MCGRATH AND ANOTHER v RIDDELL, House of Lords, 9 April 2008
The liquidators of the HIH group of Australian insurance companies appealed against the decisions of the High Court and the Court of Appeal that certain assets of the HIH group, mostly reinsurance claims on policies taken out in the London market, should not be remitted to Australia. The courts instead ordered that the assets should remain in England and be distributed to creditors in accordance with English insolvency laws.
The Court of Appeal decided yesterday that it couldn’t make a ruling on the correct way to calculate the collective redundancies threshold without making a reference to the European Court of Justice. Employers will therefore have to wait a considerable while longer before the law is clarified.
The retention of a proportion of the contractor's fee is common practice in construction contracts. The parties sometimes agree (usually in unamended industry standard building contracts) that the retention amount is held on trust by the employer in a separate bank account. But what happens if there is no such express provision and the employer becomes insolvent?
We all know how busy insolvency practitioners (IPs) were during the recession dealing with the huge rise in corporate and personal insolvencies. That is now feeding into a real spike in professional negligence claims. We briefly summarise some typical claims we are seeing and how best to handle them.
What types of claims are we seeing?
Over the last few years, the courts have shown themselves to be increasingly unwilling to interfere in the level of liquidated damages set in building contracts. The courts have taken this position predominantly because the agreed level of liquidated damages forms part of the commercial bargain reached between the parties at the outset of the contract. However, employers should still carefully calculate the level of liquidated damages inserted into the contract for the following reasons:
For those institutions carrying out building projects at the moment the recent news that the holding company of Currie & Brown was in administration at the time of its acquisition by Middle East-based consultant Dar Group raised fresh concerns that there may be more victims of this period of economic instability. The insolvency of a consultant can be as harmful to a project as that of the main contractor. Well-drafted documentation is essential to protect an employer, as is ensuring that all requests for payment are justified.
Landlords are often placed at a disadvantage when an insolvent tenant company enters into administration. The landlord will not be a secured or preferred creditor where its tenant does not pay the rent, and the landlord cannot forfeit the lease for non-payment of rent without permission of the court.
The recent news that the holding company of Currie & Brown was in administration at the time of its acquisition by Middle East-based consultant Dar Group raises fresh concerns that there may be more victims of this period of economic instability.
For landlords, a tenant in administration is just about your worst nightmare. A moratorium prevents you from suing for outstanding arrears or forfeiting the lease and you may be left with an empty unit generating no income.
Now it seems if administrators are using your premises, the rent might not even be paid as an expense simply because of when they were appointed. So what has happened?
A new practice direction on insolvency proceedings came into force on 23 February 2012. It contains procedural requirements for various aspects of proceedings under the Insolvency Act 1986 and the Insolvency Rules 1986.