Ailyan & Ors v Smith & Ors

Ailyan & Ors v Smith & Ors

The court found that all payments made by Mr Foster to the respondents were transactions at an undervalue, as the consideration received (units in a dishonestly operated pyramid scheme and artwork) was negligible or substantially less than the money paid. The respondents were parties to the transactions, which occurred at a relevant time when Mr Foster was insolvent. The court ordered repayment to restore the position as if the transactions had not occurred.

Parties
Applicant: Nedim Ailyan; Applicant: Mark Fry; Respondent: Lee Smith; Respondent: Darren Smith; Respondent: Barry Bashford; Respondent: Nigel Stevens
Jurisdiction
England and Wales
Judgment Date
08 January 2010
Procedural Posture
Bankruptcy Application / Judgment
Outcome
judgment for applicants
Legal Topics
Transactions at Undervalue, Pyramid Schemes, Corporate Veil, Valuation of Consideration, Dishonest Operation of Schemes
Insolvency Bankruptcy Civil Procedure Transactions at Undervalue Pyramid Schemes Corporate Veil Valuation of Consideration Dishonest Operation of Schemes

Case Brief

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Parties

Nedim Ailyan

Applicant

Mark Fry

Applicant

Lee Smith

Respondent

Darren Smith

Respondent

Barry Bashford

Respondent

Nigel Stevens

Respondent

Procedural Posture

Bankruptcy Application / Judgment

Legal Issues

  1. 1 Whether payments made by Mr Foster to the respondents were transactions at an undervalue under section 339 of the Insolvency Act 1986
  2. 2 Whether the transactions occurred at a relevant time as defined by section 341
  3. 3 Whether the respondents were parties to the transactions

Ratio Decidendi

The court found that all payments made by Mr Foster to the respondents were transactions at an undervalue, as the consideration received (units in a dishonestly operated pyramid scheme and artwork) was negligible or substantially less than the money paid. The respondents were parties to the transactions, which occurred at a relevant time when Mr Foster was insolvent. The court ordered repayment to restore the position as if the transactions had not occurred.

Court Disposition

judgment for applicants

Orders

  • First three respondents (Lee Smith, Darren Smith, Barry Bashford) to repay jointly and severally £5,002,943 for purchase transactions, less 0.6% allowance for value of art delivered.
  • First three respondents to repay £3,271,604 for transfer transactions admitted to have been received by them.