British Eagle International Airlines Ltd v Compagnie Nationale Air France
Encyclopedia
British Eagle International Air Lines Ltd v Cie Nationale Air France [1975] 1 WLR 758 is a UK insolvency law
case, concerning priority of creditors in a company winding up.
, or IATA. Participants were meant to not claim against each other, only IATA for any net balance due to the particular airline in the scheme, settled at the end of each month. British Eagle
went insolvent. It was a debtor to the clearing house overall but a creditor to Air France. The liquidator attempted to recover the money from Air France and Air France argued it was bound by the clearing house scheme, and could only collect money after netting out the claims of creditors of British Eagle in IATA. So the liquidator challenged the legality of the scheme, as it purported to sidestep pari passu.
UK insolvency law
United Kingdom insolvency law deals with the insolvency of firms and individuals in the United Kingdom. The important statutes are the Insolvency Act 1986, as amended by the Enterprise Act 2002, as well as the Company Director Disqualification Act 1986 and the Companies Act 2006.Insolvency is a...
case, concerning priority of creditors in a company winding up.
Facts
A number of airlines agreed to set up a clearing house to manage complicated debt and credit accounts among themselves. The clearing house fell under the authority of the International Air Transport AssociationInternational Air Transport Association
The International Air Transport Association is an international industry trade group of airlines headquartered in Montreal, Quebec, Canada, where the International Civil Aviation Organization is also headquartered. The executive offices are at the Geneva Airport in SwitzerlandIATA's mission is to...
, or IATA. Participants were meant to not claim against each other, only IATA for any net balance due to the particular airline in the scheme, settled at the end of each month. British Eagle
British Eagle
British Eagle International Airlines was a major British independentindependent from government-owned corporations airline that operated from 1948 to 1968....
went insolvent. It was a debtor to the clearing house overall but a creditor to Air France. The liquidator attempted to recover the money from Air France and Air France argued it was bound by the clearing house scheme, and could only collect money after netting out the claims of creditors of British Eagle in IATA. So the liquidator challenged the legality of the scheme, as it purported to sidestep pari passu.
Judgment
Speaking with a majority of the House of Lords Lord Cross of Chelsea held it to be against public policy to vary the claims of the insolvent estate under the ordinary rules for winding up. It was unlawful to attempt to contract out of the (what is now) Insolvency Act 1986 section 107. The scheme if it operated on insolvency would remove the sum due to Air France from British Eagle's estate, and hence reduce the amount available to the creditors generally.See also
- UK insolvency lawUK insolvency lawUnited Kingdom insolvency law deals with the insolvency of firms and individuals in the United Kingdom. The important statutes are the Insolvency Act 1986, as amended by the Enterprise Act 2002, as well as the Company Director Disqualification Act 1986 and the Companies Act 2006.Insolvency is a...
- Re Jeavons, ex parte MackayRe Jeavons, ex parte MackayRe Jeavons, ex parte Mackay LR 8 Ch. App. 643 is a UK insolvency law case. It decided that a creditor could not reserve an obligation to himself in priority of other creditors if a company were to go insolvent.-Facts:...
(1873) LR 8 Ch App 643