Re Jeavons, ex parte Mackay (1873) LR 8 Ch. App. 643 is a UK insolvency law

UK insolvency law

United Kingdom insolvency law deals with the insolvency of firms and individuals in the United Kingdom. The important statutes are the Insolvency Act 1986, as amended by the Enterprise Act 2002, as well as the Company Director Disqualification Act 1986 and the Companies Act 2006.Insolvency is a...

 case. It decided that a creditor could not reserve an obligation to himself in priority of other creditors if a company were to go insolvent.

Facts

Mr Joshua Jeavons had an iron manufacturing business (Joshua Jeavons & Company) at the Millwall Ironworks. Jeavons sold one John Brown & Co. Ltd a patent for improving armour plates manufacture in return for royalties of 15s per ton of plates produced. Brown also lent Jeavons £12,500. It was agreed that half Jeavons' royalties would go to paying back that loan, and if Jeavons went insolvent or made an arrangement with creditors, Brown could keep all the royalties to satisfy the debt.

Judgment

The Chancery Division of the Court of Appeal held that Brown had a lien on one half of the royalties only. The agreement that Brown could retain all royalties if Jeavons went bankrupt was a fraud on the bankruptcy laws and void.