Environment Agency -v- Clark (administrator of
Rhondda Waste Disposal Limited) - 10th February 2000
The Court of Appeal has recently held that criminal
proceedings are “other proceedings” for the purposes of
Section 10(1)(c) and 11(3)(d) of the Insolvency Act 1986. Therefore
leave is required to commence or continue criminal proceedings
against a company which is in administration or in relation to
which an administration petition had been presented.
It may, however, often be the case that leave will
be granted because public interest in prosecuting the criminal act
outweighs the interests of the company's creditors.
Rhondda Waste Disposal Limited (the
“Company”) operated a landfill site pursuant to a Waste
Management Licence issued by the Environment Agency. The Company
failed to comply with certain terms of the Licence and obnoxious
odours were released from the site. The Company's trading losses
eroded the Company's reserves to an extent that there were likely
to be insufficient funds to finance the works required to comply
with the licence.
On 23rd December 1998, the Company’s
directors issued a petition for an Administration Order to be made.
The Agency subsequently commenced criminal proceedings against the
Company alleging contravention of the Waste Management Licence. Two
days later, an Administration Order was made.
The Administrator applied to the Court for a
direction whether leave was required to bring or continue criminal
proceedings under Section 10 and/or Section 11 of the Insolvency
Act 1986. At first instance, the Court found that leave was
required and refused to grant leave on the basis that any fine
imposed on the Company would be paid at the expense of unsecured
creditors. The Environment Agency appealed both decisions.
Was leave required?
There were no previous authorities on whether the
relevant sections of the Insolvency Act applied to criminal
proceedings but the Court of Appeal held that the words had a plain
and clear meaning. The Court followed the decision in Paramount
Airways (Bristol Airport Plc -v- Powdrill  CH 744) that
“other proceedings” were not restricted to legal
proceedings or quasi legal proceedings such as arbitration. The
Court recognised that the ambit of criminal offences that may be
committed by corporations is very wide.
There was nothing inherently wrong with the Courts
acting, in appropriate circumstances, to filter criminal
proceedings against a company in administration. “When the
public interest so dictates, leave to pursue criminal proceedings
ought readily to be given but that will not be every
The scope of Sections 10(1)(c) and 11(3)(d) of the
Insolvency Act 1986 did include criminal proceedings and therefore
leave was required.
Should leave be granted?
The Court of Appeal held that the lower Court had
been wrong to consider only the interests of the Company’s
creditors. There were compelling reasons why the Environment Agency
should be granted leave to prosecute the Company which had over a
long period of time, acted in breach of the Waste Management
Licence resulting in pollution of the environment and serious
detriment to the amenities of the locality. The second appeal was
allowed and leave was granted.
For further information, please contact Janet Brier
in our corporate recovery group on DDI: 020 7367 2326 or e-mail