In Cage Consultants Limited v Iqbal & Iqbal  EWHC 2917 (Ch), the liquidators of Totalbrand Limited (the company) assigned certain claims – including for transactions at an undervalue and preferences – to litigation funders Cage Consultants Limited (CCL) under s.246ZD Insolvency Act 1986. The company was subsequently dissolved.
A former director of the company and another individual alleged to have benefitted from the transactions tried to strike out the claims. They did this on the basis that:
- s.246ZD does not give an assignee sole entitlement to the proceeds, and
- the proceedings had to provide for payment to be made to the assets of the insolvent company for the benefit of its creditors, which could not happen until the company was restored to the register of companies.
The Court refused to strike out the claims, because:
- the wording of s.246ZD(2) clearly permits the assignment of the right of action "including the proceeds of an action"
- the creditors would not be deprived of any benefit as the assignee will have paid a price to "purchase" the claim which benefits the creditors of the company
- for s.246ZD(2) to be given any practical meaning, you should notionally add words to the provisions of the Insolvency Act that create the claims being assigned so that there is no ongoing role for the assignor, which should not be kept "artificially alive" for the purpose.