LIQUIDATORS OF GRAMPIAN MACLENNAN'S DISTRIBUTION SERVICES LTD RECLAIMING MOTION BY, AGAINST CARNBROE ESTATES LTD [2018] ScotCS CSIH_7 (23 January 2018)

LIQUIDATORS OF GRAMPIAN MACLENNAN'S DISTRIBUTION SERVICES LTD RECLAIMING MOTION BY, AGAINST CARNBROE ESTATES LTD [2018] ScotCS CSIH_7 (23 January 2018)

Where a company is insolvent and its business is ceasing, the need for a quick sale to maintain liquidity does not justify a sale at an undervalue; the interests of creditors as a body must prevail, and adequate consideration must reflect full market value without forced sale discounts. The sale at £550,000 was not adequate consideration given expert valuations and the cessation of business, thus constituting a gratuitous alienation under section 242 of the Insolvency Act 1986.

Citation
[2018] ScotCS CSIH_7
Parties
Pursuers and Reclaimers: Stewart MacDonald and Pamela Coyne, the joint liquidators of Grampian Maclennan’s Distribution Services Ltd; Defenders and Respondents: Carnbroe Estates Ltd
Jurisdiction
Scotland
Judgment Date
23 January 2018
Procedural Posture
Civil Appeal (reclaiming Motion) / Inner House, Court of Session (appeal From Commercial Court)
Outcome
Appeal allowed; decree of reduction pronounced; defenders’ pleas repelled; expenses awarded to pursuers.
Legal Topics
Gratuitous Alienation, Adequate Consideration, Liquidation, Creditor Protection, Forced Sale, Valuation of Assets
Insolvency Law Company Law Property Law Gratuitous Alienation Adequate Consideration Liquidation Creditor Protection Forced Sale +1 more

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Parties

Stewart MacDonald and Pamela Coyne, the joint liquidators of Grampian Maclennan’s Distribution Services Ltd

Pursuers and Reclaimers

Carnbroe Estates Ltd

Defenders and Respondents

Procedural Posture

Civil Appeal (reclaiming Motion) / Inner House, Court of Session (appeal From Commercial Court)

Legal Issues

  1. 1 Whether the sale of heritable property by an insolvent company at an undervalue constitutes a gratuitous alienation under section 242 of the Insolvency Act 1986
  2. 2 Whether the consideration paid was 'adequate' within the meaning of section 242(4)(b)
  3. 3 Whether the need for a forced sale to maintain liquidity is relevant to adequacy of consideration when the business is ceasing

Ratio Decidendi

Where a company is insolvent and its business is ceasing, the need for a quick sale to maintain liquidity does not justify a sale at an undervalue; the interests of creditors as a body must prevail, and adequate consideration must reflect full market value without forced sale discounts. The sale at £550,000 was not adequate consideration given expert valuations and the cessation of business, thus constituting a gratuitous alienation under section 242 of the Insolvency Act 1986.

Court Disposition

Appeal allowed; decree of reduction pronounced; defenders’ pleas repelled; expenses awarded to pursuers.

Orders

  • Recall the commercial judge’s interlocutor of 26 January 2017 in part
  • Sustain the second and third pleas in law for the pursuers