M and T were former partners in a law firm. In June 2008 M assigned the benefit of a loan to T, ostensibly in settlement of an earlier liability of M to T. T assigned the benefit of the loan to his wife. In 2011 T’s wife issued proceedings seeking to enforce the loan, pursuant to which £400,000 was paid into court.
In November 2009 a bankruptcy order was made against T. In July 2012 a bankruptcy order was made against M. The trustees in bankruptcy for M issued an application under ss.339 and 340 of the Insolvency Act 1986 seeking to impugn the assignment from M to T as a preference or a transaction at an undervalue. T’s trustees sought a similar declaration in relation to the assignment from T to T’s wife.
M’s trustees contended that M’s claim against T’s estate under s.339 or s.340 was not a provable claim and the court had no discretion to stay the claim under s.285. They contended that there could be no obligation incurred before the commencement of bankruptcy whereas ss.339-340 could only be employed to impugn a transaction upon bankruptcy and any order under these sections only had prospective effect.
Upholding the decision of the registrar, the court held that the claim was a bankruptcy debt as defined in s.382(1).
M’s trustees further argued that the claim against T’s wife was a separate claim which the court did not have a discretion to stay. The court rejected this, as the second claim was dependent upon the first. Further, the claim against T’s wife was a claim made on behalf of T’s estate and could not be pursued by M’s estate for its own benefit.
The court’s decision turned upon the finding that the combination of the pre-existing transaction and the relevant statutory scheme under ss.339-340 provided the necessary “obligation” to render the claim a bankruptcy debt for the purposes of s.382(1)(b).
