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Does the Court of Appeal’s recent decision in Express Electrical Distributors v Beavis clarify the issue of validation orders under the Insolvency Act 1986 (IA 1986)? James Davies, a barrister at 3PB who specialises in commercial and insolvency matters, considers the implications of the judgment.
Express Electrical Distributors Ltd v Beavis and others  EWCA Civ 765,  All ER (D) 118 (Jul)
The Court of Appeal, Civil Division, held that a validation order in respect of a payment made to a creditor after a winding-up petition had been made should only be made in relation to dispositions occurring after presentation of winding-up petition if there was some special circumstances that showed that the disposition in question would be, in a prospective application case, or had been, in a retrospective application case, for the benefit of the general body of unsecured creditors, such that it was appropriate to disapply the usual pari passu principle.
The appellant (Express) was a wholesaler of electrical goods. Its customers included Edge Electrical Limited (Edge) from 2011. The relevant time line was as follows:
The liquidators demanded repayment of the £30,000, relying on IA 1986, s 127. This provides any disposition of company property after presentation of the petition is void unless the court orders otherwise. Express made an application for a validation order under IA 1986, s 127 to displace that default position. The
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