Judgment Given In A Transaction Defrauding Creditors Claim Following Strike Out (Integral Petroleum SA v Pretrogat FZE And Ors)

• Law Firm: Gatehouse Chambers
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Insolvency/Bankruptcy/Re-structuring, Corporate and Company Law, Insolvency/Bankruptcy, Arbitration & Dispute Resolution
• Author: Mr Phillip Patterson
• Published date: 27 February 2023

Dispute Resolution analysis: When the owners and controllers of a company refused to identify the recipient of payments made out of the company during the course of arbitration proceedings, their defence to a claim under section 423 of the Insolvency Act 1986 was struck out and judgment was entered against them.

Integral Petroleum SA v Pretrogat FZE and ors [2023] EWHC 44 (Comm)

What are the practical implications of this case?

This case considers the application of both section 423 of the Insolvency Act 1986 outside of ongoing insolvency proceedings and also the sort of relief which it is appropriate to grant where a claim brought under that section succeeds. The High Court has endorsed the principles set out by ICC Judge Jones in Re Dormco SICA Ltd (in liquidation) [2021] EWHC 3209 (Ch) to be applied in cases in which a transaction defrauding creditors is alleged. The judgment also focuses on two unusual features of this case. First, the fact that none of the individuals or companies involved were based in England and Wales. The judgment confirms that provided a sufficient connection to the jurisdiction can be demonstrated, an order can be made under sections 423 to 425. Second, the fact that none of the Defendants were direct recipients of the transfers which formed the subject matter of the claim. The Court noted that the restorative character of sections 423 to 425 would not generally be consistent with claims succeeding against persons who had received no benefit at all from transactions but had merely facilitated or directed them. However, incidental benefits, unrelated to direct receipt of funds, might still justify an order being made in such a claim against those incidental beneficiaries.

What was the background?

This is a dispute between two oil and petroleum trading companies, "Integral" and "Petrograt". Petrograt is owned by Mr Kanybek Beisenov, who is the sole de jure director. The two de facto directors of Petrograt are Mr Mahdieh Sanchouli and Ms Hosseinali Sanchouli. In September 2017, Integral (as buyer) and Petrograt (as seller) entered into a contract for the sale of fuel. Following a tip-off, Integral applied for and obtained an injunction preventing the conversion of the fuel. In breach of the injunction, Petrograt converted some of the fuel by diverting it to Iran. Mr and Ms Sanchouli were found guilty of contempt as a result and committed. In parallel, Integral commenced arbitration proceedings against Petrograt seeking relief in...