Byers & Ors v Chen (British Virgin Islands)
[2021] UKPC 4
…w may have had fuzzy edges, and might thereafter be subject to further judicial development. Lady Arden suggests that this analysis of section 172(3) is made without benefit of the Explanatory Notes and without considering their history, or the history of the White Papers. In my respectful view section 172(3) sp…
Ciban Management Corporation v Citco (BVI) Ltd & Anor (British Virgin Islands)
[2020] UKPC 21
…0] UKPC 21; [2021] AC 122, para 31. In particular, the shareholders can authorise or ratify the acts of directors informally, as well as formally: Julien v Evolving Tecknologies and Enterprise Development Co Ltd [2018] UKPC 2; [2018] BCC 376, para 51. (3) The traditional approach to the interests of creditors It…
MacDonald and another (Respondents) v Carnbroe Estates Ltd (Appellant) (Scotland)
[2019] UKSC 57
…to the interests of the company’s creditors as a body: ibid para 167. I repeated that view in an obiter passage in MacDonald v Carnbroe Estates Ltd [2019] UKSC 57; 2020 SC (UKSC) 23; [2020] 1 BCLC 419, para 33, in a judgment with which the other members of the court agreed. Having considered the written and oral…
Julien & Ors v Evolving Tecknologies and Enterprise Development Company Ltd (Trinidad and Tobago) (Rev 1)
[2018] UKPC 2
…8] UKPC 2; [2018] BCC 376, para 51. (3) The traditional approach to the interests of creditors It is firmly established that the directors of a company do not owe any duty to its creditors, absent special circumstances giving rise to such a duty: see, for example, In re Wincham Shipbuilding, Boiler and Salt Co a…
The Joint Administrators of LB Holdings Intermediate 2 Limited (Appellant) v The Joint Administrators of Lehman Brothers International (Europe) and others (Respondents) The Joint Administrators of Lehman Brothers..
[2017] UKSC 38
…me before a liquidation or administration became inevitable. In what follows, for brevity, I will use the term liquidation to include administration save where it is necessary to deal with them separately. Finally by way of introduction, no analysis of a common law creditor duty can be carried out without close a…
Eclairs Group Ltd and Glengary Overseas Ltd v JKX Oil & Gas plc
[2015] UKSC 71
…on 171(b) in place of the prior judge-made formulation and it is that reformulation which is made subject to section 172(3). In agreement with Lord Briggs, I am persuaded that the terms of section 172 of the 2006 Act, when interpreted against the relevant admissible background, recognise the existence of a common…
Jetivia SA & Anor v Bilta (UK) Ltd & Ors
[2015] UKSC 23
…But even the shareholders of a company which is insolvent or facing insolvency cannot do this to the prejudice of its creditors...” In Ciban Management Corpn v Citco (BVI) Ltd [2021] AC 122, para 40, Lord Burrows, giving the judgment of the Board, referred to a “recognised qualification” to the Duomatic principl…
Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3)
[2012] WASCA 157
…in the concurring judgment of Gummow and Hayne JJ. In our domestic law, in Official Receiver v Stern (No 2) [2001] EWCA Civ 1787; [2002] 1 BCLC 119 the Court of Appeal (Sir Andrew Morritt V-C, Buxton and Arden LJJ) stated at para 32: “In normal circumstances the shareholders of a company can by acting unanimously w…
Kalls Enterprises Pty Ltd (in liq) v Baloglow
[2007] NSWCA 191
…ich its affairs are managed, and their interests will normally be aligned with those of its creditors. When the company is in financial difficulties, however, the economic interest of its creditors become distinct from those of its shareholders, and are liable to become increasingly predominant as the company’s sit…
Angas Law Services Pty Ltd (in liq) v Carabelas
[2005] HCA 23
…Court of Appeal (Sir Andrew Morritt V-C, Buxton and Arden LJJ) stated at para 32: “In normal circumstances the shareholders of a company can by acting unanimously waive or ratify a breach of duty by the directors. However, if the company is insolvent this principle no longer applies.” That was taken to have bee…
Commissioner of Taxation v Linter Textiles Australia Ltd (in liq)
[2005] HCA 20
…1 KB 116, affirmed [1948] AC 534; Marex Financial Ltd v Sevilleja [2020] UKSC 31; [2021] AC 39, paras 31 and 105. Nor do its creditors, even when the company is being wound up, although they then have a statutory entitlement to share in the proceeds of the realisation of its assets: Ayerst v C & K (Construction…
