The Judicial Committee of the Privy Council Decisions

Introduction

“Redemption of Company Shares

Shareholders can redeem their Shares, in whole or in part, in a minimum amount of US$50,000 (subject to the discretion of the Board of Directors to redeem lesser amounts), on one calendar month’s prior written notice (subject to the discretion of the Board of Directors to waive such notice), on each Redemption Day. To effect a redemption, a Request for Redemption of Shares, obtained from the Company must be received by the Company by 5pm Dublin time one calendar month before any Redemption Day, accompanied by the share certificates for Shares redeemed, if any, duly endorsed and in a form for redemption acceptable to the Board of Directors.

Redemptions are made at a price per Share equal to the NAV per Share of the Company, as of the close of business on the relevant Valuation Date, rounded to the nearest whole US cent (the ‘Redemption Price’).”

“Payment of Redemptions

Redemption Payments are generally made within 30 calendar days after the Redemption Day. No interest is paid from the Redemption Day to the payment date. Payment is made by telegraphic transfer (with transfer charges to the account of the recipient) to the Remitting Bank/Financial Institution or to another account in the name of the Shareholder.”

As defined in the OM, “Redemption Day” was the first business day of each calendar month, and the “Valuation Day” was the business day immediately preceding the Redemption Day. Articles 30-37 of the Company’s Articles of Association provided for the determination of the NAV by the directors on the Valuation Day.

“Hi Gillian,

We have a few Swedish investors that have switched into our SEK based Fund as at 1 December.

We need to pay them value tomorrow please.

On the attached spreadsheet I have highlighted those investors in yellow. It is approximately US$7.6m that needs to be paid.

SEB are sending funds today to [PNC] so there should be no problem executing it.

Best regards

Magnus.”

“Every conveyance or transfer of property, or charge thereon, and every payment obligation and judicial proceeding, made, incurred, taken or suffered by any company in favour of any creditor at a time when the company is unable to pay its debts within the meaning of section 93 with a view to giving such creditor a preference over the other creditors shall be invalid if made, incurred, taken or suffered within six months immediately preceding the commencement of a liquidation.”

“61.     … Having carefully considered such evidence as a whole, and made due allowance for some discrepancies and those parts that are hearsay, I find that nevertheless the overwhelming weight of it is to the effect that Magnus Peterson directly, and through his company WCUK, managed and controlled the Company for all purposes relevant to these proceedings. He controlled the investments and he made the material decisions about redemptions.

62.       Accordingly, I find that Magnus Peterson was indeed the Company’s controlling mind in the payment of the relevant redemptions which now I must move on to examine.”

This finding by the judge was not challenged on appeal to the Court of Appeal in Cayman.

a)                 The Fraud Point: In order to establish that the Company was not insolvent at the time when the payments in issue were made, and that the payments therefore fell outside the scope of section 145(1) of the Companies Law (set out at para 12 above), SEB argued that the NAVs published by the Company were not binding as they had been inflated as a result of Magnus Peterson’s fraud, with the result that no redemptions had ever taken place in accordance with the Company’s Articles of Association, and therefore that no redeemers had ever become creditors of the Company within the meaning of section 145. In addition, SEB argued that the Company was only liable to the extent of the real (lower) NAVs. These arguments were rejected by the judge and the Court of Appeal, who held that the published NAVs were binding.

b)                 The 30 Day Point: In support of its contention that the Company was not insolvent at the time of the first redemption payment, SEB argued that on a true construction of the Articles of Association the Company had a grace period of 30 days from the 1 December redemption day to make redemption payments. Accordingly, section 145(1) was not satisfied in relation to the first redemption payment because at that date (19 December 2008) the Company was not yet liable to make payments to all the December Redeemers and was therefore solvent on a cash-flow basis. This was rejected by the judge and the Court of Appeal, who held that the Company became liable to pay the December Redeemers on the 1 December Redemption Day.

c)                 The Future Debts Point: This argument, also directed towards the existence of insolvency at the time of the first redemption payment, was advanced by the liquidators on the hypothesis that the judge had accepted SEB’s argument in relation to the 30 Day Point ie that the December redemption debt only became due and payable 30 days after the 1 December Redemption Day. If the judge were to have reached this conclusion, then the liquidators submitted that the future debts falling due at that time would in any event still be relevant to the cash-flow test of insolvency at the time of the first redemption payment. The court only needed to be satisfied that, as at 19 December 2008, the Company would not have been able to pay all of the 1 December Redemption Day payments on 31 December 2008. The judge and the Court of Appeal accepted this argument, finding that the Cayman Islands’ cash-flow test of insolvency permitted the consideration of debts which would become payable in the reasonably near future. It was possible to infer that no finance was available to the Company to fund the December redemption payments.

