Re Gray's Inn Construction Co Ltd [1980] 1 WLR 711 is a leading UK insolvency law case, concerning the cessation of transactions without court approval after a winding up petition.

An obvious example is if the company has an opportunity by acting speedily to dispose of some piece of property at an exceptionally good price.

In each case, I think, the court must necessarily carry out a balancing exercise of the kind envisaged by Templeman J. in his judgment.

The parties may be unaware at the time when the transaction is entered into that a petition has been presented; or the need for speedy action may be such as to preclude an anticipatory application; or the beneficial character of the transaction may be so obvious that there is no real prospect of a liquidator seeking to set it aside, so that an application to the court would waste time, money and effort.

It follows, in my view, that the parties when entering into the transaction, if they are aware that it is liable to be invalidated by the section, should have in mind the sort of considerations which would influence the court's decision.

A disposition carried out in good faith in the ordinary course of business at a time when the parties are unaware that a petition has been presented may, it seems, normally be validated by the court (see In re Wiltshire Iron Co (1868) L.R.

In a number of cases reference has been made to the relevance of the policy of ensuring rateable distribution of the assets In re Civil Service and General Store Ltd (1888) 58 L.T.

In the last-mentioned case Oliver J. said, at p. 304: “I think that in exercising discretion the court must keep in view the evident purpose of the section which, as Chitty J. said in In re Civil Service and General Store Ltd, 58 L.T.

828, where the business of the company was eventually sold as a going concern, presumably to the advantage of the creditors; In re Clifton Place Garage Ltd [1970] Ch.

19 the court validated a sale of a lease which was liable to forfeiture in the event of the tenant company being wound up, and also validated, as part of the transaction, payment out of the proceeds of sale of arrears of rent which had accrued before the presentation of the petition for the compulsory liquidation of the company.

But we have been referred to no case in which the court has validated payment in full of an unsecured pre-liquidation debt where there was no such special circumstance, and in my opinion it would not normally be right to do so, because such a payment would prefer the creditor whose debt is paid over the other creditors of equal degree.Goff LJ and Sir David Cairns concurred.

The decision in Gray's Inn was treated as authoritative for many years, but it has now been effectively overruled and superseded by Bank of Ireland v Hollicourt (Contracts) Ltd [2000] EWCA Civ 263.