Date: Thu, 6 Jul 2006 14:17:25 -0400

From: John Swan

Subject: Re Diplock with a twist

Duncan,

This case may be far removed from what you may have had in mind. It comes with my brief summary of the facts:

Sidaplex-Plastic Suppliers, Inc. v. Elta Group Inc. (1998), 40 O.R. (3d) 563, 162 D.L.R. (4th) 367, 43 B.L.R. (2d) 155 (Ont. C.A.) Judgment creditor accepted lc as security. The lc was, by mistake, limited and not irrevocable. The corporation sold its assets and used the proceeds of the sale to pay the bank. This payment discharged the liability of the sole shareholder and director under a guarantee. The creditor brought an application under the oppression remedy. The failure of the judgment debtor to renew the lc was oppressive of the creditor. Oppression remedy available against the corporate debtor and its sole director. Neither bad faith nor "want of probity" necessary for oppression remedy. Since the sale of the corporation's assets had not complied with the Bulk Sales Act and though creditor was not a creditor from whom provisions had to be made for payment under the Act, the creditor was entitled to apply to have the sale set aside. The sale was, accordingly, void. Since it was unclear whether the creditor had waived non-compliance with s. 16(2) of the Act (giving the creditor a right against the buyer), the issue had to be set down for trial.

John Swan

-----Original Message-----
From: Duncan Sheehan (LAW)
Sent: Thursday, July 06, 2006 12:39 PM
Subject: ODG: Re Diplock with a twist

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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