d)                The Intention to Prefer Point: In relation to the requirement under section 145(1) of an intention to prefer, the liquidators submitted that Magnus Peterson’s email of 17 December relating to the Swedish redeemers was evidence of a specific intention to prefer SEB ahead of the other redeemers in relation to the first redemption payment. In addition, in relation to the second and third redemption payments, the liquidators argued that there was a specific intention to prefer SEB over those other December Redeemers and the January and February Redeemers who were not paid. Alternatively, the liquidators argued that it was possible to infer the necessary intention to prefer from the fact that, at the time of the payments, Magnus Peterson knew the Company was unable to pay its debts in full. In relation to this issue, both the judge and the Court of Appeal considered that there was a specific intention to prefer SEB (albeit for slightly different reasons) and therefore thought it was unnecessary to decide whether the requisite intention could be inferred only from the fact of payment in knowledge of insolvency (Martin JA, para 57). The judge considered that there was a specific intention, in relation to all of the redemption payments, to prefer SEB as a member of a particular class of creditors ie the Swedish redeemers, who Peterson claimed were intending to reinvest. Before the Court of Appeal SEB did not seek to challenge the judge’s conclusion in relation to the first redemption payment, but it disputed that such an intention could be in any way continuing in relation to the second and third payments. The Court of Appeal agreed, but the court nevertheless held - by virtue of the Company’s policy of paying the December Redeemers 25% of the redemption payment initially and then the balance at a later date, and the fact that this policy had been adopted at a time when Magnus Peterson knew the Company had no prospect of paying the January or February Redeemers - that these payments were nevertheless made with the specific intention to prefer SEB within the meaning of section 145(1).

e)         The Amendment Point: There was a further argument relating to the intention to prefer, advanced by SEB before the Court of Appeal by way of an amendment to its grounds of appeal, on the hypothesis that the Court of Appeal held that the Company had intended to prefer SEB in relation to the first redemption payment, but not in relation to the second or third. In those circumstances, SEB argued that if the second and third redemption payments had not been made with the requisite intention then the first redemption payment should not be set aside. This was because, if the first redemption payment had not been made on 19 December then it would have been paid as part of the ordinary course of payments made to the December Redeemers in January/February 2009 and therefore could not constitute a preference. Given the Court of Appeal’s conclusion (referred to at para 16(d) above) that the second and third redemption payments did involve a specific intention to prefer SEB, it did not find it necessary to decide this point.

f)                  Repayment Issues: In light of the conclusions set out above the judge (and, in due course, the Court of Appeal) held that the three redemption payments to SEB were preferences within the meaning of section 145(1). SEB had argued, however, that in this eventuality it was entitled to rely on the common law defences to a claim for restitution on the basis of unjust enrichment, and that it was specifically entitled to rely on the absence of any actual enrichment on its part, and on the fact that it had changed position by remitting the payments to HQ Solid and Catella. SEB also argued that the liquidators’ claim was founded on illegality and contrary to public policy in that it sought to benefit not the Company, but the unpaid redeeming shareholders. These submissions were rejected by both the judge and the Court of Appeal, who held that the common law defences were not available to a statutory claim under section 145 and that, in any event, they were not made out on the facts. The claim was also not barred as a result of illegality or public policy.

(1)       The Fraud Point

“… [T]he evidence shows that the Directors, in effect, delegated authority, including authority in relation to redemption payments, to Magnus Peterson which they were entitled to do pursuant to articles 144 and 145. Even if there was not any formal delegation of authority for this purpose, there is a compelling weight of evidence to the effect that the Board permitted Magnus Peterson to act as a de facto director and, in effect, delegated their powers to him as they were entitled to pursuant to the articles referred to. It is probably not even a question of deciding whether this amounted to ostensible authority. In my view, it is clear that the Board allowed Magnus Peterson to act on its behalf in performing all the functions necessary for the payment of redemptions. The necessary implication is that Magnus Peterson had the Board’s actual authority for this purpose. There is no requirement, in my view, that section 145 of the Law requires express actual delegated authority. Magnus Peterson was allowed to act on behalf of the Board for relevant purposes and clearly had authority to do so.” (at para 53)

(2)       The 30 Day Point

“Redemption payments are generally made within 30 calendar days after the Redemption Day.”

