Lee Jon Booth v Lloyd Edward Hinton (as Liquidator of Active Ticketing Limited)
[2024] EWHC 1886 (Ch)
Darty Holdings SAS v Geoffrey Carton-Kelly
9 October 2023
[2023] EWCA Civ 1135
Court of Appeal
A company paid back a large debt to its parent company before going bankrupt. A court said this was unfair to other creditors. A higher court disagreed, saying there wasn't enough proof the decision to repay was made *before* the official company meeting that approved the payment.
Key Facts
- •Comet Group plc (Comet) repaid £115.4 million of unsecured intra-group debt to Kesa International Ltd (KIL) during the sale of Comet to OpCapita.
- •The repayment was part of a sale and purchase agreement (SPA) dated 9 November 2011, formally approved by Comet's board on 3 February 2012.
- •Comet entered administration on 2 November 2012, followed by creditors' voluntary liquidation on 3 October 2013.
- •Darty Holdings SAS, KIL's successor, appealed the lower court's decision that the repayment constituted a preference under section 239 of the Insolvency Act 1986.
- •Comet was insolvent before the repayment and KIL was a connected party.
- •The lower court found that the decision to repay was made on 9 November 2011 by Mr. Enoch, influenced by a desire to prefer KIL.
- •The appeal court questioned the lower court's finding of when the decision to repay the debt was made.
Legal Principles
A company gives a preference if it does anything putting a creditor in a better position in insolvent liquidation than they would have been otherwise, and the company was influenced by a desire to produce that effect.
Insolvency Act 1986, section 239(4)(b), (5)
The 'relevant time' for determining a preference is within two years before insolvency, and the company must be unable to pay its debts at that time or become unable as a consequence of the transaction.
Insolvency Act 1986, section 240(1)
Appellate courts should be cautious in overturning a trial judge's findings of fact, especially inferences drawn from evidence. Interference is only justified if the decision is unreasonable or lacks evidentiary basis.
Henderson v Foxworth Investments Ltd [2014] UKSC 41
Outcomes
The appeal was allowed.
The Court of Appeal found insufficient evidence to support the lower court's conclusion that the decision to repay the debt was made on 9 November 2011. The court held that the only operative decision was the board's decision on 3 February 2012, which was not influenced by a desire to prefer.
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