Garden House Software Limited v Timothy Marsh & Ors

HHJ Cadwallader : Introduction

1. The first, second, sixth and seventh defendants (“THD”) apply by notice dated 20 October 2026 for reverse summary judgment against the claimant on the ground that the claim has no real prospect of success, alternatively to strike out the claim on the grounds that it discloses no reasonable grounds for bringing it.

2. The action is listed for trial for 12 days in a trial window commencing 27 April 2025. An application concerning extended disclosure is due to be heard on 23 or 24 February 2026 and a pre-trial review is listed for 10 March 2026. The factual background

3. These proceedings commenced on 23 December 2022. The claimant brings them as assignee from the liquidator of Serisys Ltd (“SL”). The following summary of the factual background derives from the claimant’s skeleton argument in opposition to this application. a. Prior to its liquidation, SL was a software development company wholly owned by a Hong Kong company, Serisys Group Limited (“SGL”). b. The first and second defendants were at all material times directors of SL. The third to fifth defendants were non-executive directors of SGL and the claimant alleges that they were de facto or shadow directors of SL at the material time. The sixth defendant is the wife of the first defendant and a lender to SGL. c. The seventh defendant, Serisys Asset Holding Limited (SAHL) is a Hong Kong registered company wholly owned by SGL. d. Serisys group companies, including SL, were engaged in developing software for use by financial services institutions called Adypt. e. On 20 June 2016, the sixth defendant loaned SGL $500,000 (the Loan). THD contend that the Loan was secured by a charge (the 2016 Charge) in her favour granted by SGL over intellectual property belonging to SL (referred to in the amended particulars of claim as AdyptUK). It is common ground that the 2016 Charge was never registered at Companies House and that SGL did not own AdyptUK when it purportedly granted the 2016 Charge. f. On or around 30 August 2017, SL assigned AdyptUK to SAHL for nil cash consideration (the Assignment). SL received a non-exclusive one-year licence to use the software. This was part of a broader transfer of Adypt intellectual property rights (IPR) to SAHL from other SGL subsidiaries. C alleges that the Assignment was approved by the first to fifth defendants in their capacities as directors of SL ( de jure , de facto or shadow, as applicable) and that the value of AdyptUK at the time of the Assignment was around £3.2 million. The defendants say it had nil value. It is common ground that the value of SL’s IPR in the Software at the time of the Assignment is an issue requiring expert evidence. g. The claimant alleges that SL was insolvent at the time of the Assignment, both on a cashflow and balance sheet basis. The defendants deny this. h. On 27 March 2019, a winding up order was made in relation to SL on a petition presented by HMRC. On the same date, the first and second defendants caused SAHL to execute a charge over AdyptUK at Hong Kong Companies House in favour of the sixth defendant, which however was dated 1 March 2019 (the 2019 Charge). i. As a result of the Assignment of AdyptUK, which the claimant says was improperly transferred for nil value, the claimant has brought various claims against the defendants, including (i) the claim that there was a transaction at an undervalue under s.238 Insolvency Act 1986 ( IA 1986 ) and (ii) two separate claims that there was a transaction defrauding creditors under s.423 IA 1986, (together, the IA Claims); and claims for breaches of directors’ duties, dishonest assistance, unlawful means conspiracy, wrongful trading, preferential payments, unlawful loans and exemplary damages. j. The claimant claims the following relief: i. an order setting aside the Assignment; ii. an order setting aside the 2019 Charge; iii. an order that the seventh defendant assign AdyptUK and related Trade Marks to the claimant and/or an order that the Seventh defendant pays to the claimant £3.2 million or such other sum as the Court may determine as representing the value of AdyptUK at the time of the Assignment; iv. an order pursuant to IA1986 s.238 and/or s.423 vesting AdyptUK in SL; v. an order that the seventh defendant pay an amount equivalent to the value of AdyptUK at the date of the Assignment in the sum of £3.2 million or such other sum as the Court may determine; vi. alternatively, an order that the seventh defendant pay an amount equivalent to the current value of AdyptUK; vii. an order pursuant to IA 1986 s.214 that the first to fifth defendants and each of them pay the sum of £1.2 million or such other sum as the Court may determine against each of them; viii. pursuant to IA1986 s.238 an order that the first defendant pay the sum of £105,790 alternatively £85,790; ix. alternatively, an order pursuant to CA2006 s.213 that the first to fifth defendants and/or each of them pay the sum of £105,790 or £85,790; x. against the first, second, third, fourth and fifth defendants, equitable compensation for breach of duty; xi. against the seventh defendant equitable compensation for dishonest assistance; xii. against the first, second, third, fourth and fifth defendants and seventh defendant, damages for unlawful means conspiracy; xiii. against the first, second, third, fourth and fifth defendants, an order for payment of the sum of £1.1 million in respect of SL’s wrongful and/or fraudulent trading; xiv. against the first and second defendants, payment of the sum of £85,790, in respect of the preferential payments; xv. against the first to fifth defendants, exemplary damages of £6.25m or such other sum as the Court thinks fit; xvi. interest; xvii. further or other relief; xviii. costs. k. All the claims are denied. Summary judgment/ strike out The principles