He therefore submitted that, as the redemption day for the shares held by SEB as nominee of Catella was 1 December, the obligation to make the redemption payment, ie the debt, had not fallen due when that and the other December payments were made on 19 December. Therefore, in regard to the first payment only, the Company was not insolvent at that time.

“The price to be paid for Participating Shares which are to be redeemed shall be deemed to be a liability of the Company from the Valuation Point on the Redemption Day until the price is paid.”

“I think that the petitioners have not made out a case at all in any sense of inability to pay debts within the meaning of the Act of Parliament. I apprehend that Mr Glasse is right in his construction, that inability to pay debts must refer to debts absolutely due - that is to say, debts for which a creditor may go at once to the company’s office and demand payment.”

“1.       This appeal arises from the respondent’s application to strike out as an abuse of the process a petition to wind up the respondent, Strategic Turnaround Master Partnership Ltd, issued by the appellant, Culross Global SPC Ltd, on 10 June 2008. Whether the petition was an abuse of the process depends upon whether, at the date of its issue, the appellant was a current creditor, with standing to issue it, or at best only a prospective creditor, in which case it would have no such standing.”

“Redemption Date means generally the last Business Day of each calendar quarter or such other day as may be determined from time to time by the Board of directors in its discretion.”

There is a section dealing with the redemption of shares including para 38 to the effect that the company would remit redemption proceeds “within such period as the Directors shall determine”. Under “Payments upon Redemption” one finds the following:

“Payment of the Redemption Price will be made as soon as practicable but, except in cases otherwise described herein, a Shareholder who is making a redemption will receive at least 90% of the Redemption Price no later than 30 days following the date of redemption.”

Lord Mance’s analysis of the matter commences at para 15 and at para 20 he says this:

“The focus of these provisions is on the Redemption Date by reference to which the Redemption Price payable is crystallised and from which the Price is deemed to be a liability of the respondent; the remittance of the ‘redemption proceeds’ is treated as a matter of supplementary procedure, although it may be refused on, in particular, money laundering grounds. Both stages may be said to be part of a continuing process, but it does not follow that ‘redemption’ within the meaning of articles 55 and 32 only occurs at the conclusion of that whole process.”

(3)       The future debts point

(4)       The intention to prefer point

“Every conveyance or transfer of property … made … by any company in favour of any creditor at a time when the company is unable to pay its debts within the meaning of section 93 with a view to giving such creditor a preference over the other creditors shall be invalid …” (Emphasis added)

It is accepted that that on the authorities “with a view” requires a “dominant intention to prefer”. SEB disputes that there was such an intention here, maintaining that the second and third payments were on foot of a lawful policy of paying the December redeemers 25% on 2 January (if they had not already been paid on 19 December) with a further 75% to come. The obvious major flaw in that argument appears from the schedule of payments found as an appendix to the Statement of Facts and Issues. The two payments to SEB Merchant Banking as nominee for HQ Solid of 2 January and 11 February fully discharge the claim for redemption in the sum of $7,120,857.96. But not all the December redeemers were paid 100% as SEB was for HQ Solid. Banque Privée Edmond Rothschild Europe received $23,166,331.79 whereas it was owed $52,665,327.15. Both HSB Private Bank (Suisse) and Somers Dublin A/C Signet received only 25% of the sums to which they were entitled on foot of the NAV. These were the three largest creditors. SEB was the fourth largest creditor, but was paid in full. This was hardly accidental and demonstrates an intention to prefer. If there was a 25% / 75% policy it was not carried into effect - some redeemers were preferred.

“I find on the evidence that there was an intention to pay the Swedish redeemers on the basis that they were investors, or potential investors, in the Swedish fund. The fact that there may have been a mistake about this matters not. What does matter is the subjective intention of Magnus Peterson in acting, as I have found, as the company’s controlling mind. The intention appears to have been a principal or dominant intention to prefer a particular class of creditors. This resulted in a preference in fact of a particular creditor.”

