| Re Oasis Merchandising Services Ltd | |
|---|---|
 | |
| Court | Court of Appeal |
| Decided | 9 October 1996 |
| Citation(s) | [1998] Ch 170 [1997] 2 WLR 764 [1997] 1 BCLC 689 [1997] 1 All ER 1009 (1996) 146 NLJ 1513 [1998] Ch 170 [1997] BCC 282 |
| Court membership | |
| Judge(s) sitting | Peter Gibson LJ Otton LJ Hutchison LJ |
| Keywords | |
Re Oasis Merchandising Services Ltd [1998] Ch 170 is a UK insolvency law and company law case, concerning wrongful trading.
The liquidator brought proceedings against 5 individuals, alleged to be directors or shadow directors, amounting to lots. It tried to assign the claims to a specialist litigation company London Wall Claims Ltd, so that in return for the fruits of the litigation, they would bear the cost. The directors being sued claimed that the assignment was unlawful, as it was champertous (i.e. the wrong of getting an uninterested party involved in a lawsuit for money). Robert Walker J allowed the agreement provisionally, but allowed an appeal to the Court of Appeal to answer whether the assignment was champertous or not. London Wall Claims Ltd argued that although the agreement may be champtertous, under the Insolvency Act 1986 Schedule 4, para 6, the liquidator had the power to sell any of the company's property, and that must include the fruits of a wrongful trading action under section 214. Alternatively, the agreement was an act necessary for the course of winding up, and there would be power under the Insolvency Act 1986 Schedule 4, para 13. The directors argued that the section 214 action was not company property.
The Court of Appeal held that the assignment of the claim was not proper. The claim under s 214 is only vested in the liquidator. It arises solely when a company goes into liquidation and it would be champertous and against public policy to assign the fruits of such an action. There is no problem in assigning a s 212 action though. Under Insolvency Act 1986, s 436, company property did not include a section 214 action because there is a difference between assets of a company at the moment of liquidation, and those arising and recoverable only by a liquidator under statutory powers. [1] The agreement the liquidator entered into was an attempt to restrict his conduct of the action. Public policy demanded that it be regarded as champertous and Schedule 4 did not authorise the agreement as being necessary for the winding up of the company's affairs.
Peter Gibson LJ noted that: "As a matter of policy we think that there is much to be said for allowing a liquidator to sell the fruits of an action for the reasons given ... provided that it does not give the purchaser the right to influence the course of, or to interfere with the liquidator's conduct of, the proceedings." [2]
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.
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".
In law, a liquidator is the officer appointed when a company goes into winding-up or liquidation who has responsibility for collecting in all of the assets under such circumstances of the company and settling all claims against the company before putting the company into dissolution. Liquidator is a person officially appointed to 'liquidate' a company or firm. Their duty is to ascertain and settle the liabilities of a company or a firm. If there are any surplus, then those are distributed to the contributories.
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.
Re Continental Assurance Co of London plc [2007] 2 BCLC 287 is a UK insolvency law case on wrongful trading under section 214 of the Insolvency Act 1986.
The Company Directors Disqualification Act 1986 forms part of UK company law and sets out the procedures for company directors to be disqualified in certain cases of misconduct.
British Eagle International Air Lines Ltd v Cie Nationale Air France [1975] 1 WLR 758 is a UK insolvency law case, concerning priority of creditors in a company winding up.
Re Anglo-Austrian Printing & Publishing Union [1895] 2 Ch 891 is a UK insolvency law and company law case, concerning recovery of assets under a misfeasance action. It was held that because the claims were vested in the company before the company went into liquidation, the proceeds of such a claim would be caught by a floating charge where the floating charge was expressed to include any after-acquired property.
Re Purpoint Ltd [1991] BCLC 491 is a UK insolvency law and company law case, concerning misfeasance and wrongful trading.
Buchler v Talbot[2004] UKHL 9 is a UK insolvency law case, concerning the priority of claims in a liquidation. Under English law at the time the expenses of liquidation took priority over the preferred creditors, and the preferred creditors took priority over the claims of the holder of a floating charge. However, a crystallised floating charge theoretically took priority over the liquidation expenses. Accordingly the courts had to try and reconcile the apparent triangular conflict between priorities.
Cayman Islands company law is primarily codified in the Companies Law and the Limited Liability Companies Law, 2016, and to a lesser extent in the Securities and Investment Business Law. The Cayman Islands is a leading offshore financial centre, and financial services form a significant part of the economy of the Cayman Islands. Accordingly company law forms a much more prominent part of the law of the Cayman Islands than might otherwise be expected.
Cayman Islands bankruptcy law is principally codified in five statutes and statutory instruments:
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:
Provisional liquidation is a process which exists as part of the corporate insolvency laws of a number of common law jurisdictions whereby after the lodging of a petition for the winding-up of a company by the court, but before the court hears and determines the petition, the court may appoint a liquidator on a "provisional" basis. Unlike a conventional liquidator, a provisional liquidator does not assess claims against the company or try to distribute the company's assets to creditors, as the power to realise the assets comes after the court orders a liquidation.
Hong Kong 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 now primarily governed by the Companies Ordinance and the Companies Rules. Prior to 2012 Cap 32 was called the Companies Ordinance, but when the Companies Ordinance came into force in 2014, most of the provisions of Cap 32 were repealed except for the provisions relating to insolvency, which were retained and the statute was renamed to reflect its new principal focus.
Ayerst v C&K (Construction) Ltd [1976] AC 167 was a decision of the House of Lords relating to revenue law and insolvency law which confirmed that where a company goes into insolvent liquidation it ceases to be the beneficial owner of its assets, and the liquidator holds those assets on a special "statutory trust" for the company's creditors.
National Westminster Bank Ltd v Halesowen Presswork & Assemblies Ltd [1972] AC 785 is a decision of the House of Lords in relation to a banker's right to combine accounts under English law. It is the leading English case and a banker's right to combine accounts, and also an important decision relating to insolvency set-off.
Brooks v Armstrong[2016] EWHC 2289 (Ch), [2016] All ER (D) 117 (Nov) is a UK insolvency law case on wrongful trading under section 214 of the Insolvency Act 1986.
Re MC Bacon Ltd [1991] Ch 127 is a UK insolvency law case relating specifically to the recovery the legal costs of the liquidator in relation to an application to set aside a floating charge as an unfair preference.
Akers v Samba Financial Group[2017] UKSC 6, [2017] AC 424 is a judicial decision of the Supreme Court of the United Kingdom relating to the conflict of laws, trust law and insolvency law.