In re Rhondda Waste Disposal Ltd

The moratorium imposed by the Insolvency Act 1986, sections 10(1)(c) and 11(3)(d), is not confined to civil proceedings concerning debts or property. The phrase other proceedings bears its ordinary meaning and includes judicial and quasi-judicial proceedings, including criminal prosecutions against an administered company. The ejusdem generis approach limiting the phrase to creditor proceedings is inapplicable. On an application for leave, the court must weigh all relevant circumstances. Creditors’ interests do not automatically prevail over the public interest in prosecuting serious regulatory offences. If the first-instance judge misdirects himself, the appellate court may exercise the discretion afresh on the current facts.

The Environment Agency prosecuted Rhondda Waste Disposal Limited for allegedly breaching conditions of a waste management licence concerning a landfill site. The Company entered administration after the prosecution was commenced. The administrator applied for directions under sections 10 and 11 of the Insolvency Act 1986.

The Chancery Division held that leave was required to commence and continue the criminal proceedings, but refused leave on the basis that the Company’s insolvency and the creditors’ interests were decisive. The Agency appealed against both decisions. The central issues were whether criminal proceedings fell within the statutory phrase other proceedings and, if so, whether leave should be granted.

1. Scott Baker J gave the leading judgment. Robert Walker LJ and Henry LJ agreed. The first appeal was dismissed and the second appeal was allowed.

2. The Court held that other proceedings in sections 10(1)(c) and 11(3)(d) of the Insolvency Act 1986 includes criminal proceedings. The statutory wording covers judicial and quasi-judicial proceedings and contains no civil-proceedings qualification. The construction also accords with the temporary breathing-space and moratorium objectives of Part II.

3. The Court rejected the narrow ejusdem generis reasoning in Air Ecosse Ltd v Civil Aviation Authority (1987) 3 BCC 492. The ordinary meaning of the words and the statutory objectives were controlling. Carr v British International Helicopters [1993] BCC 855, Re Atlantic Computer Systems Plc [1992] Ch 505 and Bristol Airport plc v Powdrill [1990] Ch 744 supported the wider construction. Henry LJ considered that the latter decision’s carefully considered understanding of legal proceedings should be followed and was not limited to civil proceedings.

4. Leave under sections 10 and 11 is discretionary. The court must consider all relevant circumstances, including the administration’s statutory objectives, the Company’s financial position, the consequences for creditors, the public interest in prosecution, the seriousness and duration of the alleged breach, and the prospects and duration of the administration. The judge below erred by treating the creditors’ interests as overriding and by failing to give proper weight to the Agency’s reasons. The statutory requirement under section 18(3) of the Criminal Justice Act 1991 to consider the Company’s financial circumstances when fixing any fine did not justify refusing leave.

5. The Court exercised the discretion afresh on the facts at the date of the appeal. The breach was serious, continuing and environmentally harmful, and conviction could have consequences under section 74 of the Environmental Protection Act 1990. Leave to prosecute was therefore granted, although the Agency retained the decision whether to proceed.

• Court of Appeal (Civil Division): dismissed the appeal on statutory construction, allowed the appeal on discretion, and granted the Agency leave to prosecute. The judgment is reported at [2000] EWCA Civ 38.
• Chancery Division: on 5 July 1999 held that leave was required under sections 10 and 11 of the Insolvency Act 1986; on 6 August 1999 refused leave.