In a recent significant case, the Supreme Court has, in declining to extend the scope of section 127 of the Insolvency Act 1986, given some indication of its limits.

Akers and ors v Samba Financial Group [2017] UKSC 6 concerned a company, SICL, in liquidation in the Cayman Islands. A Mr Al-Sanea held shares worth in excess of US$300m on trust for SICL. Some 6 weeks after liquidation, Mr Al-Sanea transferred those shares to Samba Financial Group, a Saudi Arabian bank, in discharge of his own personal liabilities to Samba.

SICL and its joint liquidators brought proceedings against Samba alleging that the transfers of the shares were void under section 127 of the Insolvency Act 1986. Section 127(1) provides that ‘In a winding up by the court, any disposition of the company’s property, and any transfer of shares, or alteration in the status of the company’s members, made after the commencement of the winding up is, unless the court otherwise orders, void.

On its way to the Supreme Court, the chief issues argued in the case related to whether an equitable proprietary interest can exist in an asset sited in a jurisdiction which does not recognise the concept. In particular, the law of Saudi Arabia, where the shares are sited, does not recognise the institution of a trust or a distinction between legal and equitable proprietary interests.

But the Supreme Court did not regard this as the key question. The key question was whether there had in fact been any disposition of SICL’s rights.

The Court held unanimously that there had been no such disposition. The transfers of the shares was certainly done in breach of trust. But they amounted to a disposition by Mr Al-Sanea of his legal interest in the shares. As set out by Lord Mance, ‘SICL’s property, whether it consisted of an equitable proprietary interest or personal rights to have the shares held for its benefit, continued, despite the disposal of the legal title, unless and until that disposal overrode it. If the disposal overrode SICL’s interest as regards a third party transferee of the legal title such as Samba, that was not because of any disposal of SICL’s interest. It was because SICL’s interest was always limited in this respect’ (at [54]). The equitable interests of SICL were not in fact transferred to Samba, but were overridden, assuming Samba was a bona fide purchaser without notice.

This case will have repercussions for the way in which claims are framed, and against whom they are brought, as it is clear from the more general statements of Lords Mance and Neuberger (at [56] and [72]) that section 127 is simply not intended to apply to situations where a trustee transfers trust assets to a third party. That position may not have previously been readily apparent given the somewhat wide definition of property at section 436 of the Insolvency Act 1986 and the potentially broad application of the concept of ‘disposition’.


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