Insolvency — Administrator — Powers — Payments by administrators to persons who would be preferential creditors on compulsory winding up — Whether jurisdiction to authorise — Insolvency Act 1986 (c 45), s 18

In re Cromptons Leisure Machines Ltd

Ch D: Lewison J: 13 December 2006

In the case of an administration governed by the Insolvency Act 1986 before its amendment by the Enterprise Act 2002 the court had jurisdiction under s 18(3) and under its inherent jurisdiction to authorise the administrators to make a distribution to creditors who would be preferred creditors in the event of a winding up.

Lewison J so held in the Chancery Division when sanctioning a distribution to the creditors of Cromptons Leisure Machine Ltd.

LEWISON J said that the issue whether the court had power to sanction such a distribution had been considered by eight judges at first instance, six had said that the court did have jurisdiction two that it did not. In Colchester Estates (Cardiff) v Carlton Industries plc [1986] Ch 80 Nourse J said that where there existed conflicting decisions at first instance, questions of law were to be taken as having been settled at first instance where the earlier decision had been fully considered by a later one but not followed. Neither the Colchester case nor the rule of precedent that it laid down appeared to have been drawn to the attention of any of the judges who refused to follow each other. The time had come when the law should be taken as settled at first instance without the need for further argument. The approach of the later cases, namely In re Bovell Group [2006] BCC 912 and In re Spiralglobe Ltd [2006] All ER (D) 276 in which the earlier relevant authorities were considered had to be taken to be the law at first instance. Accordingly, there was a power under the unamended 1986 Act and under the court’s inherent jurisdiction to make the distribution.

Appearances: Barry Isaacs (instructed by Isadore Goldman) for the administrator.

Reported by: Nick Mercer, barrister