Court interprets meaning of “value” in defence to void disposition claims

Mills & Reeve acted for the trustee in bankruptcy in a case which has provided important interpretation of “value” in the context of Section 284(4) IA1986.

The bankrupt had made payments to the respondents after the presentation of the petition. In consideration for those payments, R3 had purchased dental equipment for onward lease to a partnership between the bankrupt's parents, and R6 let premises to a company whose shareholders were the bankrupt and his parents.

It was common ground that each of the payments made by the bankrupt was a disposition within the meaning of Section 284 of the Act, and the trustee accepted that, in receiving them, the respondents acted in good faith and without notice of the petition. The central issue was whether the payments had been received by the respondents "for value" within the meaning of Section 284(4) (a).  If they had, Section 284(1) and Section 284(2) would not provide the trustee with a remedy.

It was acknowledged by all parties that there was an absence of case law on the issue, and it fell to the court to decide how “value’ should be interpreted in this context.

The trustee argued that Section 284(4) had to be read narrowly, and that Section 284(4) (a) involved considering either the direct value received by the bankrupt, or the value from the bankrupt's point of view. He argued that each respondent had provided value to third parties and not to the bankrupt, no value having been received into the bankruptcy estate as a result of the payments.

The court disagreed, deciding that while Section 284 was designed to protect the estate for the benefit of the bankrupt's creditors as a whole, that was not a supreme principle. It held that there is no requirement for the value provided by the transferee to be full, or that it must be received by the bankrupt or the estate rather than a third party. It considered, therefore, that value is provided wherever there is any consideration (so that the transferee's receipt is not gratuitous).

Re Jagdev Singh Wasu Sub Nom Darren Edwards (Trustee In Bankruptcy Of Jagdev Singh Wasu) V (3) Aurora Leasing Ltd (6) Howard De Walden Estates Ltd [2021]

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