The court also recorded, at para 44, that despite Magnus Peterson’s email to PNC of 17 December saying that a few Swedish investors “have switched into our SEK based Fund” “it appears that in fact SEB never subscribed for, or expressed an interest in subscribing for, shares in the Swedish fund on behalf of Catella, HQ Solid or anyone else”.

“It must, however, be remembered that the inference to be drawn is of something which has about it, at the least, a taint of dishonesty, and, in extreme cases, much more than a mere taint of dishonesty. The court is not in the habit of drawing inferences which involve dishonesty or something approaching dishonesty unless there are solid grounds for drawing them.”

Several things are to be observed about this. The judgment of Lord Greene was ex tempore. The facts of the case of Kushler did involve dishonesty to a degree. The sole director in the 13 days before insolvency chose to pay off an overdraft to the bank for the first time rather than to pay trade creditors. He was in fact a personal guarantor of the banking account. He concealed that fact from the creditor’s meeting. That was the factual matrix of the observations above.

“56.     The matter does not, however, end there. The judge did not rely only on an intention to prefer Swedish Redeemers: he said (again at para 187) that ‘the intention in this regard appears to have been reinforced by particular decision making in relation to the payments’. He was referring to the policy set out in the letter dated 31 December 2008 of paying the December redeemers 25% initially and the balance later, and that set out in the board minutes dated 22 February 2009 of giving priority to redemptions that were not ‘Large Redemptions’. Although the judge regarded these merely as reinforcing his view that the payments to SEB were made pursuant to a policy of giving preference to investors in the Swedish fund, it seems to me that the letter dated 31 December 2008 at least has a significance of its own. By the time the Second SEB Redemption Payment, representing 25% of the amount outstanding, was made on 2 January 2009 the sums due to the January Redeemers had already fallen due and notice of redemption had been given by the February Redeemers. The judge found that Magnus Peterson knew that the Company had no prospect of paying the January Redeemers and the February Redeemers in full. The proper course would have been to suspend redemptions (if that were by then possible) or liquidate the Company. He nevertheless caused the Company to adopt a policy designed to allow the December Redeemers to be paid before other redeemers. The Second SEB Redemption Payment and the Third SEB redemption payment were made pursuant to this policy, and had the intended effect of preferring SEB (as one of the class of December redeemers) over the body of January redeemers. SEB says that it was not preferred in the application of the policy, but that does not answer the point. Although the policy may have been applied consistently in relation to the December redeemers, so that SEB gained no advantage over them, it did give SEB an advantage over the January redeemers and (in the case of the Third SEB redemption payment) over the February redeemers, all of whom were to the knowledge of Magnus Peterson unlikely to be paid. That is in my opinion sufficient to justify the judge’s conclusion of a specific intention to prefer. As the judge recorded at para 78, SEB did not put pressure on the Company to pay, or even request payment after giving notice of redemption, so there was nothing to displace the inference that SEB was paid pursuant to that intention. Accordingly, although for slightly different reasons from those expressed by the judge, I would hold that the Continuing Intention Point fails.

57.       That conclusion deals to some extent with the Respondent’s Notice, which made specific reference to the letter dated 31 December 2008 and the February 2009 board minutes. I do not, however, find it necessary to address the more general question raised by the Respondent’s Notice, namely whether the fact of payment in knowledge of insolvency is sufficient without more to found an inference of intention to prefer. In light of the letter from Maples and Calder to which I have referred, I also think it would be undesirable to do so.”

That last reference is to the fact that there was other litigation pending.

(5)       The amendment point

(6)       Repayment issues

The effect of section 145

“Every conveyance or transfer of property, or charge thereon, and every payment obligation and judicial proceeding, made, incurred, taken or suffered by any company in favour of any creditor at a time when the company is unable to pay its debts within the meaning of section 93 with a view to giving such creditor a preference over the other creditors shall be invalid if made, incurred, taken or suffered within six months immediately preceding the commencement of a liquidation.”

The side note to section 145 is “voidable preference”, and it is common ground between the parties that the effect of the section is to render a conveyance or payment falling within its scope voidable, rather than void ab initio. We shall proceed on that basis. It accords with the views of most of the academic commentators on similar provisions for the avoidance of preferences, and with Marks v Feldman (1870) LR 5 QB 275, 281 per Kelly CB. We do not consider that the description of a fraudulent preference as “void” by Lord Mansfield in Alderson v Temple (1768) 4 Burr 2235, 2241 was intended by him to distinguish between its being void and voidable.

