Re Oasis Merchandising Services Ltd

Re Oasis Merchandising Services Ltd
Court	Court of Appeal
Decided	9 October 1996
Citation(s)	[1998] Ch 170, [1995] 2 BCLC 493, [1997] BCC 282
Court membership
Judge(s) sitting	Peter Gibson LJ, Otton LJ and Hutchison LJ
Keywords
Wrongful trading

Re Oasis Merchandising Services Ltd [1998] Ch 170 is a UK insolvency law and company law case, concerning wrongful trading.

Facts

The liquidator brought proceedings against 5 individuals, alleged to be directors or shadow directors, amounting to lots. It tried to assign the claims to a specialist litigation company London Wall Claims Ltd, so that in return for the fruits of the litigation, they would bear the cost. The directors being sued claimed that the assignment was unlawful, as it was champertous (i.e. the wrong of getting an uninterested party involved in a lawsuit for money). Robert Walker J allowed the agreement provisionally, but allowed an appeal to the Court of Appeal to answer whether the assignment was champertous or not. London Wall Claims Ltd argued that although the agreement may be champtertous, under the Insolvency Act 1986 Schedule 4, para 6, the liquidator had the power to sell any of the company's property, and that must include the fruits of a wrongful trading action under section 214. Alternatively, the agreement was an act necessary for the course of winding up, and there would be power under the Insolvency Act 1986 Schedule 4, para 13. The directors argued that the section 214 action was not company property.

Judgment

The Court of Appeal held that the assignment of the claim was not proper. The claim under s 214 is only vested in the liquidator. It arises solely when a company goes into liquidation and it would be champertous and against public policy to assign the fruits of such an action. There is no problem in assigning a s 212 action though. Under IA 1986 s 436, company property did not include a section 214 action because there is a difference between assets of a company at the moment of liquidation, and those arising and recoverable only by a liquidator under statutory powers.^[1] The agreement the liquidator entered into was an attempt to restrict his conduct of the action. Public policy demanded that it be regarded as champertous and Schedule 4 did not authorise the agreement as being necessary for the winding up of the company's affairs.

Cases on recouping assets

Insolvency Act 1986 ss 127, 238-245, 423

Re Parkes Garage (Swadlincote) Ltd [1929] 1 Ch 139

Re Yeovil Glove Co Ltd [1965] Ch 148

Re Gray’s Inn Construction Co Ltd [1980] 1 WLR 711

Re MC Bacon Ltd [1990] BCLC 324

Arbuthnot Ltd v Havelet Ltd (No 2) [1990] BCC 36

Re Shoe Lace Ltd [1994] 1 BCLC 111

Phillips v Brewin Dolphin Bell Lawrie Ltd [2001] UKHL 2

Insolvency Act 1986 ss 212-215

Re Anglo-Austrian Printing Union [1985] 2 Ch 891

Re Produce Marketing Consortium Ltd (No 2) [1989] BCLC 520

Re Oasis Merchandising Services Ltd [1995] 2 BCLC 493

Re Purpoint Ltd [1991] BCC 121

Morphites v Bernasconi [2003] 2 WLR 1521

see Unlawful trading and UK insolvency law

Notes

↑ Distinguishing, Movitor Pty Ltd v Sims (1995) 19 ACSR 440

References

External links

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