Re Cromptons Leisure Machines Ltd
Jurisdiction | England & Wales |
Judge | MR JUSTICE LEWISON |
Judgment Date | 13 December 2006 |
Neutral Citation | [2006] EWHC 3583 (Ch) |
Docket Number | Case No: GLC130/06 & GLC 131/06 |
Court | Chancery Division |
Date | 13 December 2006 |
[2006] EWHC 3583 (Ch)
Mr Justice Lewison
Case No: GLC130/06 & GLC 131/06
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
MR BARRY ISAACS (instructed by Isadine Goldman) appeared on behalf of the ADMINISTRATOR
In the case of an administration governed by the Insolvency Act 1986 (before its amendment by the Enterprise Act 2002), does the court have power to authorise the administrators to make a distribution to creditors who would be preferential creditors in the event of a winding-up? This question has been considered at first instance in recent times by no less than eight judges who have reached different conclusions. Six judges (Jacob, Jonathan Parker, Arden, Peter Smith and Pumfrey JJ and His Honour Judge Norris QC) have said yes, and two judges (Lightman and Rimer JJ) have said no. The question is now largely of historic interest because in administrations governed by schedule B1 of the Act, paragraph 65 of that schedule empowers an administrator to make distributions to creditors.
In Re Powerstore Trading Limited [1992] Ch 1280 Lightman J held that the court had no jurisdiction under section 18 to sanction the distribution to creditors. In Re Mark One (Oxford Street) Plc [1999] 1WLR 1445 Jacob J refused to follow Lightman J. He held that the court had power either under section 18 or in the exercise of its inherent jurisdiction to authorise the distribution. In Re Wolsey Theatre Company Limited [2001] BCC 486 Jonathan Parker J preferred the reasoning in Re Mark One (Oxford Street) Plc to that in Re Powerstore Trading Limited. So did Arden J in Re UCT (UK) Limited [2001] 1WLR 436 in which she held that the court had jurisdiction to authorise the distribution both under section 14 and under section 18 of the Act. In Re TXU (UK) Limited [2003] 2BCLC 341 Peter Smith J followed and applied Re Mark One (Oxford Street) Plc on the basis of the court's inherent jurisdiction and said that he would not have followed Re Powerstore Trading Limited on section 18. But in Re The Designer Room Limited [2005] 1WLR 1581 Rimer J followed Re Powerstore Trading Limited and doubted Re Mark One (Oxford Street) Plc insofar as Jacob J had relied on the court's inherent jurisdiction. On the other hand, Rimer J said that he found the reasoning of Arden J in Re UCT (UK) Limited wholly convincing. In Re Beauvale Group Limited [2006] BCC 912 His Honour Judge Norris QC, sitting as a judge of the Chancery Division, distinguished Re The Designer Room Limited on the ground that the application before him was made under section 18 rather than section 14 and refused to follow it insofar as Rimer J had doubted the court's inherent jurisdiction to sanction the distribution. In Re Spiralglobe Limited [2006] All ER (D) 276 Pumfrey J refused to follow The Designer Room Limited, although that case is only noted rather than fully reported. But the note does indicate that Pumfrey J considered the relevant authorities.
This is a recipe for chaos. We have arrived at the situation that Nourse J was at pains to avoid in Colchester Estates (Cardiff) Limited v Carlton Industries Plc [1986]...
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