''Re Oasis Merchandising Services Ltd''

998 Year 998 ( CMXCVIII) was a common year starting on Saturday (link will display the full calendar) of the Julian calendar. Events By place Europe * Spring – Otto III retakes Rome and restores power in the papal city. Crescenti ...

Ch 170 is a

UK insolvency law 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 ...

and company law case, concerning

wrongful trading 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 inso ...

Facts

The liquidator brought proceedings against 5 individuals, alleged to be directors or

shadow directors A board of directors (commonly referred simply as the board) is an Committee#Executive committee, executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such a ...

, 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 The Insolvency Act 1986c 45 is an Act of the Parliament of the United Kingdom that provides the legal platform for all matters relating to personal and corporate insolvency in the UK. History The Insolvency Act 1986 followed the publication and ...

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

action under section 214. Alternatively, the agreement was an act necessary for the course of winding up, and there would be power under the

Schedule 4, para 13. The directors argued that the section 214 action was not company property.

Judgment

The

Court of Appeal A court of appeals, also called a court of appeal, appellate court, appeal court, court of second instance or second instance court, is any court of law that is empowered to hear an appeal of a trial court or other lower tribunal. In much of t ...

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

, 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. 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."

Ch 170, 186C

Notes

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References

* United Kingdom insolvency case law Court of Appeal (England and Wales) cases 1996 in United Kingdom case law

Facts

Judgment

See also

Notes

References