| Powdrill v Watson | |
|---|---|
 | |
| Court | House of Lords |
| Full case name | Powdrill v Watson, Talbot v Cadge |
| Citation(s) | [1995] 2 AC 394, [1995] 2 WLR 312 |
| Court membership | |
| Judge(s) sitting | Lord Browne-Wilkinson, Lord Keith, Lord Mustill, Lord Lloyd |
| Keywords | |
| Administration | |
Powdrill v Watson [1995] 2 AC 394 is a UK insolvency law case concerning the administration procedure when a company is unable to repay its debts.
Roger Powdrill was a joint administrator of Paramount Airways Ltd, a short haul aircraft carrier. He wrote to all the employees in the company, including John Watson, saying that the company would keep on paying the employees but was not in any way assuming personal liability. This case was joined with cases where administrative receivers had done the same though making explicit they were not adopting the employee's contracts of employment. This included John Talbot who was in charge of both Leyland DAF Ltd and Ferranti International plc. Mr Watson's contract was then terminated. He wanted to be paid for his work. He argued that he stood in priority under Insolvency Act 1986 section 19(5) (see now Insolvency Act 1986, Schedule B1) for wages over a two months’ notice period. In Talbot's case, he simply issued applications asking whether they had in fact adopted the contracts under the Insolvency Act 1986, section 44.
Evans-Lombe J in the High Court [1993] BCC 662 held the contracts were adopted. Dillon LJ, Leggatt LJ and Henry LJ in the Court of Appeal (reported at [1994] BCC 172) dismissed the appeals.
Lord Browne-Wilkinson held that IA 1986 sections 19 and 44 meant that a contract was adopted where the administrator or receiver's conduct amounted to an election to treat the contract as adopted. It was inevitably so after 14 days following appointment and could not be unilaterally avoided. Under section 19 priority was only given to liability on wages incurred by the administrator during his tenure in office, and that did include liability for the period of notice, but not holiday pay accruing before appointment.
Lord Keith, Lord Mustill and Lord Lloyd concurred.
Liquidation is the process in accounting by which a company is brought to an end. The assets and property of the business are redistributed. When a firm has been liquidated, it is sometimes referred to as wound-up or dissolved, although dissolution technically refers to the last stage of liquidation. The process of liquidation also arises when customs, an authority or agency in a country responsible for collecting and safeguarding customs duties, determines the final computation or ascertainment of the duties or drawback accruing on an entry.
In accounting, insolvency is the state of being unable to pay the debts, by a person or company (debtor), at maturity; those in a state of insolvency are said to be insolvent. There are two forms: cash-flow insolvency and balance-sheet insolvency.
In finance, a floating charge is a security interest over a fund of changing assets of a company or other legal person. Unlike a fixed charge, which is created over ascertained and definite property, a floating charge is created over property of an ambulatory and shifting nature, such as receivables and stock.
Wrongful trading is a type of civil wrong found in UK insolvency law, under Section 214 Insolvency Act 1986. It was introduced to enable contributions to be obtained for the benefit of creditors from those responsible for mismanagement of the insolvent company. Under Australian insolvency law the equivalent concept is called "insolvent trading".
English trust law concerns the protection of assets, usually when they are held by one party for another's benefit. Trusts were a creation of the English law of property and obligations, and share a subsequent history with countries across the Commonwealth and the United States. Trusts developed when claimants in property disputes were dissatisfied with the common law courts and petitioned the King for a just and equitable result. On the King's behalf, the Lord Chancellor developed a parallel justice system in the Court of Chancery, commonly referred as equity. Historically, trusts have mostly been used where people have left money in a will, or created family settlements, charities, or some types of business venture. After the Judicature Act 1873, England's courts of equity and common law were merged, and equitable principles took precedence. Today, trusts play an important role in financial investment, especially in unit trusts and in pension trusts. Although people are generally free to set the terms of trusts in any way they like, there is a growing body of legislation to protect beneficiaries or regulate the trust relationship, including the Trustee Act 1925, Trustee Investments Act 1961, Recognition of Trusts Act 1987, Financial Services and Markets Act 2000, Trustee Act 2000, Pensions Act 1995, Pensions Act 2004 and Charities Act 2011.
The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal vehicle to organise and run business. Tracing their modern history to the late Industrial Revolution, public companies now employ more people and generate more of wealth in the United Kingdom economy than any other form of organisation. The United Kingdom was the first country to draft modern corporation statutes, where through a simple registration procedure any investors could incorporate, limit liability to their commercial creditors in the event of business insolvency, and where management was delegated to a centralised board of directors. An influential model within Europe, the Commonwealth and as an international standard setter, UK law has always given people broad freedom to design the internal company rules, so long as the mandatory minimum rights of investors under its legislation are complied with.
