Unlawful means conspiracy can be based on insolvency claims in the High Court

The High Court has held that an unlawful means conspiracy claim had a real view of success, where the alleged unlawful means were acts covered by sections 238, 239 and 423 of the Insolvency Act 1986 (IA 1986).These sections provide relief in respect of transactions at an undervalue, preferences, and transactions defrauding creditors respectively. The unlawful means could also questionably include obtaining breaches of fiduciary duty.

The claimant was a creditor of company W (in liquidation). It alleged that the defendant company (C) and others had made a settlement agreement with W which sought to put W’s assets beyond the reach of the claimant contrary to sections 238, 239 and 423 of the IA 1986. The claimant argued that this constituted an unlawful means conspiracy to which W’s sole shareholder, a bankrupt (S), was a party.

In the case Avonwick Holdings Ltd v Castle Investment Fund Ltd [2015] EWHC 3832 (Ch) the court was prepared to lift the bankruptcy stay of proceedings against S to allow a conspiracy claim against him, although on S’s case he was merely being used as an anchor to found English jurisdiction against other potential overseas defendants. Practitioners may welcome the generous limit given to “unlawful means” in this case. However, one must remember that it only represents a provisional view at the interlocutory stage.

For further information on the decision in this case or for any insolvency enquiry please contact Associate Solicitor, Lauren Hartigan-Pritchard on 01905 677051 or lhartiganpritchard@thursfields.co.uk.

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