“Any settlement of property, not being a settlement made before and in consideration of marriage, or made in favour of a purchaser or incumbrancer in good faith and for valuable consideration, or a settlement made on or for the wife or children of the settlor of property which has accrued to the settlor after marriage in right of his wife, shall, if the settlor becomes bankrupt within two years after the date of the settlement, be void against the trustee in the bankruptcy, and shall, if the settlor becomes bankrupt at any subsequent time within ten years after the date of the settlement, be void against the trustee in the bankruptcy, unless the parties claiming under the settlement can prove that the settlor was, at the time of making the settlement, able to pay all his debts without the aid of the property comprised in the settlement, and that the interest of the settlor in such property passed to the trustee of such  settlement on the execution thereof.”

Section 172 of the 1925 Act provided:

“(1)     Save as provided in this section, every conveyance of property, made whether before or after the commencement of this Act, with intent to defraud creditors, shall be voidable, at the instance of any person thereby prejudiced. …

(3)       This section does not extend to any estate or interest in property conveyed for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of the conveyance, notice of the intent to defraud creditors.”

“It is clear that there is no provision in any of the sections on which the trustee relies for re-transfer of the property or repayment of the money with regard to a void transaction. … [I]t is true, when the setting aside of a transaction is obtainable under a statute, that it is by reason of that result that an obligation is imposed by the law on the man, who improperly has property or money, to re-transfer it or repay it to the successful party in the action. It seems to me that that is the true view. It was unnecessary for the statute in those cases to create any right of action for recovery of the money, because, once the transaction had been set aside, the property or money was wrongfully in the hands of the person who had it and, therefore, by operation of law, as stated by Lord Wright, MR, in Brook’s Wharf & Bull Wharf, Ltd v Goodman Bros [1937] 1 KB 534, 545 became re-transferable or repayable to the successful party. Therefore, it seems to me that the right to the recovery of the money is not a statutory right in a case like the present. It is a right imposed by the law which Lord Mansfield CJ, in Moses v Macferlan (1760) 2 Burr 1005 called a quasi-contractual right ...”

“In a winding up by the court, any disposition of the property of the company, including things in action, and any transfer of shares, or alteration in the status of members of the company, made after the commencement of the winding up, shall, unless the court otherwise orders, be void.”

Oliver J observed at p 298:

“Now, it must be remembered that the invalidation of a disposition of the company’s property and the recovery of the property disposed of, are two logically distinct matters. Section 227 says nothing about recovery; it merely avoids dispositions …What is the appropriate remedy in respect of the invalidated disposition is a matter not regulated by the statute and that has to be determined by the general law.”

He added at p 299 that section 227 did not mean that the company had some special remedy which enabled it to proceed with a claim in circumstances where, had the disposition been invalid on some other ground than the section, no such remedy would have lain.

The basis of the right to restitution of the proceeds of the redemption

“If the defendant be under an obligation, from the ties of natural justice, to refund; the law implies a debt, and gives this action, founded in the equity of the plaintiff’s case, as it were upon a contract (‘quasi ex contractu’, as the Roman law expresses it). This species of assumpsit, (‘for money had and received to the plaintiff’s use,’) lies in numberless instances …”

Although the claim proceeded upon the fiction of an implied contractual obligation, Lord Mansfield made clear at p 1012 that it was founded on essentially equitable considerations (in a non-technical sense):

“This kind of equitable action, to recover back money, which ought not in justice to be kept, is very beneficial, and therefore much encouraged. It lies only for money which, ex aequo et bono, the defendant ought to refund … In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money.”

Enrichment

“In the present case the firm was not enriched by the receipt of the £92,100. The money was trust money, which belonged in equity to the society, and was properly paid by the firm into its client account. The firm never made any claim to the money. It acknowledged that it was the society’s money, held to the order of the society and it was applied in accordance with the society’s instructions in exchange for a mortgage in favour of the society. The firm did not receive the money for its own use and benefit, but to the society’s use.”

Those observations, it was submitted, apply equally to SEB’s receipt of the redemption proceeds. Since it received the money as a trustee, and had no beneficial interest in it, it was therefore not enriched by the receipt.

