(1)This and the next two sections apply to a company that is being wound up in England and Wales.
(2)Subject as follows, the liquidator may, by the giving of the prescribed notice, disclaim any onerous property and may do so notwithstanding that he has taken possession of it, endeavoured to sell it, or otherwise exercised rights of ownership in relation to it.
(3)The following is onerous property for the purposes of this section—
(a)any unprofitable contract, and
(b)any other property of the company which is unsaleable or not readily saleable or is such that it may give rise to a liability to pay money or perform any other onerous act.
(4)A disclaimer under this section—
(a)operates so as to determine, as from the date of the disclaimer, the rights, interests and liabilities of the company in or in respect of the property disclaimed; but
(b)does not, except so far as is necessary for the purpose of releasing the company from any liability, affect the rights or liabilities of any other person.
(5)A notice of disclaimer shall not be given under this section in respect of any property if—
(a)a person interested in the property has applied in writing to the liquidator or one of his predecessors as liquidator requiring the liquidator or that predecessor to decide whether he will disclaim or not, and
(b)the period of 28 days beginning with the day on which that application was made, or such longer period as the court may allow, has expired without a notice of disclaimer having been given under this section in respect of that property.
(6)Any person sustaining loss or damage in consequence of the operation of a disclaimer under this section is deemed a creditor of the company to the extent of the loss or damage and accordingly may prove for the loss or damage in the winding up.
Cases considering section 178 35
[2026] EWCA Civ 513 · 30 April 2026Interprets
The court used section 178 to identify the liquidator’s power to disclaim onerous property and the statutory consequences relevant to the guarantee dispute. (see para [28])
The court interpreted subsection 178(4) as releasing the insolvent company’s liabilities while preserving the rights and liabilities of other persons under and in respect of the disclaimed property. That statutory continuation supported Pianoforte’s continuing exposure under the PCG. (see paras [9]; [28]-[29]; [36])
The court applied paragraph (a) to recognise that disclaimer determined Jamino’s rights, interests and liabilities under the Lease from the disclaimer date. It did not treat that release as ending Pianoforte’s separate guarantee liability. (see paras [9]; [28]-[29])
The court applied paragraph (b) so that Kiko’s, Pianoforte’s and Pontegadea’s rights and liabilities under and in respect of the Lease continued after Jamino’s disclaimer, until the New Lease terminated them. (see paras [9]; [11]; [28]; [36])
[2009] EWCA Civ 279 · 1 April 2009Interprets
The court construed the provision as ending the insolvent company’s lease interest while preserving the rights and liabilities of other persons. That preservation required the assignee’s tenant obligations to be treated as continuing for the guarantee. (see paras [34]-[40]; [45]-[48]; [51]-[60])
Applied to determine the assignee company’s rights, interests and liabilities under the lease on disclaimer. The assignee ceased to be actually liable under the tenant covenants. (see paras [36]; [45]-[46]; [51])
Interpreted as preventing disclaimer from ending the guarantor’s liability. For that purpose, the assignee was deemed to remain bound by the tenant covenants and the guarantee continued. (see paras [34]-[40]; [45]-[48]; [51]-[60])
[2006] EWCA Civ 7 · 18 January 2006Limits
The court considered the liquidator’s statutory power to disclaim property by prescribed notice. It formed the procedural setting for the construction of the disclaimer power. (see paras [33]-[35])
The court treated the prescribed-notice mechanism as part of the statutory disclaimer regime, but the appeal turned on whether the deed was onerous property. (see paras [33]-[35])
The court treated section 178(3) as defining onerous property through the categories of unprofitable contracts and other property giving rise to onerous acts or payments. The deed did not fall within either category on the facts. (see paras [35]-[54])
The court held that an unprofitable contract requires future obligations whose performance may prejudice the liquidator’s duty to realise property and distribute to creditors promptly. Mere financial disadvantage or a better possible bargain is insufficient. (see paras [40]-[54])
The court accepted that the deed was not other property within this paragraph. A restriction on proving for an inter-company debt was a negative disability, not property involving a benefit, saleability issue or positive onerous act. (see paras [35], [52])
The court considered the effect of disclaimer on the company’s rights, interests and liabilities and on the rights and liabilities of other persons. The provision explained why disclaimer would place AIG in a less advantageous position. (see paras [33]-[34])
Disclaimer would determine Group’s rights, interests and liabilities in the deed from the date of disclaimer, subject to the statutory scheme. This consequence formed part of the court’s explanation of why AIG would suffer loss. (see paras [33]-[34])
The court recognised that disclaimer does not generally affect other persons’ rights or liabilities except as necessary to release the company from liability. This framed the impact of disclaimer on AIG. (see paras [33]-[34])
A person suffering loss from disclaimer is treated as a creditor to the extent of that loss. The court used this to explain that AIG would become an unsecured proof creditor if disclaimer occurred. (see para [34])
15 more judgments, and what each says about section 178, are in the
case-law panel in the full Act.