Herbert Berry Associates Ltd v Inland Revenue Commissioners: ChD 1976

The collector of taxes distrained on the goods of the company under section 61 TMA 1970 for unpaid taxes and the company entered into a walking possession agreement. Before the collector had sold the goods, and completed the distress, the company entered into voluntary winding-up and a liquidator was appointed. There was a deficiency of andpound;91,000, with preferential creditors of andpound;31,000 and assets of andpound;25,000 including the distrained goods. The goods were later sold with the consent of the collector for andpound;10,500. The collector claimed payment in full of the unpaid tax from the proceeds of sale of the goods. The liquidator contended that the Crown could not assert its right to distrain in order to be paid in full, but by section 319(5) CA 1948 (which concerned preferential payments; the Crown’s claim for unpaid tax was a preferential debt) was only entitled to rank pari passu with other preferential creditors. It was argued that since the Crown was distraining for a preferential debt, it was bound by section 319(5) which provided for pari passu distribution among preferential creditors.
Held: The collector was entitled to distrain by taking possession prior to the date of the winding-up and then to complete it unless there were special reasons rendering it inequitable for him to do so. No distinction was to be drawn in this context between distraint by a landlord and distraint by the collector. The effect of section 319(5) ranking preferential debts pari passu was not a special circumstance which rendered it inequitable for the distress to be completed. The completion of the distress would not be incompatible with the apparently provisions of CA 1948. CA 1948 distinguishes between distress, whether by a landlord or the Crown, and execution. S228 refers to the four remedies of attachment, sequestration, distress and execution. S371(7) deals with distress by landlords or other person and s325 deals with execution or attachment. Templeman said: ‘In my judgment, it is not possible to extract distress by the Crown from distress in general in section 319 and include it somehow or other in section 325, which is not dealing with distress.’
The court rejected the argument that the collector had abandoned or prejudiced his right of distress by accepting a walking possession agreement: ‘In my judgment, the property of a company, which is directed by section 302 [now section 107 IA 1986] to be applied for the benefit of the creditors subject to preferential payments, is the property subject to such rights as were exercised prior to the date of the winding-up. At the date of the winding-up in the present case, the goods were in the possession of the collector, and he had power to sell them in order to discharge unpaid taxes. The property of the company at the date of the winding-up consisted only of its right to any surplus realised on that sale.’


Templeman J


[1976] 3 All ER 207, [1976] 1 WLR 783, 120 SJ 538


Taxes Management Act 1970 61, Companies Act 1948 319(5)


England and Wales


FollowedRe Roundwood Colliery Co 1897
The court discussed the interplay of a distress by the landlord and the later insolvency of the tenant. . .
Not followedMacGregor v Clamp and Son 1914
A distress for taxes was ‘really by way of execution’. . .

Cited by:

At ChDHerbert Berry Associates Ltd v Inland Revenue Commissioners; re Herbert BerrySP, Regina (on The Application of) v The Lord Chancellor HL 1977
The principle to the effect that the court should exercise its discretion to restrain a distress levied by a landlord before the commencement of a winding-up only where there were special circumstances rendering it inequitable that he should be . .
CitedBrenner v Revenue and Customs; In re Modern Jet Support Centre Ltd ChD 21-Jul-2005
The court was asked whether the process of distraint against goods for unpaid tax under section 61 of the 1970 Act is an ‘execution’ within section 183 of the 1986 Act which applies where a creditor has issued, but not completed, execution against . .
At ChDHerbert Berry Associates Ltd v Inland Revenue Commissioners CA 2-Jan-1976
The word ‘proceedings’ meant the ‘invocation of the jurisdiction of a court by process other than writ’. . .
Lists of cited by and citing cases may be incomplete.

Insolvency, Company

Updated: 17 May 2022; Ref: scu.228989