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This entry does not relate to the recent Metronet administration. Instead, it relates to the formulation of insolvency policy, specifically in the 1970s, and with reference to the Cork Committee. Some years ago Professor David Graham QC told me that the phrasing and language for the s.214 Insolvency Act 1986 wrongful trading provisions were discussed by him and the late Mr Alfred Goldman whilst they were on a train from Mill Hill Broadway to St Pancras station (pictured). Professor Graham at that period in his career was frequently instructed to appear on behalf of bankrupts in court seeking their discharge. The relevant legislation at the time was s.26 of the Bankruptcy Act 1914 which provided a series of badges of misconduct that the court was required to take into account on such applications. Amongst these were such matters as whether the bankrupt had contributed to his insolvency by rash and hazardous speculations, or by unjustifiable extravagance in living, or by gambling, or by culpable neglect of his business affairs. But the most important badge for this blog entry was "that the bankrupt has continued to trade after knowing himself to be insolvent." The primary test was whether in all the circumstances his conduct ought to be regarded as unreasonable.
In the course of what must now be regarded as a momentous train journey Professor Graham suggested to Mr Goldman (both working on Cork) that it was anomalous that whereas in winding up matters there was the concept of "fraudulent trading" there was no such concept of unreasonable trading. The burden of proof in fraudulent trading, both a criminal and civil matter under the same section, was regarded at the time as extremely difficult for a liquidator to discharge, requiring even in the winding up a criminal standard of proof.
The upshot was that Professor Graham came up with the idea that to overcome the anomalous situation with bankruptcy there should be a concept of unreasonable trading in winding up matters. Even then Professor Graham could be prolix and Alfred Goldman retorted, quite bluntly, "why do we not suggest the introduction of a new concept into winding up to be known simply as "wrongful trading."" Professor Graham has always believed that behind Goldman's suggestion was the need for a blunt Anglo-Saxon word rather than the more wooly "reasonable" adjective.
In another London transport and insolvency law policy development we can turn to the drinking and commuting activities of one of our most learned insolvency professors. As UCL's Professor Robert Stevens notes in his contribution to the 2006 edited collection Company Charges: Spectrum and Beyond (Getzler, J & Payne, J (Eds). Company Charges: Spectrum and Beyond. Oxford University Press, Oxford, 2006,) Professor Sir Roy Goode QC states in his third edition of his Principles of Corporate Insolvency Law that the ten percent fund for unsecured creditors (an arbitrary figure of ten percent according to Professor Stevens) has its genesis in a "conversation over two pints of beer he [Sir Roy] had at St Pancras Station with a member of the committee."
London transport and in particular St Pancras Station, it seems, has had a hitherto unknown influence and impact on the formulation of insolvency policy. If there are any defects in that policy we know who to blame. (London transport not the learned professors!)
"This is the ultimate statement of where the law on IVAs is to be found in our great common law...