interpret section 423(1) ‘in a way that would easily defeat the purpose of section 423 when read as a whole’,Footnote 15 especially in the absence of public policy reasons supporting a narrow construction. Finally, while the defendant transferees submitted that Clarkson v Clarkson Footnote 16 ruled that insolvent transactions at an undervalue under sections 238/339 must involve a transfer of debtor-owned assets, Singh LJ reasoned that the unique position of section 423 made it such that it was not bound by Clarkson. Footnote 17 Specifically, Singh LJ decided that the ratio in Clarkson related to the meaning of ‘property’ in respect of a bankrupt in section 283, while section 423 ‘is not concerned with insolvency at all’, and ‘are simply not relevant questions … [for] section 423’.Footnote 18

Singh LJ allowed Invest Bank’s appeal on the capacity point. He ruled that Baker J fell into what was termed the ‘disattribution heresy’.Footnote 19 While attribution usually identifies an agent’s act as that of the company, the logical fallacy is to immediately suppose that the agent falls out of the picture (as it usually does with a contract properly made in cases of disclosed principals). As is now clear, a director can also be personally liable for a misrepresentation even when it represents a company given its own assumption of responsibility for the statement.Footnote 20 Similarly, Ahmad’s acts on behalf of the company could fall within the terms of section 423 as his own personal acts. The Court of Appeal ruled that this was a fact-sensitive issue better reserved for determination at trial,Footnote 21 which commenced after that, and which rendered its decision on the debtor’s ‘purpose’ after the Supreme Court had heard submissions but before its judgment on the meaning of ‘transaction’.

2. Supreme Court decision

The Supreme Court primarily dealt with the ambit of ‘transaction’ under section 423. It did not comment on the substantive trial judge’s rulings on the ‘substantial purpose’ test as it acknowledged that that would make its own way up the appellate process (this does not appear to have occurred, with final costs awarded against the claimant banks at the end of 2025Footnote 22) although it made references to the discussions of debtor purpose in this context in Inland Revenue Commissioners v Hashmi. Footnote 23

Given normal canons of statutory interpretation,Footnote 24 the Supreme Court dismissed the defendant transferee’s argument that the first limb of section 423(1)(a) referring specifically to a ‘gift’ necessarily imputes a requirement that the subsequent reference to ‘transactions’ involve the transfer of debtor property. There was clearly no transfer of property by Ahmad to Ziad, one of the defendant transferees, since it was Marquee that owned the London property.Footnote 25 However, the Supreme Court adopted a disjunctive construction of ‘gift’ and ‘transaction’ and relied on the Court of Appeal decision in BTI 2024 LLC v Sequana SA,Footnote 26 which had held that a large special dividend payment by a company to its shareholders was not a ‘gift’ but a ‘transaction’ for no consideration for the purposes of section 423.

The Supreme CourtFootnote 27 clarified that ‘section 423(1) does not stand to be construed in a linguistic vacuum, uninfluenced by its purpose as set out in section 423(3)’. This works both ways so that a ‘transaction’ having no effect on the availability or value of assets was unactionable under section 423(1), even if technically caught. However, a ‘transaction’ that has both the (i) purpose and (ii) effect of prejudicing creditors should in principle be caught by section 423(1), and there was no reason to read a restriction requiring a transfer of property by the debtor into it.

3. Questions remaining

(a) Debtor’s or statute’s purposes

The approach taken by the Supreme Court to broaden (or not narrow) the definitional scope of ‘transaction’ under section 423(1) is laudable. It might otherwise be ‘to the general detriment of commerce’Footnote 28 given that so much wealth is now in the form of choses in action consisting of claims against other entities, many of them cross-border.

Nevertheless, it may be that the Supreme Court slightly conflated the debtor’s purpose with the mischief targeted by its statutory purpose.Footnote 29 The starting point is that ‘purpose’ within section 423(3) refers to the assessment of a debtor’s mental state in entering into an impugned ‘transaction’.Footnote 30 Indeed, this was found at trial not to be present in Ahmad. Nothing in the entire statutory language of section 423 includes or even refers to its statutory ‘purpose’, although the Supreme Court thought it was ‘expressed in subsection (3)’.Footnote 31

The next argument used by the Supreme Court to read a statutory purpose into section 423(1) was the ‘common purpose’ between sections 238, 339, and 423 to ‘set aside or provide other redress in cases where there have been transactions at undervalue which have prejudiced creditors’. This departs from the Court of Appeal’s view of Clarkson,Footnote 32 which saw sections 238 or 339 as distinct from section 423. While the Supreme Court distinguished Clarkson only on its facts,Footnote 33 it strictly only holds that the unique position of section 423 in applying to going concerns cannot, by itself, be the reason for denying the existence of a common statutory purpose between sections 238, 339, and 423.

