Roberts Petroleum Ltd v Bernard Kenny Ltd

Where no winding-up order precludes it, the decision whether to make a charging order nisi absolute is discretionary. The court must consider all the circumstances and do equity, so far as possible, between the judgment creditor, debtor and unsecured creditors.

Corporate insolvency and an inevitable liquidation do not alone justify refusing to make the order absolute. Refusal will generally require a further substantial factor, commonly a scheme of arrangement promoted by the main body of creditors which has a reasonable prospect of success. A conditional and insufficiently evidenced proposal does not meet that standard.

Roberts Petroleum Ltd obtained judgment against Bernard Kenny Ltd for unpaid petroleum supplies and, before Kenny entered liquidation, obtained a charging order nisi over its two filling stations. Other creditors proposed a 56-day moratorium to permit a sale of the stations as going concerns.

The District Registrar made the charging order absolute. Bristow J allowed Kenny’s appeal, holding that Kenny’s insolvency and irreversible course towards liquidation made it inequitable to preserve Roberts’ provisional advantage. Roberts appealed to the Court of Appeal. The central issue was whether insolvency and impending liquidation alone were sufficient cause to refuse to make a charging order nisi absolute.

1. Appeal allowed unanimously. Lord Brandon held, with Cumming-Bruce LJ agreeing and Dame Elizabeth Lane concurring, that Bristow J had misdirected himself in law. The order of Bristow J was set aside and the District Registrar’s order making the charging order absolute was restored.

2. In a case not precluded by a winding-up order, making a charging order nisi absolute is discretionary. The judgment debtor bears the burden of showing cause to the contrary. There is generally no material distinction, for this purpose, between a charging order nisi and a garnishee order nisi. The court must consider every relevant circumstance, whether arising before or after the nisi order, and do equity as far as possible between all affected parties.

3. Insolvency, even when followed inevitably by liquidation, is not by itself sufficient cause to refuse an order absolute. The court derived from the authorities that refusal will generally be justified where the debtor is insolvent and a scheme of arrangement has been set on foot by the main body of creditors with a reasonable prospect of success. In the absence of that combination, making the order absolute will generally be justified. Lord Brandon treated [1976] 1 WLR 719 and the contrast between [1975] 1 WLR 788 and the Glass decision as supporting that conclusion.

4. The proposed moratorium was only a tentative and conditional plan. There was no satisfactory evidence of sale values or of profitable cash trading pending a sale. Further, Roberts’ debt represented about 45 per cent of the known trade debts, so the remaining creditors could not readily be regarded as the main body of creditors. No well advanced scheme with a reasonable chance of success had therefore been established.

5. The case was materially closer to Glass, where the charging order was made absolute, than to Rainbow, where a well advanced scheme had the support of nearly all creditors and had a real prospect of approval. Leave to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division) — allowed Roberts’ appeal and restored the District Registrar’s order making the charging order absolute: [1982] 1 WLR 301.
• High Court, Queen’s Bench Division (Bristow J) — allowed Kenny’s appeal from the District Registrar and set aside the charging order absolute.
• District Registrar — made Roberts’ charging order nisi absolute on 4 April 1979.