Bringing a successful transaction at an undervalue claim

Bringing a successful transaction at an undervalue claim
When will a transaction constitute a transaction at an undervalue under section 238 of the Insolvency Act 1986? The case of Ovenden Colbert Printers Ltd Hunt v Hosking [2013] EWCA Civ 1408

, [2013] All ER (D) 188 (Nov) looks at this, where the Court of Appeal upheld a decision that the first defendant (Mr Hosking) had been entitled to have a claim brought against him by the liquidator of Ovenden Colbert Printers Ltd (Mr Hunt) under section 238 of the Insolvency Act 1986 (IA 1986) as a transaction at an undervalue struck out.The Court of Appeal decided the judge at first instance, Mr Justice Peter Smith, was correct to find that the relevant transactions complained of had not been transactions entered into by the insolvent company.

What happened in the case?

In 2002, Mr Hosking was appointed joint liquidator of two connected companies (CSM). CSM were indebted to Ovenden and, accordingly, Ovenden had been entitled to a substantial dividend from the liquidation of CSM.

In 2003, Ovenden entered into a fee agreement (the 2003 agreement) with its then accountant (T). It was said the purpose of the 2003 agreement was to reward T for the work he had carried out for Ovenden in formulating its claim in the liquidation of CSM. The 2003 agreement authorised T to:

  • receive any distributions from the liquidation of CSM
  • hold those distributions in an account to the order of Ovenden, and
  • to transfer to his own account agreed fees

On the same day, Ovenden authorised Mr Hosking, as liquidator of CSM, to pay the dividends due to the company into a client account maintained by T.

In 2005, the 2003 agreement was varied to amend the fees that T was able to retain out of the dividends of CSM (the 2005 variation). Between November 2004 and May 2005, distributions were made from CSM in favour of Ovenden and paid into the client account by T. Further, between December 2004 and October 2005, T made a series of payments out of that client account, a proportion of those payments being made to Mr Hosking.

In April 2006, Mr Hosking and one of his partners were appointed joint administrators of Ovenden and it was subsequently placed in creditors' voluntary liquidation. In due course, Mr Hunt was appoin

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