In Akers & Ors v Samba Financial Group (Rev 1) [2017] UKSC 6, the UK Supreme Court confirmed that British insolvency officers can only void dispositions of a company's assets held on trust in certain circumstances. 

Mr Al-Sanea held shares in various Saudi Arabian banks on trusts governed by Cayman Islands law, on behalf of the claimant, Saad Investments Co Ltd (SICL).  Six weeks after SICL's liquidation, Mr Al-Sanea transferred the shares to the defendant Samba Financial Group (Samba) in breach of the trust.  SICL argued that the transfer was void under section 127 of the Insolvency Act 1986 (UK) (s 127), as the transfer was a "disposition of the company's property... made after the commencement of the winding up."

The case turned on the application of the conflict of laws rules, namely the lex situs rule as recognised in Macmillan Inc v. Bishopsgate Investment Trust (No 3) [1996] 1 WLR 387, and whether there was a "disposition" of property within the meaning of s 127.

The Supreme Court found that under English law, a trust may be created, exist, and be enforceable in respect of assets located in a jurisdiction where that jurisdiction's law does not recognise trusts (in this case, Saudi Arabia).  With regard to s 127, the Court found that the section addresses cases in which legally owned assets are disposed of, not when a trustee holds an asset on trust and transfers it to a third party in breach of trust.  Rather than being classified as a disposition under s 127, the beneficiary could protect and enforce its beneficial interest against the trustee through the application of regular principles of equity.  However, the Court noted that the enforceability of beneficial interests will be inherently limited against third parties, for example by the common law rule protecting bona fide purchasers for value.

The decision is relevant to insolvency practitioners in the UK or in jurisdictions with avoidance provisions similar to s 127, and to practitioners dealing with them in relation to trust assets located anywhere in the world, under common-law jurisdiction or otherwise.

See the Court's decision here.