4. In considering the application I have regard in particular to the provisions of CPR Part 3.4 and 24 and the principles in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15] and the dicta in Jukic v BCC [2025] EWHC 221 (Ch) ] at [97]-[100]. The application

5. The THD application was supported by a sixth witness statement and eighth witness statement of the first defendant and a second witness statement of the sixth defendant. The basis of the application at that stage was expressed to be that the claimant’s case was unsustainable because the 2016 Charge, created long before any alleged insolvency issues, remains extant; and if the intellectual property was already subject to the 2016 Charge then SL did not have an unencumbered interest to dispose of; the value available to unsecured creditors was already nil; a transfer of unencumbered intellectual property could not be a transfer at an undervalue because the secured creditor would always rank ahead of unsecured creditors, and accordingly the case under sections 238 and 423 Insolvency Act 1986 must inevitably fail.

6. The claimant’s submission in response was in summary that the 2016 Charge could not be a charge over AdyptUK because the chargor was SGL, which did not own it and so could not charge it. Only SL could have done so but it did not. Even if SL had charged it, the 2016 charge was never registered and was accordingly void against the company’s creditors, administrator or liquidator: the suggestion that it might have taken effect in equity was simply wrong. In any case, the 2016 Charge did not mean that the Assignment could not be a transaction at an undervalue: it was only relevant to the amount of the undervalue, as to which there was a dispute. That was the position adopted in the claimant’s skeleton argument, as well as in its solicitors’ letter dated 27 January 2026.

7. Instead of pursuing the application on the basis that the claimant’s case was unsustainable because of the 2016 Charge, or explicitly abandoning it in the face of these points (although I understood that it was not pursued), THD raised two different reasons in their skeleton argument why the claim that the 2019 Charge was a transaction at an undervalue or a transaction defrauding creditors was bound to fail, and pursued the application on the footing that this affected the claim in respect to the Assignment. The case based on the 2016 Charge was not pursued at the hearing before me.

8. The claimant’s case that the 2019 Charge was a transaction at an undervalue for the purposes of section 423 Insolvency Act 1986 was put on the basis (as set out for convenience in the claimant’s skeleton argument) that i. SAHL received no consideration from the sixth defendant for the grant of the 2019 Charge (the Loan having previously been provided by the sixth defendant to SGL in 2016); ii. insofar as the sixth defendant and SGL renewed the terms of the Loan as consideration for the 2019 Charge, that arrangement was a sham as there was no genuine intention to enter into a new loan. The sixth defendant did not take security from SL or SAHL for the Loan advanced to SGL. To the extent the 2016 Charge was granted, it was never registered and is now void against the claimant; iii. the value of AdyptUK significantly exceeded the Loan advanced to SGL. On THD’s evidence, as at 1 October 2025, the outstanding debt under the Loan was just over $1 million, whereas the claimant estimates that AdyptUK was valued at around £4.56 million at the time the 2019 Charge was granted.

9. THD’s argument on this was that the claimant cannot show that the 2019 Charge was a transaction defrauding creditors. ‘Not a relevant transaction’

10. First, the THD argue, the Supreme Court in El-Husseiny and another v Invest Bank PSC [2026] AC 1 at [75] (“ El-Husseiny ”) established that a "transaction" within section 423(1) is not confined to a dealing with an asset owned by the debtor but extends to the type of transaction in this case, whereby the debtor enters into an arrangement under which a company owned by him or her transfers a valuable asset for no consideration or at an undervalue. Since SL did not enter into the 2019 Charge, and SAHL (which did) was not a company owned by SL, the requirements of s.423(1) Insolvency Act 1986 cannot be satisfied.

