Avery-Gee v Thompson & Ors [2018] EWHC 743 (Ch) (9 January 2018)

Avery-Gee v Thompson & Ors [2018] EWHC 743 (Ch) (9 January 2018)

The asset sale agreement was a transaction at an undervalue because the company received significantly less than the value of the assets transferred, as a substantial portion of the consideration was diverted to Mr Thompson. Mr Thompson did not act in good faith in accepting payments from EMS without inquiry, knowing the company was insolvent and that the payments were not from the party contractually obliged to pay him. Mr Frayne provided no value and cannot rely on good faith. The court should order repayment to restore the position for the benefit of creditors, except for sums received by Mr Thompson before he had notice of EMS's involvement.

Citation
[2018] EWHC 743 (Ch)
Parties
Applicant: Stephen L Conn; Applicant: Jonathan E Avery-Gee; Respondent: David Thompson; Respondent: EMS Waste Services Ltd; Respondent: Jesse Frayne
Jurisdiction
England and Wales
Judgment Date
09 January 2018
Procedural Posture
Insolvency Application Under Section 238 Insolvency Act 1986 / Judgment After Final Hearing
Outcome
Application granted in part; orders made against Mr Thompson and Mr Frayne for repayment of specified sums.
Legal Topics
Transaction at an Undervalue, Section 238 Insolvency Act 1986, Good Faith and Value in Insolvency, Restoration of Company Assets, Directors' Duties, Relief Under Section 241 Insolvency Act 1986
Insolvency Company Law Transaction at an Undervalue Section 238 Insolvency Act 1986 Good Faith and Value in Insolvency Restoration of Company Assets Directors' Duties Relief Under Section 241 Insolvency Act 1986

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Parties

Stephen L Conn

Applicant

Jonathan E Avery-Gee

Applicant

David Thompson

Respondent

EMS Waste Services Ltd

Respondent

Jesse Frayne

Respondent

Procedural Posture

Insolvency Application Under Section 238 Insolvency Act 1986 / Judgment After Final Hearing

Legal Issues

  1. 1 Whether the sale of the company's business under the March 2016 asset sale agreement was a transaction at an undervalue under section 238 Insolvency Act 1986
  2. 2 Whether payments made to Mr Thompson were recoverable by the liquidators
  3. 3 Whether Mr Thompson and/or Mr Frayne acted in good faith and for value so as to be protected under section 241(2)

Ratio Decidendi

The asset sale agreement was a transaction at an undervalue because the company received significantly less than the value of the assets transferred, as a substantial portion of the consideration was diverted to Mr Thompson. Mr Thompson did not act in good faith in accepting payments from EMS without inquiry, knowing the company was insolvent and that the payments were not from the party contractually obliged to pay him. Mr Frayne provided no value and cannot rely on good faith. The court should order repayment to restore the position for the benefit of creditors, except for sums received by Mr Thompson before he had notice of EMS's involvement.

Court Disposition

Application granted in part; orders made against Mr Thompson and Mr Frayne for repayment of specified sums.

Orders

  • Mr Thompson to pay £44,687.50 to the company or its insolvency office holders, representing five payments received between April and August 2016.
  • Mr Frayne to pay £62,562.50 to the company or its insolvency office holders, representing reimbursement of £30,000 and all seven payments made to Mr Thompson.