Coutts & Co v Stock

Coutts & Co v Stock
Court High Court of Justice
Citation(s) [2000] 1 WLR 906
Keywords
Insolvency, voidable transaction

Coutts & Co v Stock [2000] 1 WLR 906 is a UK insolvency law case, concerning voidable transactions.

Facts

Coutts & Co gave Mr Stock’s company a £200,000 overdraft. Mr Stock gave a personal guarantee for it. Then came a winding up petition, as the account was £500 in credit. But by the time the petition was advertised, the account was overdrawn by £121,875 and £190,000 by the time the petition was granted. The bank honoured cheques in favour of third parties, most of which were three companies controlled by Mr Stock. Coutts & Co wanted to enforce the guarantee. Mr Stock argued the Insolvency Act 1986 section 127 prevented the bank from debiting the account, and so the bank could not recover from him.

Judgment

Lightman J held the purpose of the provision is to preserve corporate assets for the benefit of the general body of creditors by empowering the liquidator to ‘claw back’ company property transferred by directors after a winding up petition is presented.

On principle… the acts of the bank in honouring cheques drawn on a company’s overdrawn account constitute (i) loans of the sums in question by the bank to the company and (ii) payment by the bank as agent of the company of the sums loaned as moneys of the company to the party in whose favour the cheques are drawn. On this analysis, the loan by the bank to the company is not a disposition of the company’s property (it is a disposition of the bank’s money to the company) and is therefore outside s 127; but the payment by the bank as agent for the company does constitute a disposition to the payee by the company within s 127 and is recoverable by the liquidator from the payee.

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