LITIGATION AGAINST A COMPANY IN COMPULSORY LIQUIDATION OR A BANKRUPTThe issue being considered is the necessity to obtain leave to litigate against a company in compulsory liquidation or a bankrupt and, in particular, whether such leave can be given retrospectively.S.285 of the Insolvency Act provides that:-- at any time when proceedings on a bankruptcy petition are pending or an individual has been adjudged bankrupt, the court may stay any action, execution or other legal process against the property or person of the debtor or of the bankrupt;-- any court in which proceedings are pending against any individual may, on proof that a bankruptcy petition has been presented in respect of that individual or that he or she is an undischarged bankrupt, either stay the proceedings or allow them to continue on such terms as it thinks fit; and-- after the making of a bankruptcy order, no person who is a creditor of the bankrupt in respect of a debt provable in the bankruptcy shall have any remedy against the property or person of the bankrupt in respect of that debt or, before the discharge of the bankrupt, commence any action or other legal proceedings against the bankrupt except with the leave of the court and on such terms as the court may imposeS.130 of the Insolvency Act 1986 provides that when a winding-up order has been made, or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company or its property except by leave of the court and subject to such terms as the court may impose.The following differences arising out of the above provisions should be noted.-- In s.130(2), there is a reference to 'proceeded with' that has no equivalent in s.285(3).

The latter only refers to 'commence any action' .

However, a similar effect can be achieved in bankruptcy in the event of an application under s.285(1) or (2) by the trustee in bankruptcy.

The difference between the latter subsections is, in broad terms, the identity of the court to which the application is made.

In subs (1), it is the bankruptcy court, whereas in subs (2) it is the court in which the proceedings are pending.-- A distinction needs to be drawn as to the relevant court for s.130(2) and s.285(3).

In the case of s.130(2) the application can be made to any court having jurisdiction to wind up the company, although it is best made to the court that is seised of the liquidation itself.

Reference should be made to s.251 of the Insolvency Act 1986, s.744 of the Companies Act 1985 and Fabric Sales Ltd v Eratex Ltd [1984] 1 WLR 863.

In respect of s.285(2), the relevant court appears to be the bankruptcy court having regard to the definition contained in s.385 of the Insolvency Act 1986, although there is no authority known to the writer on this point.RETROSPECTIVE LEAVEThere has been debate as to whether there is jurisdiction to grant leave for litigation retrospectively.

This is of particular importance in the context of litigation where limitation difficulties arise.

This has recently been the subject of detailed consideration by Lindsay J in the judgment given by him on 3 April 1996 in Bristol & West Building Society v Saunders and Bearman [1996] BPIR 355.

This case is a bankruptcy case but, in terms of jurisdiction, the answer to the problem of retrospective leave is unlikely to be any different in the context of compulsory liquidation.

Different considerations may apply to the way in which the court exercises its discretion to give retrospective sanction as between a bankruptcy and a compulsory liquidation.Prior to the decision, it had been thought in England and Wales that retrospective sanction was not jurisdictionally possible (see the decisions in Wilson v Banner Scaffolding [1982] The Times, 22 June, and Re National Employers Mutual General Assurance Association Ltd [1995] 1 BCLC 232).However, in Bristol & West, a review was undertaken of a large number of authorities which did not appear to have been cited in either Wilson or National Employers Mutual, many of which came from jurisdictions outside England and Wales -- in particular, Scotland, Northern Ireland, Australia, New Zealand, India and Canada.These additional authorities indicated that England and Wales were the only relevant countries in which retrospective leave was, apparently, not permitted.In these circumstances, the judge declined to follow Wilson and National Employers Mutual on the issue of whether or not there was jurisdiction to grant retrospective sanction.Care must be taken that undue reliance is not placed on Bristol & West.

The court is entitled to exercise its jurisdiction against the granting of retrospective sanction in an appropriate case.In this regard, given the ease with which it is possible to ascertain from Companies House whether or not a winding-up order has been made, the court may take the view that any problems that arise from a refusal to give retrospective sanction have been caused by the relevant plaintiff or his advisers in failing to carry out the appropriate search.

Different considerations apply in relation to searches against individuals, given the constraints presented by the form of index adopted under the Land Charges Act 1972.

However, even here it is obviously best not to rely upon the court granting retrospective leave.Leave to appeal Bri stol & West has been granted, but a date has not been set for the hearing.Points to note-- There is jurisdiction to give retrospective leave in connection with s.130 and s.285 of the Insolvency Act 1986, but try to avoid having to rely upon this.-- Commence proceedings well within the relevant limitation period.-- Carry out searches at Companies House and the Land Charges department, as appropriate, before commencing proceedings, even though there are limitations as to the index maintained under the Land Charges Act 1972.-- In respect of companies contact the Central Index of Winding-up Petitions (tel 0171 936 7328) to ascertain whether or not there is a pending winding-up petition.

WordStar 4.0B Messages 14 Feb 87 Copyright (C) 1983,1987 MicroPro International Corp.

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