Directors' Duties and Insolvent Companies
| Date | 01 July 1991 |
| DOI | http://doi.org/10.1111/j.1468-2230.1991.tb00909.x |
| Author | Ross Grantham |
| Published date | 01 July 1991 |
711e
Moderti
Law
Review
[Vol.
54
some evidence to substantiate that defence.23
At
the same time, section
60(6)
of
the
Town and Country Planning Act
1971
does not imply that common law defences
such as duress and necessity would not be available to a tree-feller. Hence,
it
would
be
a
far better strategy for a tree-feller
to
forsake, when appropriate, the statutory
permission and rely upon the common law defence of necessity. The fact that this
choice between defences of identical substance may have such far-reaching
implications reinforces the foregoing critique of
Alath,
It
is not suggested that
Alath’s
outcome necessarily amounts
to
a miscarriage of
justice. Rather, it is submitted
that
insofar as its allocation of the burden of proof
is concerned, the decision delivered
in
that case is wrong
in
principle.
It
is,
nevertheless, good news for tree-lovers.
Directors’ Duties and Insolvent Companies
Ross
Grantham
*
The recent decision of Hoffmann
J
in
Re Welfab Engineers
Ltdl
raiscs again the
question of what,
if
any, obligations company directors owe to the company’s
creditors. The circumstances of this case are however novel
in
that the allegation
was not, as
in
earlier cases, that creditors suffered as a result of the board’s action,
but rather that while the directors did not do a bad job, they could have done a
better one.
The story of Welfab Engineers Ltd begins for our purposes
in
1979.
The company
which had
until
that time been profitable, began a slow descent into insolvency,
due
in
the main to factors outside its control. The company suffered from the
insolvency of its customers, the general down-turn
in
the economy, and from the
departure of one of its directors, who set up
in
competition. In late
1982
the board
decided that,
if
the company was to continue trading, its principal asset, a freehold
property, would have to be sold and thereafter the business of the company conducted
from rented premises. The land, which was subject
to
a charge
to
the bank, would,
if
the plan was to succeed, have to fetch close
to
its valuation of
f145,OOO.
The
directors through estate agents placed the property on the market, asking
f200,OOO.
It
was however to be indicated to prospective purchasers that a lower figure would
be considered. At the board’s request, the estate agent’s marketing of the property
was discreet,
so
as not to advertise the company’s difficulties.
The estate agent’s marketing, and the activities of the board elicited
a
total of
three offers, of which two remained serious contenders. The first of these was an
offer, from Bell
&
Webster (Steel Structures) Ltd, for
f125,OOO.
This offer, for
the freehold property and some equipment, also allowed for the possibility of a lease-
back of the property to Welfab.
It
was clear to the directors that this figure would
be insufficient
to
enable the company
to
remain
in
business. As the board were
detcrmined that the company should either continue to trade or be sold as a going
concern, this offer was rejected. The other offer was from Thermaspan Roofing
23
Since this defence
is
based
on
‘duress
of
circumstances,’ its proof would be guided by the rules which
apply
to
‘duress’ and other common law defences except that
of
insanity. See,
eg,
R
v
Gill
119631
I
WLR
841,
and supra
n
16.
*
Lecturer in Conimercial Law, University
of
Auckland
1
119901
RCC
600.
576
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