Insolvency Oracle

Developments in UK insolvency by Michelle Butler

Monthly Archives: September 2013


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Administration Order Applications All At Sea

1007 Borneo 186

I really do want to write about all the changes the Scottish Government is proposing to make to personal insolvency north of the border, but every time I think I’ve got a handle on it all, the AiB produces something more! So for now I’ll have to settle for some case summaries:

• Data Power Systems v Safehosts London: another administration application ends in a winding up order
• Information Governance v Popham: yet another failed administration application
• UK Coal Operations: “reasonable excuse” for avoiding administration proposals and meeting
• Times Newspapers v McNamara: access to bankruptcy file granted in the public interest

Another failed administration application results in a winding up order

Data Power Systems Limited & Ors v Safehosts (London) Limited (17 May 2013) ([2013] EWHC 2479 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2013/2479.html

The library of precedents for courts rejecting applications for administration orders is building: we’ve have Integeral Limited (http://wp.me/p2FU2Z-3C) and UK Steelfixers Limited (http://wp.me/p2FU2Z-t) and here is a third. What makes this particularly interesting is that no one was asking for a winding up order, but that’s what the judge decided to do.

So where did it all go wrong this time..?

• HHJ Simon Barker QC stated that there was no explained basis for one of the applicant’s expressed belief that the company could be rescued as a going concern. He stated that the forecasts, which were prepared (or perhaps only submitted) by “an experienced insolvency practitioner”, were “merely numbers on a piece of paper and of no greater evidential value than that” (paragraph 17).
• The judge stated that the strategy proposed by the second set of proposed administrators (nominated by the major creditor, as an interested party to the application) was “with all due respect, no more than an outline of the sort of tasks that administrators would be focusing upon in any administration, it does not appear to be tailored in any way to the particular position of the company” (paragraph 18).
• The judge also saw no evidence “that the creditors are at all likely to benefit either from a rescue or from any dividend in the event that the company is placed in administration” (paragraph 20), but the evidence did include a statement that the asset realisations likely would be swallowed up by the costs of the administration.
• As there were no secured creditors and no evidenced preferential creditors (and even if there were any, they would be highly unlikely to receive a distribution), there was not even a prospect that the third administration objective might be achieved.
• Consequently, although the judge accepted that the threshold set by Paragraph 11(b) of Schedule B1 of the Insolvency Act 1986 “is not a high one; it is simply not crossed. The circumstances of this case serve as a reminder that insolvency alone is not sufficient to engage the jurisdiction for an administration order to be made, and further that the requirement of paragraph 11(b) of Schedule B1 is not a mere formality capable of being satisfied by assertion unsupported by cogent credible evidence sufficient to enable the Court to be satisfied that, if an administration order is made, the purpose of administration is reasonably likely to be achieved” (paragraph 23).

What was the outcome in this case? The judge had contemplated adjourning the application to enable further evidence to support the suggestion that the company could be rescued to be presented, but he noted that “the essence of an administration is speed and that is made clear at paragraph 4 of Schedule B1 – ‘The administrator of a company must perform his functions as quickly and efficiently as is reasonably practicable’. Delay should be completely contrary to the purpose of an administration” (paragraph 25). Although no one had been bidding for a winding-up order, that is what the judge decided to do: Paragraph 13(1)(e) empowered him to treat the application as a winding-up petition. He also contemplated ordering that the OR be appointed provisional liquidator, but he ended up appointing the major creditor’s nominated IPs.

The postscript to this case: the provisional liquidators generated asset realisations far in excess of that previously estimated, presumably with the prospect of a dividend to creditors, after all. Although that’s a positive outcome of course, it is a shame that the funds could not be distributed to creditors without incurring Insolvency Service fees as an expense of the winding-up.

Yet another failed administration application

Information Governance Limited v Popham (7 June 2013) ([2013] EWHC 2611 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2013/2611.html

This case isn’t really in the same league as the other three rejected administration applications I’ve mentioned, but it highlights an interesting hiccup for the applicant.

The sole director issued an application for an administration order, but before it was heard, two shareholders made themselves directors, validly in the court’s opinion. These new directors opposed the application, taking the view that there was a possibility that the company could trade out of its difficulties. Although Mr Justice David Richards was satisfied that the court had jurisdiction to make the administration order on the basis that, on the face of it, the company could not pay its debts and that an administration purpose was achievable, he did “not think it right in all the circumstances to take that step” (paragraph 17) that day and dismissed the application.