United Kingdom insolvency law regulates companies in the United Kingdom which are unable to repay their debts. While UK bankruptcy law concerns the rules for natural persons, the term insolvency is generally used for companies formed under the Companies Act 2006. Insolvency means being unable to pay debts. Since the Cork Report of 1982, the modern policy of UK insolvency law has been to attempt to rescue a company that is in difficulty, to minimise losses and fairly distribute the burdens between the community, employees, creditors and other stakeholders that result from enterprise failure. If a company cannot be saved it is liquidated, meaning that the assets are sold off to repay creditors according to their priority. The main sources of law include the Insolvency Act 1986, the Insolvency Rules 1986, the Company Directors Disqualification Act 1986, the Employment Rights Act 1996 Part XII, the EU Insolvency Regulation, and case law. Numerous other Acts, statutory instruments and cases relating to labour, banking, property and conflicts of laws also shape the subject.
Environment Agency v Clark [2001] Ch 57 is a UK insolvency law case concerning the right of creditors to bring proceedings against insolvent companies in administration. It concerned s.10, Insolvency Act 1986, now Schedule B1, para. 43(6) whereby a moratorium on legal proceedings is effected after an administration order takes place.
Soden v British and Commonwealth Holdings plc [1998] AC 298 is a UK insolvency law case, decided in the House of Lords. It decided that damages for negligent misrepresentation inducing purchase of company shares are not "sums due" to shareholders for the purpose of the Insolvency Act 1986, s 74(2)(f), so that a claim for such damages is not subordinated to claims from other creditors.
Re Barleycorn Enterprises Ltd [1970] Ch 465 is a UK insolvency law case, concerning the priority of creditors in a company winding up. It was held that fees for liquidation came in priority to preferential claims and floating charges. This was overturned by the House of Lords in Buchler v Talbot, but reinstated by Parliament through an amendment to the Insolvency Act 1986 s 176ZA.
Krasner v McMath [2005] EWCA Civ 1072 is a UK labour and insolvency law case concerning the priority of payments to workers of an insolvent company in priority to other creditors.
Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676 is a landmark UK insolvency law case, concerning a quasi-security interest in a company's assets and priority of creditors in a company winding up.
Re Bank of Credit and Commerce International SA [1998] AC 214 is a UK insolvency law case, concerning the taking of a security interest over a company's assets and priority of creditors in a company winding up.
Illingworth v Houldsworth [1904] AC 355 is a UK insolvency law case, concerning the taking of a security interest over a company's assets with a floating charge. In the Court of Appeal Romer LJ held that a key to a floating charge, as opposed to a fixed charge was that the company can carry on its business with assets subject to the charge.
The corporate veil in the United Kingdom is a metaphorical reference used in UK company law for the concept that the rights and duties of a corporation are, as a general principle, the responsibility of that company alone. Just as a natural person cannot be held legally accountable for the conduct or obligations of another person, unless they have expressly or implicitly assumed responsibility, guaranteed or indemnified the other person, as a general principle shareholders, directors and employees cannot be bound by the rights and duties of a corporation. This concept has traditionally been likened to a "veil" of separation between the legal entity of a corporation and the real people who invest their money and labor into a company's operations.
Re Peveril Gold Mines Ltd [1898] 1 Ch 122 is a UK insolvency law case concerning liquidation when a company is unable to repay its debts. It held that a member cannot be prevented by a company constitution from bringing a winding up petition. It is, however, possible for a member to make a shareholder agreement and thus contract out of the right to bring a winding up petition outside of the company.
Stonegate Securities Ltd v Gregory [1980] Ch 576 is a UK insolvency law case concerning the liquidation procedure when a company is unable to repay its debts. It held that a winding up petition would not be granted to a petitioner to whom a debt was bona fide under dispute.
Oldham v Kyrris[2003] EWCA Civ 1506 is a UK insolvency law case concerning the administration procedure when a company is unable to repay its debts.
Administration in United Kingdom law is the main kind of procedure in UK insolvency law when a company is unable to pay its debts. The management of the company is usually replaced by an insolvency practitioner whose statutory duty is to rescue the company, save the business, or get the best result possible. While creditors with a security interest over all a company's assets could control the procedure previously through receivership, the Enterprise Act 2002 made administration the main procedure.
Australian insolvency law regulates the position of companies which are in financial distress and are unable to pay or provide for all of their debts or other obligations, and matters ancillary to and arising from financial distress. The law in this area is principally governed by the Corporations Act 2001. Under Australian law, the term insolvency is usually used with reference to companies, and bankruptcy is used in relation to individuals. Insolvency law in Australia tries to seek an equitable balance between the competing interests of debtors, creditors and the wider community when debtors are unable to meet their financial obligations. The aim of the legislative provisions is to provide: