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Insolvency Law

Expert guidance on all aspects of corporate and personal insolvency

25 JUN 2009

Proof of debts and some interesting comments on old bankruptcy statutes - Official Receiver v McKay [2009] EWCA Civ 467

The Court of Appeal has handed down its judgment in Official Receiver v McKay [2009] EWCA Civ 467. The appeal concerns the following point:

"Where a debt has once been the subject of a proof of debt, but the proof has been withdrawn, does the amount of the original proof count as one of the "debts which have been proved" for the purposes of Rule 6.211(2) so that, despite the fact that it has been withdrawn, it must be paid in full if section 282(1)(b) is to be used?"

The case is particularly interesting to those who are interested in the history of the subject as it contains the following passage:

"As Mr Ritchie pointed out in his helpful submissions, the 1986 Act is a mixture of new law and re-enactment of old law. Provisions such as section 282 are in very similar terms to the preceding law but other provisions are very different and in many significant respects the legislative regime is altogether different. In Re Smith Ex parte Braintree District Council [1990] 2 AC 215 at 238 Lord Jauncey said that the 1986 Act was to be construed "as a piece of new legislation without regard to 19th Century authorities or similar provisions of repealed Bankruptcy Acts." However, it is not always right to ignore previous authorities, as Hoffmann J said in Re a Debtor (No 784 of 1991) [1992] Ch 554 at 558:

"That approach to construction was approved by the House of Lords in In re Smith (A Bankrupt), Ex parte Braintree District Council [1990] 2 A.C. 215, in which Lord Jauncey of Tullichettle said, at p. 238, that, in view of the changes in policy shown by the new Act, he felt justified in construing the provision of the Act of 1986 "as a piece of new legislation without regard to 19th century authorities or similar provisions of repealed Bankruptcy Acts."

Those authorities show that, in approaching the language of the Act of 1986, one must pay particular attention to the purposes and policies of its own provisions and be wary of simply carrying over uncritically meanings which had been given to similar words in the earlier Act. It does not, however, mean that the language of the new Act comes to one entirely free of any of the intellectual freight which was carried by words and phrases in earlier bankruptcy or other legislation.

Decisions of the court upon the meanings of phrases used in Acts of Parliament may come, in the course of time, to give them the quality of terms of art which Parliament may well be assumed to have intended them to bring with them when used in subsequent legislation. In section 265, for example, terms such as "domiciled," "personally present," "ordinarily resident," have had attributed to them, both in the context of bankruptcy and in that of civil procedure generally, a wealth of refined construction which it is difficult to suppose Parliament did not intend equally to apply when those words were used in the Act of 1986. Is there any reason why that should not apply equally to the words "has carried on business?" There does not seem to me to be anything in the policy of the new Act which suggests that in this provision Parliament was intending to give those words a different meaning from those which they had been held to bear under the Act of 1914."

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