The company entered into creditors voluntary liquidation. The liquidator assigned a number of rights of action to a third party assignee pursuant to section 246ZD of the Insolvency Act 1986. The causes of action included claims against the first defendant, as a director of the company, for fraudulent trading under section 213 of the Insolvency Act 1986, and claims against the second defendant for recovery of payments from the company that were said to amount to either a transaction at an undervalue or a preference under sections 238 and 239 of the 1986 Act respectively. The company was dissolved some time after the assignment. The defendants applied for proceedings brought by the assignee to be dismissed, contending that sections 213, 238 and 239 of the 1986 Act only empowered the court to order the making of a contribution to assets of the company or to make some other order which would have the effect of restoring the position of the company. Accordingly, if, as in the present case, the company had ceased to exist, any claim pursued by an assignee was incapable of resulting in any order. The district judge refused the application.
On the defendants’ application for permission to appeal—
Held, application refused. The plain wording of section 246ZD of the Insolvency Act 1986 envisaged an outright assignment by the liquidator of the entire rights of action and all of the proceeds of such rights of action to the assignee. The section required a purposive and non-literal interpretation to be given to the sections of the 1986 Act creating the liquidator’s rights of action by notionally adding words to the effect that the right to apply to the court was given to the office-holder “or his assignee following an assignment of the right of action pursuant to section 246ZD”. To read section 246ZD otherwise would deprive the section of its practical utility for office olders and thereby frustrate the clear legislative purpose, which was to provide an alternative mechanism by which creditors could benefit from the proceeds of sale of such claims and to increase the number of claims brought against miscreant directors so as to bring about long-term improvements in the behaviour of directors generally (paras 21–28).
Steven McGarry for the defendants.
The assignee did not appear and was not represented.