Managh v Morrison and Ors involved an application by a liquidator to set aside a transaction pursuant to section 292 of the Companies Act 1993. Approximately one year before liquidation the company assigned causes of action against a firm of solicitors and a real estate agent to a trust associated with the company's director.
At the time of the assignment the trust was a creditor of the company (but only for a small amount). Upon the company's liquidation, the liquidator contended that the assignment was voidable as it enabled the trust to receive more than it would have received in the liquidation. It was not disputed that the company was insolvent at the time of the assignment, and its only assets of significance were the causes of action. The issue was whether the transaction enabled the trust to receive more towards satisfaction of its debt than it would have received, or would have been likely to receive, in the company's liquidation.
The trust argued this requirement could not be met because the liquidator could not show that the trust would receive a net return from the assignment. The Court rejected this argument and held that the assignment was a voidable transaction. The Court said that the term "enable" in section 292 requires only that the creditor is given the means to improve its position over that of other creditors, not that it will necessarily succeed in doing so. It went on to hold that the evidence disclosed support for the claims that were the subject of the assignment and that there was sufficient substance in the claims to conclude that the trust would be likely to receive more from the litigation than it would have received in the liquidation. The assignment was set aside.
See Court decision here.