In the latest, and possibly final, chapter of the matter of Invest Bank v El-Husseini, the litigation and dispute resolution team at Debenhams Ottaway is delighted to report another resounding win in another landmark decision in the Commercial Court. The judgment, a respectable 120 pages, was handed down 0n 21 November 2024 by Mr Justice Calver.
In the intense four-week trial back in July, the team and its counsel, Niranjan Venkatesan and Constantine Fraser from One Essex Court, acted for two of the eight defendants in the claim. The case was brought under section 423 of the Insolvency Act 1986 on transactions defrauding creditors, and was essentially that the first defendant, a Lebanese businessman, had transferred various assets worth over £20m to the other defendants for the purpose of prejudicing the UAE Bank, as well as certain other creditors. The case has given rise to numerous interlocutory disputes, many concerning important points of law and, according to counsel, today’s judgment is likely to become a leading authority on various substantive and procedural issues concerning these types of claims. Claimants must be careful with how their cases are pleaded.
In the trial, the bank sought to advance what Judge Calver ultimately found to be an unpleaded case regarding the solvency of the lead defendants’ companies. This proved to be fatal for the claimant.
The judge found that section 423 claims are ordinarily subject to the Three Rivers rules on pleading, as the allegation that the transferor acted for the purpose of prejudicing his creditors is itself an allegation of discreditable conduct, as well as finding that where particular elements of a cause of action are said to be established by inference, the ‘primary facts relied upon should, out of fairness to the defendant, be identified’. Since it had not pleaded the relevant primary facts, it sought to rely on at trial, it was not open to the bank to advance that case.
Going even further, he also agreed with counsel for the defendants that, even if it were open to the bank to run that case, the relevant purpose of the first defendant had simply not been proven.
Finally, he rejected the bank’s contention that adverse inferences should be drawn ‘as of right’ from the first defendant’s failure to participate or to give disclosure, as this would be too broad as a principle. Turning to the facts of the case, he found that such adverse inferences should not be drawn.
You can read the judgment in full here.
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