Express Electrical Distributors Ltd v Beavis & Ors [2016] EWCA Civ 765 (19 July 2016)

Express Electrical Distributors Ltd v Beavis & Ors [2016] EWCA Civ 765 (19 July 2016)

A validation order under section 127 of the Insolvency Act 1986 should not be granted for a payment made after presentation of a winding up petition unless there is credible evidence that the transaction was for the benefit of the general body of unsecured creditors or did not prejudice their interests. In this case, the payment was not in the ordinary course of business, was made in advance of contractual terms, and there was insufficient evidence of benefit to creditors; thus, the court's discretion should not be exercised in favour of validation.

Citation
[2016] EWCA Civ 765
Parties
Appellant: Express Electrical Distributors Limited; Respondent: Beavis and Ors
Jurisdiction
England and Wales
Judgment Date
19 July 2016
Procedural Posture
Appeal (civil) / Court of Appeal Judgment on Appeal From Chancery Division, Manchester District Registry
Outcome
Appeal dismissed
Legal Topics
Validation Orders, Section 127 Insolvency Act 1986, Pari Passu Principle, Retrospective Validation, Creditor Preference
Insolvency Law Company Law Validation Orders Section 127 Insolvency Act 1986 Pari Passu Principle Retrospective Validation Creditor Preference

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Parties

Express Electrical Distributors Limited

Appellant

Beavis and Ors

Respondent

Procedural Posture

Appeal (civil) / Court of Appeal Judgment on Appeal From Chancery Division, Manchester District Registry

Legal Issues

  1. 1 Whether a validation order should be granted under section 127 of the Insolvency Act 1986 for a payment made by a company after presentation of a winding up petition but before knowledge of the petition by the payee.
  2. 2 Whether the payment was in the ordinary course of business and/or for the benefit of the general body of unsecured creditors.

Ratio Decidendi

A validation order under section 127 of the Insolvency Act 1986 should not be granted for a payment made after presentation of a winding up petition unless there is credible evidence that the transaction was for the benefit of the general body of unsecured creditors or did not prejudice their interests. In this case, the payment was not in the ordinary course of business, was made in advance of contractual terms, and there was insufficient evidence of benefit to creditors; thus, the court's discretion should not be exercised in favour of validation.

Court Disposition

Appeal dismissed

Orders

  • No validation order granted under section 127 Insolvency Act 1986 for the £30,000 payment.
  • Sum to remain with solicitors for the liquidators pending outcome.