Here the text is quite clear and, unlike the previous reference to ‘conveyance’ in section 172 of the Law of Property Act 1925,Footnote 34 is not bound strictly to transfers of property. While this may require mutuality,Footnote 35 the onus was on the defendant transferees to argue why a normal reading of ‘transaction’ defeats the very purpose for which it was legislated by Parliament and/or inadvertently sanctions the mischief sought to be addressed by the statute. While section 423(3) helps to determine the statutory purpose, the debtor’s purposes identified there cannot be conclusive and were themselves the subject of interpretation at trial. This was indeed Singh LJ’s approach in the Court of Appeal, which focused mainly on the clear meaning of ‘transaction’ in section 423(1) and found no policy reasons to narrow it. The Court of Appeal did not, however, have to tread as carefully as it did not have to purposively interpret ‘transaction’ when a decision on the merits of the debtor’s purpose was being considered at about the same time. This indicates that using ‘purpose’ as part of a wrongdoer’s state of mind can be problematic, as it merges with the wrongful act more than other more traditional mens rea.Footnote 36

(b) Piercing the corporate veil

At first instance, Baker J held that a debtor does not ‘enter into a transaction’ for the purposes of section 423 when all his actions are carried out in his capacity as director.Footnote 37 While a law student may simply suggest piercing the veil, greater insight into corporate personality has been provided by the Supreme Court in Hurstwood Properties (A) Ltd v Rossendale Borough Council Footnote 38 and Prest v Petrodel Resources Ltd,Footnote 39 where Lord Sumption’s ‘evasion’ principleFootnote 40 links the piercing of the company’s separate legal personality to making it bound by obligations originally owed by its controlling shareholder. If the issue pertains to removing limited liability, existing legal doctrine should suffice to reveal facts potentially ‘concealed’ by the corporate veil.Footnote 41

Lord Neuberger in Prest also observed that veil piercing and section 423 are ‘specified and limited’ applications of the principle that ‘fraud unravels everything’.Footnote 42 Despite that linkage, any alleged veil piercing in El-Husseiny was unlikely as the point of law being considered was about making Ahmad responsible (even if it is not about removing limited liability) for the acts of the company he controlled and not vice versa. As such, one could argue that the case was in fact one where the ‘court must ascertain the truth that he has concealed’Footnote 43 in the context of section 423 – that Ahmad had entered into transactions to defraud his creditors not by transferring his assets directly but by entering into various agreements and arrangements that diminished the value of those assets.

(c) Proof of insolvency

Another unresolved issue is whether section 423 is really a rule not contingent upon the transferor’s insolvency or if practice requires proof of such. At trial, Calver J held that there was insufficient evidence that Ahmad had the purpose of putting his assets beyond the reach of his creditors or otherwise prejudicing them. This is subjective, and perhaps proof of insolvency or ‘financial difficulties’ is required. Curiously, no adverse inferences were drawn against Ahmad for not giving evidence, despite telling his financial advisers that the transfers were for ‘asset protection purposes’. While most UK judges still see section 423 applying to the debtor as a going concern, it is interesting that in Sequana, however, Lord Reed declared that ‘section 423 is one among a number of rules of insolvency law’.Footnote 44

If section 423 elides into a de facto insolvency provision, as is the case in US and New Zealand fraudulent conveyance cases,Footnote 45 its value-add will be seriously diminished since, as seen above, the meaning of ‘transaction’ there is not dissimilar to its use in insolvent transactions at undervalue.Footnote 46 Given the need to prove the debtor’s mental state under section 423, those provisions are more likely to be invoked.

Conclusion

In El-Husseiny v Invest Bank PSC the Supreme Court expanded (or at least did not limit) the scope of operation of section 423. By giving a wide meaning to ‘transaction’, the Supreme Court safeguards creditor protection against prejudicial asset dissipation, much of which would be in entities over which the debtor may have claims as shareholder or bondholder. The Supreme Court also implicitly confirms that the viability of corporate veil-piercing in the UK as a residual claim is limited. However, it is likely that the highest appellate courts in many Commonwealth jurisdictions with similar provisions on transactions defrauding creditors will have to, in the near future, substantively engage with the ‘purpose’ element under section 423(3), its interplay with section 423(1), and the section’s links to insolvency.

References

1 Insolvency Act 1986 (c 45), Part XVI, s 423.

2 [2025] UKSC 4 (El-Husseiny SC).

3 J Armour ‘Transactions defrauding creditors’ in J Armour and H Bennett (eds) Vulnerable Transactions in Corporate Insolvency (Oxford: Hart Publishing, 2003) 3.1.