Swift move to CVL equals “reasonable excuse” for avoiding administrators’ proposals and creditors’ meeting

Re. UK Coal Operations Limited & Ors (9 July 2013) ([2013] EWHC 2581 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2013/2581.html

Is there any point in issuing proposals to creditors on a case whose rationale has already been explained to the court (for it to make an administration order in the first place) and when the company is to be moved swiftly to CVL? HH Judge Purle thinks not.

I should qualify that: in this case, the restructuring of four companies was to take place via administrations followed, within a few days, by Para 83 moves to CVL so that some onerous liabilities could be disclaimed. In Purle J’s view, these circumstances gave rise to a reasonable excuse for not complying with the statutory requirements to issue proposals and convene creditors’ meetings, “to avoid the pointless expense” (paragraph 5).

Whilst I’m sure that, in the context of these cases, unsecured creditors are not feeling hard done by – maybe they’re content not to have any information regarding the events leading to insolvency or the financial condition of the companies, which would have been provided in administrators’ proposals or in a S98 report in a standard CVL – but the principle just doesn’t sit well with me. Something else I find surprising is that the court seemingly granted the administration orders purely on the basis that the speed with which the process could be carried out, when compared with that to hold a S98 meeting, meant that the administrations were likely to achieve the objective of a better result for creditors as a whole than on winding up. It also seems to me that Purle J was too focussed on the long-stop timescale of proposals being 8 weeks “by which time the company will be in liquidation” (paragraph 4), whereas, as we all know, Para 49(5) requires the proposals to be issued “as soon as reasonably practicable after the company enters administration”. Having said that, I note from Companies House that the CVL was registered three days after the administration, which, given that the Form 2.34B has to reach Companies House first, does seem extremely fast work, so perhaps I should be applauding this case as demonstrating a novel and successful use of the administration process.

Journalist allowed access to bankruptcy file to explore legitimate public interest in bankruptcy tourism

Times Newspapers Limited v McNamara (13 August 2013) ([2103] EWHC B12 (Comm))

http://www.bailii.org/ew/cases/EWHC/Comm/2013/B12.html

The Times sought access to the court file on the bankruptcy of Mr McNamara, an Irish property developer, on the basis that the circumstances surrounding his and his companies’ amassing of debts of some €1.5 billion and his justification for his COMI being in England were matters of public interest.

Mr Registrar Baister noted that there have been no cases dealing with the permission of someone who was not party to the insolvency proceedings to have access to the court file, as provided in Rule 7.31A(6), introduced to the Insolvency Rules 1986 in 2010. However, he drew up some principles based on the leading authority on access to court documents (R. (on the application of Guardian News and Media Limited) v City of Westminster Magistrate’s Court, [2012] EWCA Civ 420), which he felt applied to proceedings of all kinds, including insolvency proceedings and which he hoped would assist courts consider requests for permission under R7.31A(6) in future:

“(a) that the administration of justice should be open, which includes openness to journalistic scrutiny;
(b) that such openness extends not only to documents read in court but also to documents put before the judge and thus forming part of the decision-making process in proceedings;
(c) that openness should be the default position of a court confronted with an application such as this;
(d) however, there may be countervailing reasons which may constitute grounds for refusing access;
(e) the court will thus in each case need to carry out a fact-specific exercise to balance the competing considerations” (paragraph 23).

In the circumstances of this case, Registrar Baister stated: “It is entirely appropriate for the press to seek to delve into the mind of the registrar (to the extent that it can) and to comment on what the court has done or appears to have done. The bankruptcy tourism question remains very much alive and is a legitimate matter of public interest in this country, in Ireland, in Germany and in Europe generally” (paragraph 36). Consequently, he granted the Times access to the court file of McNamara’s bankruptcy.


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What will “Transparency & Trust” mean for IPs?

0222 Cairns skyrail

My thanks to Mr Cable for re-appearing in the headlines and making this two month old consultation suddenly seem current again. The proposal in his “Transparency & Trust” paper that got everyone talking was the attempt to curb future excesses of the banks and demand by legislation that their directors take care to be socially responsible, but is there anything in the paper for IPs..?

The consultation can be found at https://www.gov.uk/government/consultations/company-ownership-transparency-and-trust-discussion-paper, although regrettably it closed to responses yesterday. Well, it’s been a busy summer!

