Arbuthnot Leasing International Ltd v Havelet Leasing Ltd (No 2) [1990] BCC 636 is a leading UK insolvency law

UK insolvency law

United Kingdom insolvency law deals with the insolvency of firms and individuals in the United Kingdom. The important statutes are the Insolvency Act 1986, as amended by the Enterprise Act 2002, as well as the Company Director Disqualification Act 1986 and the Companies Act 2006.Insolvency is a...

 case, concerning a fraudulent transaction under the Insolvency Act 1986 section 423.

Facts

Arbuthnot sought a declaration that Havelet Leasing Ltd, whose plane and coach hire business had gone insolvent, had defrauded its creditors by transferring its business, assets and contracts to the related Havelet Leasing Finance Ltd. Arbuthnot had financed part of Havelet's business, and it owned some of the vehicles which were leased to Havelet. When Havelet fell into arrears, Arbuthnot obtained a judgment and appointed a receiver. They then found that Havelet had transferred its business, assets and benefits of all Havelet’s agreements to a third company (Havelet Leasing Finance Ltd). Havelet’s lessees were paying Havelet Leasing Finance, which in turn paid Havelet in quarterly arrears. This was contended to be a fraudulent scheme to elevate the owner of Havelet in priority after insolvency.

Judgment

Scott J held that the transfer would be reversed, that all assets in Havelet Leasing Finance’s possession were held on trust for Havelet, without prejudice to Havelet Leasing Finance’s creditors. He said that although the motive was not necessarily dishonest (on the basis that Havelet's lawyers had advised Havelet that it was not), the purpose of the transfer was to put the assets out of Arbuthnot’s reach, it was still done with the purpose of putting assets beyond creditors' reach and thus was a fraudulent transaction and void.

Scott J's judgment set out as follows.

See also

• UK insolvency law
  UK insolvency law
  United Kingdom insolvency law deals with the insolvency of firms and individuals in the United Kingdom. The important statutes are the Insolvency Act 1986, as amended by the Enterprise Act 2002, as well as the Company Director Disqualification Act 1986 and the Companies Act 2006.Insolvency is a...
  
  
• Fraudulent Conveyances Act 1571
  Fraudulent Conveyances Act 1571
  Fraudulent Conveyances Act 1571 was an Act of Parliament in England, which laid the foundations for fraudulent transactions to be unwound when a person had gone insolvent or bankrupt...
  
  , repealed by LPA 1925 s 172, though kept through the insolvency legislation, now IA 1986 s 423
• Alderson v Temple (1768) 96 ER 384

• Chohan v Saggar [1994] B.C.C. 134; [1994] 1 B.C.L.C. 706
• Hill v Spread Trustee Co Ltd [2006] EWCA Civ 542
• Secretary of State for the Environment, Food and Rural Affairs v Feakins [2005] EWCA Civ 1513
• Reid v Ramlort Ltd [2004] EWCA Civ 800