Court of Appeal success for Giles Maynard-Connor

March 27, 2018

Giles Maynard-Connor has secured an important victory for his clients in a complex bankruptcy case at the Court of Appeal, which has significant and wide-ranging implications for both the personal and corporate insolvency fields.

Acting for the appellants in EAITISHAM AHMED (A DEBTOR) sub nom (1) KASHIF AHMED (2) BUSHRA AHMED (3) TESNEEM AHMED (4) TABASUM HUSSAIN v (1) DAVID INGRAM (2) MICHAELA HALL (JOINT TRUSTEES IN BANKRUPTCY OF THE ESTATE OF EAITISHAM AHMED) (2018) Giles Maynard-Connor was instructed by Pannone Corporate.

The Court of Appeal considered the correct approach to determining liability for breach of trust in the context of avoided transactions, in this case where a brother had transferred minority shareholdings to his siblings after petitioning for bankruptcy but before the bankruptcy order was made.  The Court also commented upon the appropriate method of valuing the shares and explained how to calculate the loss suffered by the bankrupt’s estate.

The appellant siblings, who had received minority shareholdings in three family companies from their brother, appealed against a decision that they were jointly liable, pursuant to the Insolvency Act 1986 s.284, to pay a sum representing the fair value of the shares to the respondent trustees in bankruptcy.

The bankrupt had transferred the shares to the first appellant between presentation of the bankruptcy petition in January 2007 and the making of the bankruptcy order in April 2009. The first appellant made subsequent transfers to his sisters, the second to fourth appellants. The trustees in bankruptcy successfully challenged the transfer with a view to restoring the value of the shares to the bankrupt’s estate. The appellants delivered the shares up in February 2015, shortly before trial. A judge determined the fair value of the shares at £2.26 million. She ordered the appellants to pay a sum representing the fair value of the shares as at the transfer date less their value upon re-delivery to the trustees. It was common ground that the trustees in bankruptcy were entitled to the return of the shares, plus equitable compensation for any loss suffered as a result of the appellants’ wrongful retention. The appellants disagreed with the judge’s analysis of liability and her calculation of loss.


Did s.284 provide a free-standing right to recover compensation for loss arising out of the illegitimate transfer of shares? No. It operated only to avoid relevant dispositions and was silent as to appropriate remedy. Remedy was determined by the general law and was restitutionary, Hollicourt (Contracts) Ltd (In Liquidation) v Bank of Ireland [2001] Ch. 555 applied (see paras 29, 33 of judgment).

Had the judge taken the correct approach to determining the appellants’ liability? No. She seemed to have decided that the appellants had committed a breach of trust, which had caused loss. She did not explain what loss, or why the breach had occurred, only that it occurred on the transfer date, and that the first appellant, as trustee, owed a fiduciary duty to preserve the share value. She had been wrong to find that the estate should be restored to the position it would have been in had the trustees in bankruptcy been able to realise the shares immediately. The word “restitutionary”, as used in the authorities, meant restoring trust property actually lost as a result of the breach of trust. The judge appeared to have fixed the loss as at the transfer date simply because, the transfer being void, there was an obligation on that date to restore the shares. The trustees in bankruptcy were only entitled to be compensated for any diminution in the value of the shares which they could prove had actually been suffered by the appellants’ breach of trust, AIB Group (UK) Plc v Mark Redler & Co Solicitors [2014] UKSC 58 and Target Holdings Ltd v Redferns [1996] A.C. 421 followed. Liability was, therefore, fault-based. The judge should have identified (a) what constituted the breach of trust; (b) when it occurred; (c) the loss actually caused to the estate in line with the principles in AIB and Target Holdings (paras 32-38).

The judge was wrong in law to have fixed the appellants with liability as at the transfer date without requiring the trustees in bankruptcy to show actual loss. On the evidence, the first appellant (and/or the sisters, depending on the dates of the subsequent transfers to them) had held legal title to the shares and were therefore constructive trustees from the date of the bankruptcy order until the date on which the shares vested in the trustees in bankruptcy. The first apellant’s knowledge of the facts made him a bare trustee. Accordingly, he (and the sisters) had been under an immediate obligation to restore the bankruptcy estate as soon as a trustee in bankruptcy was appointed, so that the shares could be realised for the benefit of creditors. The breach of trust therefore occurred on the date of appointment of the trustee in bankruptcy, and the loss on the date when the trustee in bankruptcy would have sold the shares. On the evidence, that date was 30 June 2010. The appellants were therefore only liable for the diminution in value of the shares from 30 June 2010 until their return shortly before trial (paras 40-41, 45-46, 50-51, 54-55, 57-61).

Was “fair value” the appropriate method of valuation? Yes. The argument in favour of market value was rejected (paras 64-65).

Appeal allowed.


For the appellants: Giles Maynard-Connor

For the respondents: Frances Collaco Moraes


For the appellants: Pannone Corporate LLP

For the respondents: Max Legal Ltd

Related Proceedings:

Ingram v Ahmed [2016] EWHC 1536 (Ch), [2016] B.P.I.R. 1087


Please note – a version of this text originally appeared on Lawtel.