Transactions at an undervalue, sham litigation and settlements, Marex tort, abuse of process (Hotel Portfolio II UK Ltd (in liquidation) v Marlborough Developments Ltd)
Restructuring & Insolvency analysis: This judgment concerned two sets of legal proceedings connected to allegations of serious dishonesty, fraudulent activity and abusive litigation tactics by various parties to obstruct the enforcement of a judgment. Dr Smith and Mr Ruhan had been long-term adversaries in prolonged and bitter litigation against each other. However, they formed the ‘unholiest of unholy alliances’ in colluding in a scheme to frustrate Hotel Portfolio II UK Ltd’s (HPII’s) efforts to enforce a judgment obtained against Mr Ruhan for £102.26m. The scheme included companies controlled by Dr Smith fabricating litigation against Mr Ruhan leading to a default judgment for £850m, a fabricated settlement agreement and the transfer of assets to entities controlled by Dr Smith. The court found that the transactions were transactions at undervalue under section 423 of the Insolvency Act 1986 (IA 1986), set aside the fraudulent default judgment, struck out the sham proceedings and issued injunctions to protect HPII’s judgment rights against further tortious interference. Written by Justin Perring, barrister, New Square Chambers.
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