A great deal of insolvency litigation is funded by non-parties to a claim – for example, by a creditor or an “after the event” (ATE) insurer. Ordinarily such arrangements and their precise terms are confidential and are not required to be fully disclosed to a counterparty in litigation. In the recent case of Re Hellas Telecommunications (Luxembourg) [2017] EWHC 3465 (ch) (“Hellas”), the court considered the extent to which the underlying details of the litigation funders should be disclosed for the purposes of a security for costs application.
On 15 January 2018, Carillion, the UK’s second-largest builder and one of the Government’s largest contractors, was placed into compulsory liquidation and the Official Receiver was appointed as liquidator, with Michael John Andrew Jervis, David James Kelly, David Christian Chubb, Peter Dickens, David Matthew Hammond and Russell Downs of PwC being appointed as special managers to assist in the wind down of the business and realisation of its assets.
“There’s a magical place, we’re on our way there, with toys in their millions, all under one roof – it’s called… Toys R Us!”
The lyrics resonate with millions worldwide. The advert is as iconic as Coca Cola’s “Holidays Are Coming” commercial or the Sainsbury’s “Christmas is for sharing” World War 1 cinematic ad. Sadly, there is no longer a magical place aura emanating from the retail giant, but a sobering reality that its financial disarray may lead to the company’s demise.
A recent decision of the High Court (Goel and another v Grant and another [2017] EWHC 2688 (Ch)) has provided a useful reminder that care must be taken when administrators enter into pre-contract negotiations and the risk of inadvertently entering into a binding contract before terms are finalised. It also deals with the risks of disposing of assets, even those that are difficult to value, without due process.
The Facts
UK insolvency law has seen a number of significant changes over recent years, including the introduction of the Insolvency Rules 2016 (“IR 2016”) in April 2017. Further legislation has been expected in order to ensure that all of these changes apply consistently throughout the whole insolvency regime, after it became clear that IR 2016 did not apply to insolvent LLPs.
An out-of-hours office appointment of an administrator, although not unusual, is not a regular occurrence in the world of insolvency. It is however, exactly what happened at 4am on Monday 2 October, as Britain’s longest surviving airline brand ‘Monarch’ entered administration. The collapse of the airline comes as a result of mounting cost pressures in an increasingly competitive market and is the third European airline insolvency in 2017, following Air Berlin and Alitalia.
The English High Court has sanctioned a scheme of arrangement for Algeco Scotsman PIK SA, a Luxembourg-incorporated company, after the creditors consented to the New York governing law and jurisdiction clause being altered in favour of the jurisdiction of the English courts. The issues discussed were:
- the fair representation of a class of creditors;
- cross-jurisdictional schemes; and
- early tender fees offered to creditors.
Background
The recent case of Farnborough Airport Properties Company and another v HMRC is noteworthy for the light it shines on the dimly lit and often difficult interaction between tax law and insolvency.
The issues
There are various ways misconduct can be reported in respect of companies and individuals. Establishing which authority has the power to conduct investigations of wrongdoing depends to a certain extent on the status of the companies and individuals.
Remuneration schemes involving Employee Benefit Trusts (EBTs) have become more prevalent over the last 20 years, often as a way of seeking to remunerate key employees without making pay as you earn or national insurance contributions. Given the developments highlighted below, insolvency practitioners are advised to investigate such schemes in matters coming across their desks to see whether funds can be clawed back for the benefit of creditors.
HM Revenue and Customs’ opinion on EBT schemes