Identifying Beneficial Owners

I’ve been doing a bit of work recently on compliance with the Money Laundering Regs and it has reminded me of the rigmarole around identifying, and verifying the identities of, an insolvent company’s beneficial owners. Identifying the >25% shareholders is the easy bit (although, of course, it gets a bit more complicated where the shareholders are corporate entities), but how, on day minus-one of an insolvency appointment, are you supposed to identify other beneficial owners, those who “otherwise exercise control over the management of the company”? People don’t often stand up and introduce themselves as shadow directors. The consultation describes other complications to identifying the beneficial owners, such as where a number of shareholders have agreed to act in concert.

BIS’ suggested solution: let’s make it a requirement for companies to disclose their beneficial owners. The consultation considers the details of such a system: when companies would be required to make such disclosure; to which companies it would apply; what about trusts; what powers would need to be granted and to whom to ensure compliance; whether such a registry would be publicly available or restricted only to law enforcement and tax authorities… but what I cannot help asking myself is: if a company is being misused for illegal purposes by some hidden beneficial owner, would the company really have complied with the legislation and disclosed him/her? Or is it more likely that such requirements would just put more burden on law-abiding companies in ensuring that their registers of beneficial owners, in which no one is really interested (the information only really has any value if money laundering has taken place, doesn’t it?), are kept up-to-date?

Although, personally, I cannot see such a system doing anything much to help prevent illegal activity, at least if IPs are able to see information on companies’ beneficial owners, it might help in their Anti-Money Laundering checks, and I think that anything that helps with that chore would be a bonus. So how likely is it that the information would be made public? It seems from the consultation that it is the Government’s preference and, even if that doesn’t happen, the second option is that it might be accessible to “regulated entities”, i.e. anyone who is required to make MLR checks.

There’s a sting in the tail, however. Slipped into the consultation is: “If they were given access to the registry, regulated entities would incur additional costs if they were required to check and report any inconsistencies between their own data and that held on the register” (paragraph 2.74). Can you imagine? Would they seriously require office holders to inform whoever that a defunct company’s register of beneficial owners was not up to date? My perception is that IPs do not really feature as a separate group in the minds of those who oversee the MLR, so I doubt that they would see the pointlessness of such a task.

Changing Directors’ Duties

Okay, this proposal won’t directly affect IPs, but I couldn’t help passing a quick comment. As no doubt you’ve heard, the proposal is to amend the directors’ duties in the CA06 “to create a primary duty to promote financial stability over the interests of shareholders” (page 61). It is noticeable that more consultation space is taken up listing the potential drawbacks of the proposal than its advantages. In addition to the described issues of how to enforce such a duty, how shareholders would react, how UK corporate banks would fare competing against banks not caught by the CA06, I was wondering how you could measure promoting financial stability: it seems to me that it would depend on whether you were to ask Vince Cable or George Osborne.

The consultation includes many other proposals, which would affect the disqualification regime – some of these are:

• whether the regime should be tougher on directors where vulnerable people have suffered loss (is the absence of a jubilant Christmas for a Farepak customer a more worthy cause than that for a redundant employee who’d worked hard up to the end of an insolvent company’s life?)
• whether the courts should take greater account of previous failures, even if no action has been taken on them (surely the just and socially-responsible solution would be to fund the Service adequately to tackle any misconduct of the first failure?)
• whether to extend the time limit for disqualification proceedings from two to five years (what about the Service’s method of prioritising cases? I appreciate that this is a gross simplification, but don’t they hold a big pile of potentials and progress those that they feel are in the public’s greatest interest, leaving the rest in the pile until it gets to the critical time when they have to make a decision one way or the other? Won’t the extension to five years simply mean that their potential pile holds four years’ worth of cases, rather than one year’s? Again, unless the Service is granted more resources, I cannot see that this measure would really help. I also object to the consultation’s comment that “it can quite easily be several months before the relevant insolvency practitioner reports to the Secretary of State detailing the areas of misconduct that may require investigation. In such cases, the limitation period might mean that misconduct is not addressed” (paragraph 12.2))
• whether “sectoral regulators”, such as the Pensions Regulator, FCA and PRA, should be granted the ability to ban people from acting as a director in any sector.
• whether directors who had been convicted/restricted/disqualified overseas should be prevented from being a director in the UK.

