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Lionel Smith
Wed, 3 Jan 2007 16:01:42 -0500
Re Diplock with a twist


Hi Duncan,

I have been holding on to this for a long time ... on the principle of better late than never (and zealous New Year's attempts to take care of to-do lists), here are some thoughts. I assume that by contributories you mean those shareholders with rights to whatever property remains after debts have been paid.

First, the application to Diplock of the Diplock principle was actually quite novel as regards who were the claimants. What I mean is that in almost all of the cases in the line on which it was based, the claimants were underpaid creditors. Diplock was novel in allowing the Diplock principle to be used by next of kin. In that light, Butler is the right way round and if anyone is the wrong way round, it is Diplock itself (although I don't think it is).

In your case the claim against the non-entitled recipients prima facie belongs to the company, which no longer exists, so the claim I suppose vests in the Crown as bona vacantia when the company is dissolved (CA 1985, s 654; in Canadian federal corporate law, CBCA, s. 228). Former shareholders or liquidators can apply to have such assets transferred to them but this is in the discretion of the Crown. It is possible to revive a corporation when it is discovered that it had assets that were overlooked; under the CBCA the property will generally re-vest in the corporation, although in the UK I think it is still discretionary. I don't think the liquidator could have any right personally, nor could the shareholders.




On 6/7/06 12:39, "Duncan Sheehan (LAW)" wrote:

Dear all

The situation I have in mind is this. Company X goes bust; liquidator is appointed and proceeds to gather in and distribute the assets. Unfortunately he disburses money to people who turn out not to have been entitled to it (I don't think it matters why). Some time later after the company is wound up this is discovered. The question is what claims the contributories might have. Presumably there is a claim against the liquidator for not doing his job properly if nothing else, but might the contributories have a claim against the payees, and if so is that a derivative claim through the liquidator? It seems to me that this far more obviously analogous to Re Diplock than Butler v Broadhead [1975] Ch 97, where the claimants were creditors, claiming that the liquidator hadn't paid them and consequently overpaid the contributories, which strikes me as just the wrong way round. Templeman J though recognised a possible analogy with Re Diplock, but in the end said,

"The conclusion I have reached is that there can be no room for the operation of the principle of Ministry of Health v. Simpson [1951] A.C. 251 in respect of a claim for which a proof could have been entered and for which there has been advertisement, not complied with ..." at 111. And that must be right, but doesn't I think cover my facts.

Thoughts anybody? It may be that we need not invoke Re Diplock analogies at all. If so I'd be grateful for the answer from those who know more about insolvency than me. And apologies for the inevitable cross-posting.

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