Commissioner of Taxation v Linter Textiles Australia Ltd
[2004] HCATrans 255
…rmed [1948] AC 534; Marex Financial Ltd v Sevilleja [2020] UKSC 31; [2021] AC 39, paras 31 and 105. Nor do its creditors, even when the company is being wound up, although they then have a statutory entitlement to share in the proceeds of the realisation of its assets: Ayerst v C & K (Construction) Ltd [1976] AC 167,…
Spies v The Queen
[2000] HCA 43
…ith approval in Angas Law Services Pty Ltd v Carabelas [2005] HCA 23; (2005) 226 CLR 507, para 67, in the concurring judgment of Gummow and Hayne JJ. In our domestic law, in Official Receiver v Stern (No 2) [2001] EWCA Civ 1787; [2002] 1 BCLC 119 the Court of Appeal (Sir Andrew Morritt V-C, Buxton and Arden LJJ)…
Walker v Wimborne
[1976] HCA 7
…7 that “the directors of a company in discharging their duty to the company must take account of the interest of its shareholders and its creditors”, explaining that “[a]ny failure by the directors to take into account the interests of creditors will have adverse consequences for the company as well as for them.”…
Marex Financial Ltd v Sevilleja
[2020] UKSC 31
…1976] AC 167, 178-179. The analysis may be clearer and more realistic if one thinks of interests in an economic rather than legal sense. The essential points being made in cases such as Permakraft and Kinsela are, first, that the creditors have an economic interest in the company’s assets where it is insolvent or…
[1967] 2 AC 134
[1967] 2 AC 134
…example, Aveling Barford and the analysis of Buxton LJ in MacPherson v European Strategic Bureau Ltd [2000] 2 BCLC 683, para 60). Moreover, it follows that, where ratification purports to exceed this limitation, it is ineffective, and the directors remain in breach of duty. Whether they control the company in gen…
[2003] 1 AC 518
[2003] 1 AC 518
…In a different context, in Johnson v Unisys Ltd [2003] 1 AC 518, para 37, Lord Hoffmann stated the principle in more general terms: judicial development of the law “must be consistent with legislative policy as expressed in statutes. The courts may proceed in harmony with Parliament but there should be no discord”…
[1897] AC 22
[1897] AC 22
…ively established in Salomon v Salomon & Co Ltd [1897] AC 22 (“ Salomon ”), the company was nevertheless regarded, for the purposes of the directors’ duty to act in its interests, as being its collective membership. As a matter of legal history, that approach appears to have been influenced by the continuity of…
[1974] AC 821
[1974] AC 821
…Greene MR. In my view it is that reformulation in section 172(1) that is now relevant to the proper purpose duty in section 171(b) in place of the prior judge-made formulation and it is that reformulation which is made subject to section 172(3). In agreement with Lord Briggs, I am persuaded that the terms of sec…
(1887) 12 App Cas 409
(1887) 12 App Cas 409
…, this would run counter to the basis upon which Part 23 requires future liabilities to be provided for, as summarised above. In short, Parliament has prescribed that creditor protection against a company paying away assets to shareholders is to be delimited by reference to probable liabilities, not those falling below…
[1976] AC 167
[1976] AC 167
…omic interest in the company’s assets where it is insolvent or nearing insolvency (and, one might add, an interest also in its liabilities: the amount which they may receive in a winding up depends on the company’s liabilities as well as its assets), and secondly, that the directors should therefore manage the c…
[1925] AC 619
[1925] AC 619
…a v Northern Assurance Co Ltd [1925] AC 619) and as carrying on its own business ( Gramophone and Typewriter Ltd v Stanley [1908] 2 KB 89), its interests continued to be equiparated with those of its shareholders. For example, in Greenhalgh v Arderne Cinemas Ltd [1951] Ch 286, 291, Lord Evershed MR, with whose j…
[1975] 1 WLR 758
[1975] 1 WLR 758
…alysis is an endorsement of the emphasis in the case law on the practical operation of the law in this field. In my judgment it is implicit in that change that the rationale of the Rule in West Mercia is the need to ensure, so far as practicable, that creditors are not harmed by the asymmetry in governance followin…