“Improving Financial Redress for Creditors”

The Government anticipates that, if liquidators and administrators (as the Red Tape Challenge outcome proposes to extend the power to take S213/4 actions to administrators) were entitled to sell or assign fraudulent and wrongful trading actions, a market for them would develop. Do you think so..?

BIS has thought about the possibility that directors (or someone connected to them) might bid for the action and, although they suggest an, albeit not water-tight, safeguard, they also point out that, if the director did buy the right of action, at least the estate would benefit from the sale consideration. Although, personally, I’d feel uncomfortable with that – and I’m not sure what the creditors would say (but, of course, the office holder could ask them, and maybe that would be a better safeguard?) – I guess it makes commercial sense.

The consultation also proposes to give the court the power to make a compensatory award against a director at the time it makes a disqualification order. The consultation states: “This measure could potentially affect the timeliness of obtaining disqualifications if it deterred directors from offering a disqualification undertaking and therefore resulted in more disqualification cases needing to be taken to court” (paragraph 11.16), but personally, I would have thought that this measure would increase exponentially the number of director undertakings, as there seems to be no suggestion that an undertaking would expose a director to the risk of an award.

It is envisaged that the award would not be used to cover the general expenses of the liquidation and “there is a question as to who should benefit from any compensatory award. This could be creditors generally or it could be left to the court to determine based on the facts of the case” (paragraph 11.14), although I assume that, if it were for the general body of creditors, the office holder would be expected to pay the dividend. I wonder how the office holder’s fees and costs would be viewed, if he had to keep the case open purely for the purposes of seeing through the outcome of any such action.

The consultation also states that “Liquidators would still be expected to consider whether there are any actions they could bring themselves, as they ought to now” (paragraph 11.15). Could liquidators be criticised for taking actions, the proceeds of which would settle first their costs, when, if it were left to the court on the back of a disqualification order, the creditors would see the full amount? It is a liquidator’s function to get in and realise the assets, so probably not, but administrators..?

The same paragraph states: “If by the time the disqualification action comes before the court, liquidators have successfully recovered monies from the directors, that is something the court would be expected to take into account when deciding whether or not to make a compensatory award (or in setting the amount of it)” – it could get fun if the actions were running in parallel.

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Despite my quibbles, generally I think the proposals are a step in the right direction. However, I wonder how those in the Service’s Intelligence and Enforcement Directorate feel about the proposals, which would lead to so much more work and high expectations laid upon them. Let’s hope that these proposals give them a sound case for increasing their access to funds and people.


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Hats Off

0520 Goblins

Having recently spent a week or so in Somerset enjoying the unseasonal blue skies (but yes, you’re right, the photo is not Somerset!), I’ve managed to accumulate quite a pile of BAILII reports. I don’t want to skip them entirely, as one day I do want to create a searchable index of my posts, so I’ve tried to give credit where I can to other write-ups of the judgments. Much is old news, therefore, but if you missed them the first time around…

• Olympic Airlines – failure to meet “establishment” test of European Insolvency Regulation rules out secondary insolvency proceedings.
• Jetivia v Bilta – argument that the company, by its liquidators, could not pursue claims based on a fraud to which it was party failed.
• Tchenguiz v SFO – liquidators’ reports not subject to litigation privilege, as litigation was not the dominant purpose for their production.
• Southern Pacific Personal Loans – liquidators were not data controllers for data processed by company pre-liquidation and, subject to certain conditions, they could destroy the data.
• JSC BTA Bank v Usarel Investments – useful comments regarding the absence of inevitable bias of court-appointed receivers when faced with prospect of taking action against party that sought their appointment.
• Bestrustees v Kaupthing Singer – reversal of administrators’ part-rejection of pension scheme claim, as changes in assets and liabilities after the actuary’s certificate “irrelevant”.
• Wood & Hellard v Gorbunova – receivers’ indemnity out of assets restricted, as respondent’s costs increased due to receivers’ “inappropriate conduct of the application”.
• JSC BTA Bank v Ablyazov – subject’s drawing down of £40m loans not “assets” for the purposes of a freezing order.

The Trustees of the Olympic Airlines SA Pension & Life Insurance Scheme v Olympic Airlines SA (6 June 2013) ([2013] EWCA Civ 643)

http://www.bailii.org/ew/cases/EWCA/Civ/2013/643.html

A successful appeal against a secondary winding-up in England provides clarification of the meaning of “establishment” of the European Insolvency Regulation, but makes it difficult to call on the PPF where a scheme is exposed to an insolvency with main proceedings in another EU/EEA state.