11. The claimant’s pleaded case, however, is that SAHL was the person entering into the transaction, and that SAHL did not receive any consideration from the sixth defendant in return for the grant of the 2019 Charge for the reasons set out in paragraph 72 of the amended particulars of claim. The purpose is alleged to have been that of putting assets beyond the reach of persons who might make claims against SAHL or otherwise prejudicing such persons in relation to such claims, for the reasons set out in paragraph 73 of the amended particulars of claim. SL, its liquidator and/or its creditors were the victims of the 2019 Charge for the purposes of Insolvency Act 1986 s.423 in that the aim and effect of the Charge was to interpose security over the rights to AdyptUK, thereby obstructing a claim to set aside the Assignment and/or removing an asset against which a monetary judgment might be enforced. SL was not the person entering into the transaction, for these purposes, but arguably, like its liquidator, a victim of it.

12. I do not accept, for present purposes, the THD’s submission that no victim had been properly identified. The potential claim in respect of a transaction at an undervalue by the assignment was potentially thwarted by the 2019 Charge, either because it blocked the remedy, or because it removed an asset from the risk of enforcement. The suggestion that it could not be a transaction defrauding creditors because the Assignment had taken place two years previously is therefore (at least arguably) nothing to the point. ‘Not at an undervalue’

13. The THD’s second point on this was that what was required under s.423 of the 1986 Act was a transaction at an undervalue, the establishment of which requires a comparison to be made between, “the value obtained by the company for the transaction and the value of consideration provided by the company. Both values had to be measurable in money or money's worth and had to be considered from the company's point of view”: Re MC Bacon Ltd (No.1) [1999] B.C.C. 78 at [3]. In MC Bacon at p.78 and p.91-94 it was said that: “The creation of security over the company's assets did not come within sec. 238(4)(b). It did not deplete the assets or diminish their value. Loss of the ability to apply the proceeds of the assets otherwise than in satisfaction of the secured debt was not capable of valuation in monetary terms, nor was the consideration the company received in return.” Accordingly the 2019 Charge could not deplete AdyptUK or diminish its value.

14. Here it is worth reminding oneself that s.423(1) of the 1986 Act provides that a person enters into a transaction at an undervalue where “(a) he makes a gift to the other person or he otherwise enters into a transaction with the other on terms that provide for him to receive no consideration…; or (c) he enters into a transaction with the other for a consideration the value of which, in money or money's worth, is significantly less than the value, in money or money's worth, of the consideration provided by himself.” The passages in MC Bacon on which the THD relied were concerned with the position where the consideration received was worth significantly less than the value of the consideration provided by the person entering into the transaction. The claimant’s case was that there was no consideration for the 2019 Charge: para 72.1 of the amended particulars of claim. Accordingly it might arguably be a transaction at an undervalue: see Hill v Spread Trustee Co Ltd [2007] 1 WLR 2404 at [93]. THD argued that there was consideration in the form of forbearance to call in the loan, but whether there was or not seems to be a matter for trial, not for this application. ‘Bars the remedy’

15. Then the THD argue that the existence of the 2019 Charge prevents the court from making the order which the claimant seeks setting aside the Assignment.

16. Obviously, however, any difficulty of that kind would be avoided if the Court set aside the 2019 Charge because of the availability of an order under s. 241 of that Act .

17. Such a difficulty is not in any event necessarily insuperable in the context of the claim under s.238 of the 1986 Act that the Assignment was a transaction at an undervalue where the property was not acquired in good faith or is deemed not to have been so acquired under s.241 (2A) and (3) of that Act , as is pleaded in the amended particulars of claim at para. 33.

18. Moreover, other remedies may be available, for example under s.241(1) (d) of the 1986 Act , which provides that the court may require any person to pay, in respect of benefits received by him from the company, such sums to the office-holder (in whose shoes the claimant claims to stand) as the court may direct.

19. Against this background, the observation made by THD that the claimant has not challenged the formal validity of the 2019 Charge is irrelevant, for present purposes, to the claims both under section 238 and under section 423 of the 1986 Act . For this reason, the absence of evidence as to Hong Kong law as to registration of charges does not affect the application now before the court. Conclusion

20. Accordingly, I conclude that the application does not succeed on the merits. Abuse of process Procedural history

21. For the sake of completeness I ought briefly to consider the claimant’s additional point, that the application was in any event an abuse of process, and ought not to be allowed on that basis even if otherwise allowable on the merits.