4 El-Husseiny SC, above n 2, at [1].

5 El-Husseiny SC, above n 2, at [4].

6 Ibid, at [2].

7 Invest Bank PSC v El-Husseini [2024] EWHC 2976 (Comm).

8 Ibid, at [375]–[377].

9 Ibid, at [328] and [486].

10 El-Husseiny SC, above n 2, at [3] and [5].

11 El-Husseiny SC, above n 2, at [12] referencing Invest Bank PSC v Ahmad Mohammad El-Husseini [2022] EWHC 894 (Comm), [43]–[46].

12 Ibid, at [47(1)].

13 Ibid, at [71].

14 [2023] EWCA Civ 555, [2024] KB 49 (El-Husseiny CA).

15 Ibid, at [63].

16 [1994] BCC 921.

17 El-Husseiny CA, above n 14, at [60]–[67].

18 Ibid, at [68]–[73].

19 Ibid, at [47], citing N Campbell and J Armour ‘Demystifying the civil liability of corporate agents’ (2003) 62 Cambridge Law Journal 290 at 292.

20 Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830; see FM Reynolds ‘Personal liability of company directors in tort’ (2003) 33 Hong Kong Law Journal 51. See also Standard Chartered Bank v Pakistan National Shipping Corpn and Others (Nos 2 and 4) [2003] 1 AC 959 (fraud) and PG Watts ‘The company’s alter ego – an imposter in private law’ (2000) 116 Law Quarterly Review 525.

21 El-Husseiny CA, above n 14, at [54].

22 Invest Bank PSC v El-Husseini [2025] EWHC 3119 (Comm).

23 El-Husseiny SC, above n 2, at [28], referring to [2002] EWCA Civ 981, [2002] 2 BCLC 489. The Hashmi ‘substantial purpose’ test enquires whether the defendant would have entered into the transaction in any event and is not a test of the relative strength of another legitimate motivation behind the transfer. It has been held that defrauding creditors has to be a purpose and not the sole or dominant purpose of the transaction: JSC BTA Bank v Ablyazov [2018] EWCA Civ 1176 (also cited by El-Husseiny SC, above n 2, at [28]).

24 El-Husseiny SC, above n 2, at [32], citing R (O) v Secretary of State for the Home Department [2022] UKSC 3, [2023] AC 255, at [29]–[31].

25 Ibid, at [42].

26 [2019] EWCA Civ 112, [2019] Bus LR 2178, [50], affirmed [2022] UKSC 25. This is also how the dividend in Sequana was seen by the Singapore Court of Appeal in CH Biovest Pte Ltd v Envy Asset Management Pte Ltd [2025] SGCA 3 (Envy CA), at [93]–[108], disagreeing with the Singapore High Court in Envy Asset Management Pte Ltd v CH Biovest Pte Ltd [2024] SGHC 46, at [177], which had seen the dividend also as a unilateral payment.

27 El-Husseiny SC, above n 2, at [59].

28 Armour, above n 3, at 3.10–3.12.

29 El-Husseiny SC, above n 2, at [60].

30 Armour, above n 3, at 3.26.

31 El-Husseiny SC, above n 2, at [64].

32 Above n 14.

33 El-Husseiny SC, above n 2, at [72].

34 Law of Property Act 1925, Part IX, s 172, now repealed by Insolvency Act 1985 (c 65), s 235(3), Sch 10, Pt IV (with saving in Insolvency Act 1986 (c 45), s 437, Sch 11, para 10).

35 Not discussed in El-Husseiny SC, above n 2, but required in Envy CA, above n 26, at [100], relying on Re Hampton Capital Ltd [2016] 1 BCLC 374, at [38]. See also Armour, above n 3, at 2.50–2.53.

36 See, in the context of a company giving financial assistance for the acquisition of shares, Brady v Brady [1989] AC 755 where Lord Oliver said that ‘purpose’ was not to be equated with ‘reason’ (at 179–180). Instead, purpose objectively focuses on the necessary effect of the transaction: Darvall v North Sydney Brick & Trust Co Ltd (1987) 12 ACLR 537, affirmed (1989) 15 ACLR 230.

37 Above n 10.

38 [2021] UKSC 16.

39 [2013] UKSC 34, [2013] 2 AC 415 (Prest), at [16].

40 Prest, above n 39, at [28].

41 Ibid, at [16].

42 Ibid, at [83].

43 Ibid, at [36].

44 Sequana, above n 26, at [61], but compare eg Lady Arden at [368]. Cf Armour, above n 3, at 3.1, that ‘it will be difficult for a creditor to show they have been prejudiced by the debtor’s actions unless the debtor is insolvent’.

45 See US Bankruptcy Code, s 548(a)(1) and its application in re Kaiser, 722 F 2d 1574 (2d Cir 1983) and s 346 of the Property Law Act 2007 (NZ).

46 Cf El-Husseiny SC, above n 2, at [62]. See also Envy CA, above n 26, at [90].