A couple of good summaries (although with differing views on how things may change on the revision of the EIR) are provided by Malti Shah of Taylor Wessing (http://goo.gl/0m0aDZ), and Justin Briggs & Charles Crowne of Burges Salmon (http://goo.gl/P0I3G4).

(UPDATE 07/08/14: The enactment of the Pension Protection Fund (Entry Rules) (Amendment) Regulations 2014 have opened the way for this scheme to access the PPF. The Regulations cease to have effect on 21 July 2017 and set down such specific criteria that it seems unlikely that it will help many more schemes access the PPF. For a more detailed analysis, see Mayer Brown’s article at: http://goo.gl/Xzyx5q)

(UPDATE 21/05/15: the Supreme Court considered an appeal and swiftly dismissed it, endorsing the Court of Appeal’s earlier decision that having three employees in the country involved only in winding up the company’s affairs did not amount to “economic activity”.  The judgment, given on 29 April 2015, can be found at: http://www.bailii.org/uk/cases/UKSC/2015/27.html)

Jetivia SA & Anor v Bilta UK Limited (in liquidation) & Ors (31 July 2013) ([2013] EWCA Civ 968)

http://www.bailii.org/ew/cases/EWCA/Civ/2013/968.html

Bilta, by its liquidators, brought claims for conspiracy and dishonest assistance against the appellants, who sought to defeat the claims on the basis that, as Bilta was party to the illegal act, it could not bring the claims (the ex turpi causa principle). The appeals were dismissed.

Tom Henderson of Herbert Smith Freehills LLP has produced a good summary of the case, I think: http://www.lexology.com/library/detail.aspx?g=ead603c4-454c-4d19-ae54-4ed2196ec771

Tchenguiz & Ors v Director of the Serious Fraud Office & Ors (26 July 2013) ([2013] EWHC 2297 (QB))

http://www.bailii.org/ew/cases/EWHC/QB/2013/2297.html

The court found that the joint liquidators’ reports were not subject to litigation privilege, as the judge was not convinced that the dominant purpose for which the reports were originally produced was for obtaining information or advice in connection with pending or contemplated litigation, or for conducting or aiding in the conduct of such litigation.

Timothy Wright and Nicholas Greenwood of Morgan Lewis & Bockius LLP – http://www.lexology.com/library/detail.aspx?g=c1be8860-2d7d-466b-a1b7-3d3be7b93431 – have produced a pretty good summary of the case.

(UPDATE 15/10/13: this decision is subject to an appeal by the liquidators.)
(UPDATE 16/03/14: the liquidators’ appeal, heard on 20/02/14, was dismissed: http://www.bailii.org/ew/cases/EWCA/Civ/2014/136.html. As in the first instance, the judge emphasised “the need to establish which of dual or even multiple purposes was dominant if a plausible claim to privilege was to be made out” (paragraph 22), and felt that the appellants had not demonstrated that the dominant purpose of the communications was for use in actual or anticipated litigation. He agreed with Counsel for the respondents that, even with liquidations of this nature, it cannot be right to assume that everything that a liquidator does is in contemplation of litigation.)

Re. Southern Pacific Personal Loans Limited (8 August 2013) ([2013] EWHC 2485 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2013/2485.html

Liquidators estimated that the costs of responding to data subject access requests (“DSARs”) on a case amounted to £40,000 per month. Thus, they sought directions on whether there was a way of avoiding this ongoing expense.

Mr Justice David Richards concluded that the rights to control the data remained vested in the company and the company remained under a statutory obligation to deal with the DSARs. He stated that, as the liquidators acted as agents of the company, they were not data controllers in respect of the data processed by the company prior to liquidation.

In considering application of the fifth data protection principle – that personal data should not be kept for longer than is necessary for the purposes for which it was processed – David Richards J directed that the liquidators might dispose of all personal data in respect of which the company is the data controller subject to two qualifications: (i) that the company retained sufficient data to enable it to respond to DSARs made before the disposal of data; and (ii) that the liquidators retained sufficient data to enable them to deal with any claims that might be made in the liquidation.

