Khan v Goldfarb – proprietary injunctions

In this case, a trustee in bankruptcy brought claims pursuant to section 339 and section 423 of the Insolvency Act 1986 seeking declarations that three properties that had been transferred to the bankrupt’s daughter by the bankrupt had been transferred at an undervalue or to defraud the bankrupt’s creditors. 

The trustee in bankruptcy sought and obtained proprietary injunctions against the three properties preventing the daughter from disposing of the properties until the conclusion of the claims. 

The daughter appealed against the making of the proprietary injunctions.

The daughter’s representative submitted in effect that on a proprietary injunction application it was necessary to establish that, if the claim in support of which the injunction was being sought was successful, this would have the effect that the applicant had a proprietary interest as at the date the application for the injunction was made.

Furthermore, since the relief under section 339 and/or 423 was not capable of voiding transactions ab initio, ie, from the date the transaction was entered into; rather the relief was effective only from the later date when the court made the section 339 or section 423 order, the trustee in bankruptcy had no present proprietary interest in the properties at the time of the application for an injunction such that the proprietary injunction jurisdiction was not available. 

The court disagreed with the first limb of the reasoning: it was not necessary to found a proprietary injunction for the applicant to have a present proprietary interest in the asset the subject of the injunction; it was sufficient if the claim was for a proprietary interest that may be granted by the court in the future and there was a serious issue to be tried. The court went on to dismiss the other grounds of appeal and the appeal thus failed.

Khan v Goldfarb [2025] EWHC 874 (Ch), Business and Property Courts sitting in Cardiff on appeal from the County Court.