Following the administration of Virgin Australia the lessors of four engines that were leased to Virgin served notice requiring delivery up of the engines to a nominated address in the USA.  The administrators argued that their obligations to the lessors were met if they made the engines available for delivery up in Australia. 

In our April newsletter, we noted that the UK Government had announced proposed changes to insolvency laws.  On 20 May 2020, the Corporate Insolvency and Governance Bill (UK) was introduced.  The proposed reforms include:

Regan v Brougham [2019] NZCA 401 clarifies what is needed to establish a valid guarantee.

A Term Loan Agreement was entered into whereby Christine Regan and Mark Tuffin lent $50,000 to B & R Enterprises Ltd. Rachael Dey and Bryce Brougham were named as Guarantors. Bryce Brougham was the only guarantor to sign the agreement. The Company was put into liquidation and a demand made against the Guarantor.

The guarantor argued that the guarantee was not enforceable based on the following:

North Harbour Motors Limited (in liquidation) (North Harbour) issued a statutory demand against Moffat Road Limited (Moffat) in respect of two separate $30,000 deposits paid by North Harbour to Moffat on the purchase of two properties pursuant to agreements for sale and purchase dated 6 July 2015 (the Agreements).

In a second application heard on the same day, Hildyard J considered an application by the administrators of Lehman Brothers Europe Limited (LBEL) for directions that would enable a surplus to be distributed to the sole member of LBEL while LBEL remained in administration. The proposed scheme had material benefits for both shareholders and creditors. The administrators acknowledged that the orders sought were an indirect means of circumventing the Insolvency Act 1986 (UK), which does not expressly provide for directors to make distributions during an administration.

Arena Capital Limited (Arena) was a Ponzi scheme.  Arena's liquidators applied under s284(1)(a) of the Companies Act 1993 for directions regarding the distribution of assets under liquidation.

The Court held that dividing the assets into trust assets and general assets was inefficient in the circumstances and ordered a "common pool approach."  The Court ordered distribution on a pro rata, pari passu basis.  The investors had borne the same degree of risk and it was not cost-effective to trace the numerous small contributions.

Commercial Factors Ltd v Meltzer concerned a funding agreement between Commercial Factors Ltd (CFL) and the liquidators of Blue Chip New Zealand Ltd (in liq) (Company) by which CFL agreed to lend $67,750 to allow the liquidators to obtain an opinion on the merits of claims against the Company's directors.

If proceedings were commenced, the Company was to pay 2.5% of any proceeds received to CFL.  If the Company did not commence proceedings but otherwise received funds, the agreement stipulated CFL's right to repayment after any liquidator costs.

Deep Purple was, and still is, a rock music band. Its members included Mr Gillan, Mr Glover and Mr Paice. In 2005, band members entered into an agreement with HEC Enterprises Limited (HEC) and Deep Purple (Overseas) Limited (DPO). Under that agreement, the parties agreed to form a new company named Purpletuity, to which various copyrights and other assets were to be transferred. In 2015, Mr Gillan, Mr Glover and Mr Paice commenced proceedings against HEC and DPO to enforce that agreement.

In our April 2019 newsletter we reported on the High Court judgment in Mainzeal Property Construction Limited (in liq) & Ors v Yan & Ors [2019] NZHC 255.  The directors were ordered to contribute $36m to Mainzeal’s assets to be distributed to creditors.  The Court found that Mr Yan was the most culpable director and had induced the other directors to breach their duties.

The English High Court ruled that prospective emergency legislation to amend insolvency laws due to the COVID-19 pandemic could not prevent liquidation proceedings from being brought.  In Shorts Gardens LLP v London Borough of Camden Council [2020] EWHC 1001 (Ch) applications were made by two companies to restrain local councils from bringing liquidation proceedings in respect of unpaid rates and costs orders.