JSC BTA Bank v Usarel Investments Limited (24 June 2013) ([2013] EWHC 1780 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2013/1780.html

The circumstances of this case – involving a litigation receiver seeking a ruling that his appointment to defend an action gave him power to conduct an appeal (which was not granted) – are unlikely to arise often, if at all, but I thought that Mr Justice Warren’s comments on the integrity of court-appointed receivers were worth repeating.

Warren J felt that the receivers and managers (who were appointed after the litigation receiver) were just as competent to decide on whether an appeal should be pursued as the litigation receiver. He stated: “I do not consider that it can be said that, whenever the Court appoints a receiver and manager nominated by an applicant for such an appointment, there is inevitably a justified perception of bias if the appointed nominee needs to consider whether to pursue litigation against the person who applied for his appointment. His position, as an officer of the Court, is different from that of a receiver or manager appointed for instance by the holder of a charge over the company’s assets. A perhaps justified perception of bias in relation to a receiver or manager appointed out of Court should not be allowed to infect the perception of an officer of the court” (paragraph 37).

Bestrustees Plc v Kaupthing Singer & Friedlander Limited (in Administration) (31 July 2013) ([2013] EWHC 2407 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2013/2407.html

Bestrustees appealed against the Administrators’ decision to reduce its proof of debt by £2 million. The Administrators’ reason for reducing the proof was because the actuary had certified that the deficit of the occupational pension scheme (“the section 75 debt”) was £74,652,000, but they had attributed no value to the £2 million deposited by the scheme with the company in a trust account, which at that time was subject to legal proceedings but the funds were paid to the scheme later.

The Administrators were ordered to reverse the £2 million reduction to the proof, primarily because they had not challenged the amount of the section 75 debt, as certified by the actuary, and they had not challenged the nil value attributed to the deposit subject to pending litigation at that time. The Chancellor of the High Court, Sir Terence Etherton, observed: “the Employer Debt Regulations require the assets and liabilities of a pension scheme to be valued, for the purposes of ascertaining the section 75 debt, in a notional exercise immediately before the trigger event, here KSF entering into administration on 8 October 2008. Changes in the value of assets or the extent of liabilities after that time are irrelevant. In the present case, just as the value of the £2 million deposit increased after 8 October 2008 as litigation progressively clarified the rights of those, including the Trustee, entitled to the money in the trust account, so the evidence also shows that the scheme’s ‘buy out’ liabilities, that is to say the notional cost of going into the market to purchase the annuities which would match the scheme’s liabilities to its pensioners and members, also increased substantially after that date” (paragraph 35).

Wood & Hellard v Gorbunova & Ors (5 July 2013) ([2013] EWHC 1935 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2013/1935.html

Receivers were indemnified out of the assets only to the extent of two thirds of the costs of one respondent (and 85% of another’s) on the basis that the respondent’s costs “increased by reason of the inappropriate conduct of the application by the receivers” (paragraph 66).

Mr Justice Morgan acknowledged the “difficulties the receivers found themselves in and their proper desire to get the receivership moving” (paragraph 68), but he felt that the receivers had been unwise in seeking wide-ranging orders, some elements of which were dropped later by the receivers, and that they had persuaded themselves that the respondent was being recalcitrant when the judge felt that the respondent had behaved properly throughout and simply had been subject to legitimate constraints in delivering up papers.

JSC BTA Bank v Ablyazov (25 July 2013) ([2013] EWCA Civ 928)

http://www.bailii.org/ew/cases/EWCA/Civ/2013/928.html

A freezing order was drafted in a standard form to prohibit Mr Ablyazov from in any way disposing of, dealing with, or diminishing the value of his assets. The bank sought to persuade the court that the loan facility agreements entered into by Mr Ablyazov, which enabled him to instruct the lenders to pay £40 million direct to third parties, were “assets” for the purposes of the freezing order.

The court at first instance agreed that they were choses in action, but its decision that not all choses in action were assets was appealed by the bank. Lord Justice Beatson agreed with the earlier judgment: “a man who is entitled to borrow and does so ‘is not ordinarily to be described as disposing of or dealing with an asset’. As Sir Roy Goode has stated, albeit in the context of section 127 of the Insolvency Act 1986, ‘[i]f there is one thing that is still clear in the increasingly complex financial scene … it is that a liability is not an asset and that an increase in a liability is not by itself a disposition of an asset’” (paragraph 72).