[1975] 1 WLR 355
[1975] 1 WLR 355
…e company’s assets. The references to “in a practical sense” and to business ethics are a concession that it is not possible to square the obligations in relation to creditors with the legal basis of directors’ duties. Dismissal of the appeal I agree that, on the facts, this appeal must be dismissed. SECTION 2 back…
[1986] 1 WLR 1512
[1986] 1 WLR 1512
…h them is a matter for the directors, as custodians of what Lord Templeman memorably called the “conscience of the company” in the Winkworth case [1986] 1 WLR 1512, 1516.…
[1985] 1 NZLR 242
[1985] 1 NZLR 242
…he view, obiter, that directors might owe a duty to the company to consider the interests of creditors “if the company is insolvent, or near-insolvent, or of doubtful solvency, or if a contemplated payment or other course of action would jeopardise its solvency” (p 249). He considered that such a duty might apply in…
[1991] 1 AC 187
[1991] 1 AC 187
…fe Nominees Ltd [1991] 1 AC 187, 218. A different approach, which has been influential in the modern case law, was adopted in Gaiman v National Association for Mental Health [1971] Ch 317, where Megarry J said at p 330 that “[t]he [company] is, of course, an artificial legal entity, and it is not very easy to dete…
[2021] AC 39
[2021] AC 39
…8-179. The analysis may be clearer and more realistic if one thinks of interests in an economic rather than legal sense. The essential points being made in cases such as Permakraft and Kinsela are, first, that the creditors have an economic interest in the company’s assets where it is insolvent or nearing insol…
Caratti v Mammoth Investments Pty Ltd
[2016] AC 1
…areholders of a company which is insolvent or facing insolvency cannot do this to the prejudice of its creditors...” In Ciban Management Corpn v Citco (BVI) Ltd [2021] AC 122, para 40, Lord Burrows, giving the judgment of the Board, referred to a “recognised qualification” to the Duomatic principle, namely “th…
[1908] 2 KB 89
[1908] 2 KB 89
…and Typewriter Ltd v Stanley [1908] 2 KB 89), its interests continued to be equiparated with those of its shareholders. For example, in Greenhalgh v Arderne Cinemas Ltd [1951] Ch 286, 291, Lord Evershed MR, with whose judgment the other members of the Court of Appeal agreed, said that the phrase “the company as…
[1980] 1 WLR 627
[1980] 1 WLR 627
…company “are not exclusively those of its shareholders but may include those of its creditors”. This dictum, albeit brief and obiter, recognised that how the company’s interests were understood might depend on the circumstances. The idea that creditors’ interests might be a relevant factor received more extended co…
8 Ch App 643
8 Ch App 643
…in West Mercia applies when the economic position of the creditors changes: that analysis is an endorsement of the emphasis in the case law on the practical operation of the law in this field. In my judgment it is implicit in that change that the rationale of the Rule in West Mercia is the need to ensure, so fa…
[1948] AC 534
[1948] AC 534
…its assets: Ayerst v C & K (Construction) Ltd [1976] AC 167, 178-179. The analysis may be clearer and more realistic if one thinks of interests in an economic rather than legal sense. The essential points being made in cases such as Permakraft and Kinsela are, first, that the creditors have an economic interest…
[2015] AC 1503
[2015] AC 1503
…LJ in the same case at p 455; per Nourse LJ in Brady , para 397 above; and per Leslie Kosmin QC in Colin Gwyer (paras 411-412 below at, for example, para 74 of his judgment). They did not adopt the approach of Cooke J. The passage which Lord Briggs cites at para 167 of his judgment from Goode on Principles of Co…
[1948] 1 KB 116
[1948] 1 KB 116
…eds of the realisation of its assets: Ayerst v C & K (Construction) Ltd [1976] AC 167, 178-179. The analysis may be clearer and more realistic if one thinks of interests in an economic rather than legal sense. The essential points being made in cases such as Permakraft and Kinsela are, first, that the creditors ha…
[1911] AC 498
[1911] AC 498
…r with obligation. It is also consistent with the spirit of what Lord Haldane said [in Attorney General of Canada v Standard Trust Co of New York [1911] AC 498, 503-505]. In a situation of marginal commercial solvency such creditors may fairly be seen as beneficially interested in the company or contingently so.…
