MacDonald and another v Carnbroe Estates Ltd (Scotland)

MacDonald and another v Carnbroe Estates Ltd (Scotland)

Carnbroe failed to establish that the consideration paid for the property was adequate, as there was no evidence that the price reflected what would have been achieved by a sale through a liquidator or security holder. The Inner House was entitled to interfere with the Lord Ordinary’s assessment. However, the court has discretion under section 242(4) to fashion an appropriate remedy, which may include giving credit for consideration paid by a bona fide purchaser, and the case should be remitted to the First Division to determine the appropriate remedy.

Parties
Respondents: MacDonald and another; Appellant: Carnbroe Estates Ltd
Jurisdiction
England and Wales
Judgment Date
04 December 2019
Procedural Posture
Civil Appeal (insolvency) / Supreme Court Judgment on Appeal From Inner House
Outcome
Appeal allowed in part; case remitted to the First Division to determine the appropriate remedy under section 242(4) in light of the court’s power to give appropriate redress.
Legal Topics
Gratuitous Alienations, Adequate Consideration, Remedies for Undervalue Transactions, Directors' Duties on Insolvency, Restitution and Unjust Enrichment
Insolvency Law Property Law Company Law Gratuitous Alienations Adequate Consideration Remedies for Undervalue Transactions Directors' Duties on Insolvency Restitution and Unjust Enrichment

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Parties

MacDonald and another

Respondents

Carnbroe Estates Ltd

Appellant

Procedural Posture

Civil Appeal (insolvency) / Supreme Court Judgment on Appeal From Inner House

Legal Issues

  1. 1 What constitutes 'adequate consideration' under section 242(4)(b) of the Insolvency Act 1986?
  2. 2 Was the Inner House entitled to interfere with the Lord Ordinary’s evaluation of adequacy of consideration?
  3. 3 Does the court have discretion as to the remedy under section 242(4)?

Ratio Decidendi

Carnbroe failed to establish that the consideration paid for the property was adequate, as there was no evidence that the price reflected what would have been achieved by a sale through a liquidator or security holder. The Inner House was entitled to interfere with the Lord Ordinary’s assessment. However, the court has discretion under section 242(4) to fashion an appropriate remedy, which may include giving credit for consideration paid by a bona fide purchaser, and the case should be remitted to the First Division to determine the appropriate remedy.

Court Disposition

Appeal allowed in part; case remitted to the First Division to determine the appropriate remedy under section 242(4) in light of the court’s power to give appropriate redress.

Orders

  • Remit to the First Division to consider whether and how to qualify the remedy of reduction to account for consideration paid by Carnbroe.