22. This claim was issued on 23 December 2022. As the Agreed Case Summary states, on 16 June 2023 THD issued an application for strike out/reverse summary judgment. On 7 September 2023, the claimant issued an application for permission to amend the particulars of claim. On 25 October 2023 Master Kaye adjourned the strike out application to 11 January 2024 and gave directions in the interim for the claimant to serve draft amended particulars of claim which, if not agreed, would be the subject of a renewed application for permission to amend, also to be heard on 11 January 2024. Some of those amendments were agreed subject to further clarification of the dishonest assistance claim and the claimant’s paying THD’s costs of and occasioned by the amendments. THD maintained their strike out application in relation to other proposed amendments, including in relation to the claim under s.423 Insolvency Act 1986 related to the 2019 Charge. THD however accepted that if permission for the proposed amendments were granted by Master Kaye, the strike out application would fall away, because amendments could only be permitted where the pleading disclosed a reasonable basis for the cause of action and a claim had a realistic prospect of success. The hearing of the amendment and strike out applications took place on 11 January 2024. By then, THD had accepted all the amendments relating to the Insolvency Act claims so their strike out application in relation to those claims had fallen away.

23. By a judgment and order dated 1 May 2024, Master Kaye granted the claimant permission to amend in the form of the draft amended particulars of claim; no order was made on the strike out application for the above reason; and directions were issued. The order required the claimant to pay all THD’s costs of and occasioned by the claimant’s amendments.

24. THD subsequently amended their Defence and the amendment cut out their previous allegations that the claimant’s claims were liable to be struck out. Principles

25. In Koza Ltd v Koza Altin Isletmeleri AS (CA) [2020] EWCA Civ 1018 Popplewell LJ held as follows at [42] “The Henderson and Hunter principles apply to interlocutory hearings as much as to final hearings. Many interlocutory hearings acutely engage the court’s duty to ensure efficient case management and the public interest in the best use of court resources. Therefore the application of the principles will often mean that if a point is open to a party on an interlocutory application and is not pursued, then the applicant cannot take the point at a subsequent interlocutory hearing in relation to the same or similar relief, absent a significant and material change of circumstances or his becoming aware of facts which he did not know and could not reasonably have discovered at the time of the first hearing.” And, “There is… no general principle that the applicant in interlocutory hearings is entitled to greater indulgence; nor is there a different test to be applied to interlocutory hearings. In every case the principles are those identified in paras 30—40 above, the application of which will reflect that within a single set of proceedings, a party should generally bring forward in argument all points reasonably available to him at the first opportunity, and that to allow him to take them serially in subsequent applications would generally permit abuse in the form of unfair harassment of the other party and obstruction of the efficacy of the judicial process by undermining the necessary finality of unappealed interlocutory decisions.”

26. The previous application to strike out was not made on the same point as it is now. It is accepted that it might have been. But it is argued that in the earlier application the focus was on pleading points, not merits; that no order was made on the strike out application, rather than an order determining it; that the judgment did not explicitly determine that the amendments had a real prospect of success; and that in any event matters had moved on since, with extended disclosure having taken place and the exchange of witness statements. Moreover, even if the THD could and should have taken the point then, it was convenient to the parties and the Court to have it determined now anyway, with a view to shortening the upcoming trial.

27. I find myself unable to accept these submissions. In the earlier application the focus was both on pleading points and merits. No order was made on the strike out application because it had fallen away. The judgment clearly proceeded on the footing that the amendments had a real prospect of success. Matters have indeed moved on since, but THD did not identify any significant or material change of circumstances or facts which they did not know and could not reasonably have discovered at the time of the earlier hearing. I do not consider that the supposed convenience of making the application at this stage would have justified its otherwise being, as I find it to have been, an abuse of process.

28. In dealing with the matter this briefly, I should make clear that I have confined my observations to the main points raised before me; but I have taken into account all the points which were made, both in writing and orally, albeit it has not seemed necessary to go into each and every one in this judgment. Conclusion

29. Accordingly, quite apart from the merits, I should have dismissed this application on the grounds of abuse of process in any event.

30. It follows that the application should be dismissed. I understood that each party accepted that costs should follow the event. Accordingly I will order that THD should pay the costs of the claimant of and incidental to the application. Any submissions as to consequential matters may be made briefly in writing and, subject to those submissions, I intend to deal with them without a hearing. Subject to those submissions I consider that costs should be summarily assessed on the standard basis and ordered to be paid as so assessed.