In the recent English judgment in Tatiana Akhmedova v Farkhad Teimur Ogly Akhmedov & others  EWHC 545 (Fam), a high-profile and long-running divorce case, the English Court examined the requirements for relief to be granted under section 423 of the English Insolvency Act 1986.
Section 423 provides the Court with broad powers to grant relief where:
- a debtor;
- enters into a transaction;
- at an undervalue;
- with the purpose of putting assets beyond the reach or prejudicing the interests of a person with an actual or potential claim.
The Court has a broad discretion under section 423 to grant relief with a view to restoring the position to what it would have been if the transaction had not been entered into and protecting the interests of persons who are victims of the transactions.
The Respondents sought to argue that before relief under section 423 could be granted, it must be shown that after the impugned transaction, the debtor would be left with insufficient assets to meet the liability owed to the victim. The Court rejected the argument and concluded that such a condition should not be read into section 423, as it would have the effect of prejudicing creditors’ interests in circumstances where the debtor’s purpose for entering into the transaction fell within the ambit of section 423(3).
This judgment also serves as a reminder of the extraterritorial reach of section 423. In granting relief, the Court considered that there was sufficient connection to England to justify the Court exercising its section 423 jurisdiction, notwithstanding that the respondents and the assets in questions were located outside England.
The closest BVI equivalent to section 423 is section 81 of the Conveyancing and Law of Property Act 1961 (CLPA), which provides that “every conveyance of property made … within intent to defraud creditors shall be voidable at the instance of any person thereby prejudiced”.
The closest Cayman equivalent is the Fraudulent Dispositions Law (FDL), which provides that “every disposition of property made within an intent to defraud and at an undervalue shall be voidable at the instance of a creditor thereby prejudiced”.
Like section 423, section 81 of the CLPA may be engaged whether or not the relevant “conveyance” or “disposition” causes the debtor to be insolvent.
In relation to whether a claim brought under section 81 of the CLPA may be served out of jurisdiction, please refer to our earlier blog post here. For a discussion of the operation of the FDL, please refer to our earlier blog post here.