Not Ordinary Trading Companies: Common Law Responses to Insolvent Utilities in the United Kingdom, Australia and the United States

Abstract

This paper discusses the extent to which the common law recognized public interest considerations when confronted with utility insolvencies in the UK, Australia, and the US in the period 1825 to 1970. Jurisprudence in all three jurisdictions concerning insolvent utilities arose in the nineteenth century out of the difficulties arising from the financial distress of railway companies. It is argued that public interest considerations were mobilized to justify various degrees of restriction on the usual rights of creditors in all jurisdictions. While evidence was found of the use of public interest theory in all jurisdictions, there was little development of it in the UK and Australia compared with the US. This may have been because of the early introduction of statutory schemes of arrangement in both countries and because of the nationalization of the industries for the better part of the twentieth century. In the US, on the other hand, public interest theory in the context of insolvent railways and other utilities was much more developed. In particular, it provided part of the rationale for the judicial development of the equity receivership into a comprehensive corporate reorganization mechanism.