Mr Jeavons sold a patent regarding the manufacture of armour plates to a Brown and Co and Cammell and Co in consideration of the companies paying royalties. There was also a loan from the company to Mr Jeavons secured on the royalties. The parties agreed that (1) the companies would keep half the royalties towards satisfying the debt, and (2) in the event of Mr Jeavons’ bankruptcy, they could also keep the other half of the royalties until the debt had been fully paid.
Held: The first provision was valid, but the second was invalid.
James LJ said that provision (1) represented ‘a good charge upon one moiety of the royalties, because they are part of the property and effects of the bankrupt’, but provision (2) ‘is a clear attempt to evade the operation of the bankruptcy laws’ as it ‘provide[d] for a different distribution of his effects in the event of bankruptcy from that which the law provides’.
And
A person ‘is not allowed, by stipulation with a creditor, to provide for a different distribution of his effects in the event of bankruptcy from that which the law provides’
Mellish LJ said that the case fell within the principle that: ‘a person cannot make it a part of his contract that, in the event of bankruptcy, he is then to get some additional advantage which prevents the property being distributed under the bankruptcy laws’
Judges:
James, Mellish LJJ
Citations:
(1873) LR 8 Ch App 643
Jurisdiction:
England and Wales
Citing:
Cited – Higinbotham v Holme 6-May-1812
A settlement entered into disposing of property into a trust for himself and others when the donor was not endebted, but which provided that on his bankruptcy would pay an annuity to his wife, was void as against creditors on his later bankruptcy. . .
Cited by:
Cited – Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd and Another SC 27-Jul-2011
Complex financial instruments insured the indebtedness of Lehman Brothers. On that company’s insolvency a claim was made. It was said that provisions in the documents offended the rule against the anti-deprivation rule. The courts below had upheld . .
Cited – British Eagle International Airlines Ltd v Compagnie National Air France HL 1975
British Eagle, which had gone into liquidation. The parties disputed a contract attempting to reset the ranking of debts. The House was asked whether there was a debt due to the insolvent company at the commencement of its winding-up, to which the . .
Cited – LB Holdings Intermediate 2 Ltd, The Joint Administrators of v Lehman Brothers International (Europe), The Joint Administrators of and Others SC 17-May-2017
In the course of the insolvent administration of the bank, substantial additional sums were received. Parties appealed against some orders made on the application to court for directions as to what was to be done with the surplus.
Held: The . .
Lists of cited by and citing cases may be incomplete.
Insolvency, Contract
Updated: 07 August 2022; Ref: scu.442610