Re Oasis Merchandising Services Ltd - AbsoluteAstronomy.com

Re Oasis Merchandising Services Ltd [1998] Ch 170 is a UK insolvency law

UK insolvency law

United Kingdom insolvency law deals with the insolvency of firms and individuals in the United Kingdom. The important statutes are the Insolvency Act 1986, as amended by the Enterprise Act 2002, as well as the Company Director Disqualification Act 1986 and the Companies Act 2006.Insolvency is a...

and company law case, concerning wrongful trading

Wrongful trading

Wrongful trading is a type of civil wrong found in UK insolvency law, under s 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....

Facts

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 (ie 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

Insolvency Act 1986

The Insolvency Act 1986 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:...

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

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

Insolvency Act 1986

The Insolvency Act 1986 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:...

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

Judgment

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 IA 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. 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.

Facts

Judgment

See also