[2009] AC 1391
[2009] AC 1391
…2006 Act. Parliament must be taken to have understood the general state of the common law at that time, which by the binding Court of Appeal authority of the West Mercia case did clearly recognise a creditor duty, even if the precise content of that rule of law may have had fuzzy edges, and might thereafter be s…
Hutton v West Cork Railway Co
(1883) 23 ChD 654
…nderstood as the interests of its shareholders: Hutton v West Cork Railway Company (1883) 23 Ch D 654. Although the separate personality of the company was recognised long before it was authoritatively established in Salomon v Salomon & Co Ltd [1897] AC 22 (“ Salomon ”), the company was nevertheless regarded, for the purposes of the direct…
[2004] 3 SCR 461
[2004] 3 SCR 461
…of the corporation transfer control to a trustee, who administers the corporation’s assets for the benefit of creditors…. 47…. In resolving these competing interests, it is incumbent upon the directors to act honestly and in good faith with a view to the best interests of the corporation. In using their skills for…
Aberdeen Railway Co v Blaikie Bros
69 ER 1256
…company’s affairs on its behalf: see, for example, Aberdeen Railway Co v Blaikie Bros (1854) 1 Macq 461, 471 and In re Lands Allotment Co [1894] 1 Ch 616, 631. Since they are in a fiduciary position, they must exercise their powers bona fide for the benefit of the company as a whole ( Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656,…
[2017] AC 467
[2017] AC 467
…goes. In this connection, the law should in my judgment be developed with caution and an awareness of the difficulties which experts in the field have expressed, much as the great Lord Mansfield in deciding commercial cases encouraged liaison between law and commerce. Even in judge-made law, there are questions…
[2013] 1 WLR 1408
[2013] 1 WLR 1408
…gger for creditors’ interests to override those of shareholders, I prefer the test of irreversible insolvency which makes insolvent liquidation unavoidable as this enables those prospects to be taken into account if they are reasonable. It seems to me that this better reflects the context in which this issue is like…
[2018] AC 465
[2018] AC 465
…idation or administration became inevitable. In what follows, for brevity, I will use the term liquidation to include administration save where it is necessary to deal with them separately. Finally by way of introduction, no analysis of a common law creditor duty can be carried out without close attention to the…
[2021] AC 122
[2021] AC 122
…In Ciban Management Corpn v Citco (BVI) Ltd [2021] AC 122, para 40, Lord Burrows, giving the judgment of the Board, referred to a “recognised qualification” to the Duomatic principle, namely “that the transaction must not jeopardise the company’s solvency or cause loss to its creditors”.…
1980 SC 1
1980 SC 1
…e, the proposition that on insolvency directors should consider creditors’ interests must surely represent the basis of good practice in any event. Issue (6) Can the Rule in West Mercia apply to a decision by directors to pay a dividend which is otherwise lawful? The relevant statutory provision here is sect…
Trevor v Whitworth
12 App Cas 409
…e unlikely to occur, this would run counter to the basis upon which Part 23 requires future liabilities to be provided for, as summarised above. In short, Parliament has prescribed that creditor protection against a company paying away assets to shareholders is to be delimited by reference to probable liabilities, not those…
Mills v Northern Railway of Buenos Ayres Co
4 Ch App 475
…lternative to its being paramount, ie that it displaced the duty to act for the benefit of members once the duty had itself been triggered. PART 2 - THE OVERARCHING LEGISLATIVE FRAMEWORK FOR THE DUTIES AND LIABILITIES OF DIRECTORS OF FINANCIALLY DISTRESSED COMPANIES There is a clear legislative scheme for the d…
[2008] WASC 239
[2008] WASC 239
Para 2008
…cited above). This was not about real risk of insolvency but rather a real risk that a proposed transaction would prejudice creditors. I agree with David Richards LJ at para 191 that the Westpac case provides no assistance to the appellant. The two English cases relied upon by the appellant in relation to this qu…