“Every conveyance or transfer of property, or charge thereon made, every payment made, every obligation incurred, and every judicial proceeding taken or suffered by any person unable to pay his debts as they become due from his own money in favour of any creditor, or of any person in trust for any creditor, with a view of giving such creditor, or any surety or guarantor for the debt due to such creditor, a preference over the other creditors, shall, if the person making, taking, paying or suffering the same is adjudged bankrupt on a bankruptcy petition presented within three months after the date of making, taking, paying or suffering the same, be deemed fraudulent and void as against the trustee in the bankruptcy.”

The money in question had been paid to the agents of the creditor. A claim to repayment which was brought against them was rejected by P O Lawrence J. He observed at pp 86-87 that “the payment of a debt to an authorized agent for the use of the creditor operates in law as a payment to the creditor, and such a payment is, in my judgment, covered by the words in section 44(1): ‘every payment made ... in favour of any creditor.’” Payment to an agent was not payment to “any person in trust for any creditor”: those words, in the judge’s view, had in contemplation the situation where a “payment might be made to a trustee (either created ad hoc or existing under some instrument) in such circumstances as would support the contention that no payment had been made to the creditor himself”: p 87.

92.             The conclusion that a trustee is enriched by the receipt of money in that capacity is consistent with the decision of the Divisional Court in King v Stewart (1892) 66 LT 339, where money had been paid to the defendant trustee in the mistaken belief that it was due under a contract between him and the plaintiff. The trustee was held to be the appropriate defendant, although the money had been remitted by him to the cestui que trust. A more recent illustration is In re Thirty-Eight Building Ltd [1999] BCC 260, a case brought under section 239 of the Insolvency Act 1986, where the trustees of a pension fund, rather than the beneficiaries of the scheme, were held to be the appropriate defendants.

Change of position: the relevant principles

“This is equally beneficial to the defendant. It is the most favourable way in which he can be sued: he can be liable no further than the money he has received; and against that, may go into every equitable defence, upon the general issue; he may claim every equitable allowance; he may prove a release without pleading it; in short, he may defend himself by every thing which shews that the plaintiff, ex aequo et bono, is not intitled to the whole of his demand, or to any part of it.”

“To relieve the recipients of an obligation to repay these wrongfully received moneys would result in an unequal distribution of assets of a bankrupt among creditors with similar rank, and that, in turn, would be incompatible and inconsistent [with] the specific intent and purpose of the Bankruptcy and Insolvency Act.” (para 182)

“The whole idea of the defence of change of position is that the equity lies with the payee and not with the payor who wants to get back his payment. But where a trustee in bankruptcy carries out a duty to sue to undo a fraudulent payment, it is difficult to say that change of position makes the trustee’s suit inequitable.”

That point was also emphasised in another Canadian case, In re Titan Investments Ltd Partnership [2005] ABQB 637. The case concerned voidable preferences following the collapse of a Ponzi scheme. The relevant legislation, the Fraudulent Preferences Act 2000, provided that payments with intent to prefer were to be void as against the creditor or creditors injured, delayed, prejudiced or postponed, and afforded an individual creditor the right to bring a class claim for recovery on behalf of all creditors. The payments were not described as fraudulent. The Bankruptcy and Insolvency Act was still in force, but no trustee had been appointed by the time of trial. Following Cairns J in the Anderson case, Hawco J said that it would be contrary to public policy to allow the defence of change of position to prevail where there had been fraud. He added at para 47 that any consideration of equity with respect to the recipients of the preferences would also have to include a consideration of equity with respect to the underpaid creditors.

The present case

“It [ie SEB] claims to have changed its position by paying the proceeds to Catella and HQ Solid in circumstances where it now has no ability to recover them; but the position in fact was that it paid them over on terms that included contractual indemnities. The deterioration in SEB’s position stems not from its payment of the proceeds but from the fact that the indemnities have, according to the evidence, always been worthless. SEB’s failure to procure a valuable indemnity or otherwise protect its position cannot be said to amount to a change of position sufficient to afford a defence to the preference claim.”

The majority of the Board have serious reservations whether this is a correct application of the principles which underlie the defence of change of position. It could be said, to the contrary, that the very fact that SEB paid away the redemption proceeds without the protection of an effective indemnity was the basis of its change of position.

Conclusion on change of position

Postscript

Illegality and public policy

Conclusion

SIR DONNELL DEENY: (with whom Lord Wilson agrees)

“The assets of the Company shall be valued in accordance with such policies as the Directors may determine. Any valuations made pursuant to these articles shall be binding on all persons.”