Soden v British and Commonwealth Holdings plc
Encyclopedia
Soden v British and Commonwealth Holdings plc [1998] AC 298 is a UK insolvency law
case, decided in the House of Lords
. It decided that damages for negligent misrepresentation inducing purchase of company shares are not "sums due" to shareholders for the purpose of the Insolvency Act 1986
, s 74(2)(f), so that a claim for such damages is not subordinated to claims from other creditors.
plc ("BCH") bought all the shares in Atlantic Computers plc ("AC") for £434m in 1988. Both went into administration. BCH brought an action against AC for negligent misrepresentation, which induced BCH to buy shares, and also against its advisors in the acquisition Barclays de Zoete Wedd Ltd. ("BZW") started proceedings against AC for contribution.
AC's administrator appealed against a Court of Appeal ruling, arguing that neither BZW's, nor BCH's claim would be subordinated to the claims of other creditors under s 74(2)(f) IA 1986.
s 14(1) and did not include the type of damages sought by BCH. Lord Browne-Wilkinson gave the lead judgment.
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...
case, decided in the House of Lords
House of Lords
The House of Lords is the upper house of the Parliament of the United Kingdom. Like the House of Commons, it meets in the Palace of Westminster....
. It decided that damages for negligent misrepresentation inducing purchase of company shares are not "sums due" to shareholders for the purpose of 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:...
, s 74(2)(f), so that a claim for such damages is not subordinated to claims from other creditors.
Facts
British and Commonwealth HoldingsBritish and Commonwealth Holdings
British and Commonwealth Holdings plc was a financial services company which used to be a constituent of the FTSE 100 Index.-History:The Company was originally established in 1955 when Clan Line Steamers was merged with Union Castle to form The British & Commonwealth Shipping Company, a shipping...
plc ("BCH") bought all the shares in Atlantic Computers plc ("AC") for £434m in 1988. Both went into administration. BCH brought an action against AC for negligent misrepresentation, which induced BCH to buy shares, and also against its advisors in the acquisition Barclays de Zoete Wedd Ltd. ("BZW") started proceedings against AC for contribution.
AC's administrator appealed against a Court of Appeal ruling, arguing that neither BZW's, nor BCH's claim would be subordinated to the claims of other creditors under s 74(2)(f) IA 1986.
Judgment
The House of Lords (Lord Browne-Wilkinson, Lloyd, Steyn, Hoffmann and Hope) dismissed the appeal. Sums due to a "member of the company (in his character as a member)" within s 74(2)(f) only extended to sums recoverable in actions based on the statutory contract between the members and the company under the Companies Act 1985Companies Act 1985
The Companies Act 1985 is an Act of the Parliament of the United Kingdom of Great Britain and Northern Ireland, enacted in 1985, which enabled companies to be formed by registration, and set out the responsibilities of companies, their directors and secretaries.The Act was a consolidation of...
s 14(1) and did not include the type of damages sought by BCH. Lord Browne-Wilkinson gave the lead judgment.