Anti-Deprivation Principle Applied

Author:Mr Mark Alsop
Profession:Charles Russell LLP
 
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Folgate London Market Limited v Chaucer Insurance plc [2011] EWCA Civ 328

In a settlement agreement, Folgate agreed to indemnify another person, with a provision that the indemnity would automatically terminate if the other person became the subject of formal insolvency proceedings. The High Court said that this infringed the anti-deprivation principle, namely that it relieved a party from its obligation to make payment in the event of the receiving party's insolvency to the detriment of creditors.

Folgate appealed on the grounds that the other person was unable to provide consideration on insolvency and that the indemnity obligation was not an asset to which the company's creditors ever had a right, i.e. it was a flawed asset. The court...

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