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Freakley and others v Centre Reinsurance International Company and others; HL 11 Oct 2006

References: [2006] UKHL [2006] UKHL 45, Times 16-Oct-2006
Links: Bailii
Coram: Lord Hoffmann, Lord Hope of Craighead, Lord Phillips of Worth Matravers, Lord Walker of Gestingthorpe, Lord Brown of Eaton-Under-Heywood
When it became clear that the company would be financially overwhelmed by asbestos related claims, a voluntary scheme of arrangement was proposed under s425. The House was now asked whether the right to re-imbursement of the company’s lawyers after the appointment of the administrators had a statutory priority over other costs of the administration, the floating charge and the unsecured creditors of the company.
Held: The appeal succeeded. Such claims did not have the priority sought. The House approved Chadwick LJ’s statement in the CA, but that did not mean that anyone with authority to act on behalf of the company must be deemed to have derived his authority from the administrator. The company may, before the appointment of the administrator, have conferred on someone an authority to contract on its behalf which, in law or in practice, the administrator cannot revoke. This is such a case. Such contracts are made on behalf of the company but not on behalf of the administrator, and liabilities for such debts should not have priority over those of other creditors.
Statutes: Companies Act 1985 425
This case cites:

  • At First Instance – Centre Reinsurance International Co and Another v Curzon Insurance Ltd ChD (Times 27-Feb-04, [2004] EWHC 200 Ch, Gazette 18-Mar-04, [2004] 2 All ER (Comm) 28)
    It was a necessary part of the system of statutory transfers of insurance obligations under the Act, that the rights should be transferred before exhaustion of any policy excess, and notwithstanding the insolvency. The rights (inchoate at this . .
  • Appeal from – Freakley and Curzon Insurance Ltd v Centre Reinsurance International Company and Another; similar CA (Bailii, [2005] EWCA Civ 115, Times 28-Feb-05, [2005] 2 All ER (Comm) 65)
    Claims were made for personal injury caused by asbestos. The re-insurers sought declaratory relief against the head insurers, and the administrators of the insolvent company. The administrators sought declarations in turn. Curzon insured the company . .
  • Cited – Groom v Crocker ([1939] 1 KB 194)
    An action by a client against a solicitor alleging negligence in the conduct of the client’s affairs, is an action for breach of contract. A solicitor is not entitled to payment of his costs by his client where his own negligence makes the work he . .
  • Cited – Cox v Bankside Members Agency Ltd and Others CA (Independent 09-Jun-95, Times 16-May-95, [1995] 2 Lloyd’s Rep 437)
    Successful Lloyds names were entitled to enforce their claims in the normal time sequence. The transfer of the rights of the insured against the insurer under section 1(1) the 1930 Act takes place on the event of insolvency, even if the insured’s . .
  • Cited – Powdrill and Another v Watson and Another HL (Independent 23-Mar-95, Gazette 03-May-95, Times 23-Mar-95, [1995] 2 AC 394)
    A receiver of a companies assets, who employed former staff of the company, beyond an initial period of 14 days, becomes personally responsible for their employment contracts, and consequently becomes liable for making redundancy payments. The 1870 . .
  • Cited – In re Atlantic Computer Systems Plc CA ([1992] Ch 505)
    The chargor was a company which arranged with the chargee, a funding bank, that it should purchase equipment and let it on hire purchase to the chargor with permission to sub-lease to end users. The chargor charged to the chargee by way of security . .

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