Lloyd's Maritime and Commercial Law Quarterly
Transactional avoidance in insolvency and change of position
Andrew Keay*
Provisions in the Insolvency Act 1986 that allow insolvency officeholders to bring proceedings seeking the avoidance of antecedent transactions provide for restitutionary relief. Given that, this paper examines whether, if an officeholder who brings an avoidance action satisfies the conditions in the Insolvency Act, the respondent to the proceedings, on the current law, can plead the restitutionary defence of change of position either as a defence to the action or to use it to try to persuade a court that it should decline to grant relief to the officeholder. Secondly, the paper analyses whether the state of the law as it presently stands is in fact correct and appropriate.
I. INTRODUCTION
The Insolvency Act 1986 (“the Act”) endows certain insolvency officeholders, that is those who are appointed to deal with the affairs of an insolvent under a formal insolvency regime, such as administration, liquidation or bankruptcy,1 with the right to take action against some parties who may have benefited from a transaction in which a payment or disposition was made to them by the insolvent within a certain period before the insolvency regime commenced. The actions available to officeholders (“avoidance actions”) will seek the avoidance of the transactions which are impugned. Avoidance actions constitute critical weapons in the arsenal of an administrator, liquidator or trustee in bankruptcy, as the avoidance of transactions will augment the property and funds of the insolvent estate available to be distributed to its creditors. The notion behind this is that, if assets and funds that are disposed of before an insolvency regime commences are not recovered and included in the insolvent estate, then this perverts the scheme laid down by the Act for dealing with the insolvent’s property.
Actions by officeholders, brought under one or more of the provisions in the Act which allow for the avoidance of pre-regime transactions (“avoidance provisions”), if successful, will usually be rewarded by the provision of restitutionary relief.2 This reverses the unjust enrichment resulting from the entry into the impugned transaction. Where relief is sought
* Professor of Corporate and Commercial Law, School of Law, University of Leeds and Barrister, Kings Chambers and 9 Stone Buildings (Lincoln’s Inn). The abbreviations “the Act” and “IA 1986” are used for The Insolvency Act 1986.
1. These officeholders are administrators, liquidators and trustees in bankruptcy.
2. Skandinaviska Enskilda Banken AB v Conway [2019] UKPC 36; [2020] AC 1111; [2019] BPIR 1562, [77]; Johnson v Arden [2018] EWHC 1624 (Ch), [92].
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