Cases - McLaughlin & Harvey plc (in Liquidation), Mullan & Sons Contractors Ltd v John Ross and Malcolm London

Record details

Name

McLaughlin & Harvey plc (in Liquidation), Mullan & Sons Contractors Ltd v John Ross and Malcolm London

Date

(1998)

Citation

86 BLR 1 CA, Northern Ireland

Legislation

English Insolvency Rules 1986

Keywords

Insolvency

Summary

After the liquidation of the main contractor, an employer could not make direct payments to the sub-contractor.

McLaughlin & Harvey ('M&H') were main contractors to the Londonderry Port and Harbour Commissioners ('Londonderry Port'), subject to a JCT 1981 form of contract. Mullan was M&H's sub-contractor for site works and drainage. After Mullan had substantially completed its works, M&H went into administrative receivership and then voluntary winding up. Mullan applied to Londonderry Port for direct payment under clause 27 of the JCT contract. Clause 27.4.3.1 purported to allow the employer to pay any subcontractor directly.

It was held by the Court of Appeal in Northern Ireland that under the insolvency law of Northern Ireland (and like provisions in the English Insolvency Rules 1986); an insolvent company's assets were to be distributed pro rata amongst its creditors. It was the liquidator's job to collect in the company's assets and then distribute them pro rata. The money that Londonderry Port would pay directly to Mullan, was money in fact due to M&H and collectable by M&H's liquidators. If Londonderry paid Mullan direct, Mullan would receive full payment, rather than a pro rata payment, and be better off than M&H's other creditors. This offended against the insolvency rules and accordingly, no effect would be given to clause 27 when the main contractor was in liquidation. The clause was void and Londonderry Port could not make direct payment to Mullan.