A recent court decision has significantly increased the long term risk associated with asset transfers by widening the time limits under the Insolvency (Northern Ireland) Order1989.
Background to the dispute
The case arises from long running litigation between Linda Riley and her half brother, John Aidiniantz (Riley v Aidiniantz and von Ehrenstein [2024] EWHC 3222), concerning the ownership and control of Rollerteam Limited, the company which operates the Sherlock Holmes Museum in London. The company has been valued at approximately £20 million.
Between 2014 and 2016, Mr Aidiniantz transferred his shares in Rollerteam Limited to his wife by way of gift. Over the same period, Ms Riley obtained a number of costs orders against Mr Aidiniantz in related litigation. Although the parties contested the figures, both parties agreed that Ms Riley was owed at least £300,625.24 by Mr Aidiniantz.
The claim under section 423 / Article 367
In July 2024, Ms Riley issued proceedings under section 423 of the Insolvency Act 1986 (the equivalent provision in Northern Ireland being Article 367 of the Insolvency (Northern Ireland) Order 1989).
She alleged that the transfer of shares were transactions at an undervalue carried out with the purpose of putting assets beyond the reach of creditors, including herself, and sought an order restoring the position by vesting the shares in her.
The Limitation defence
Mr Aidiniantz argued that the claim was statute barred, contending that the applicable limitation period was six years and that this period had expired long before the claim was issued.
The court rejected that argument. It held that because the right of action arises under statute and is not limited to the recovery of a debt, the appropriate limitation period is 12 years rather than six.
When does the limitation period start to run?
The court went further, making an important clarification on when time begins to run for the purposes of limitation. It held that, in claims brought under section 423 (and Article 367), the limitation period runs from the point at which the creditor is adversely affected by the transaction, not from the date on which the transaction itself took place.
Why this decision matters
This represents a significant development. Article 367 has often been understood to be subject to a six year limitation period. The decision indicates that the limitation period is, at a minimum, 12 years and may in practice be longer, as time does not begin to run until the claimant has suffered an adverse effect.
It is also a reminder that Article 367 has a wider application than insolvency alone, allowing challenges to transactions entered into for the purpose of putting assets beyond the reach of creditors even where no formal insolvency process is underway.
This article was written by Jeanette Donohoe, Director in our Dispute Resolution department and Trainee Solicitor, Thomas Moorehead.
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This article has been produced for general information purposes and further advice should be sought from a professional advisor. Please contact our Dispute Resolution team at Cleaver Fulton Rankin for further advice or information
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