The 2008 collapse of the Lehman Brothers group (“the Group”) continues to generate questions of English insolvency law of interest to the international business community. A recent judgment of the UK Supreme Court considered, amongst other issues, the rights of foreign (non-sterling) currency creditors in English insolvency proceedings. This Alert considers that issue and provides some takeaway points for you to consider in your dealings with English counterparties.
Key Point
In certain circumstances, a purchaser’s deposit may constitute an equitable lien upon the liquidation of the seller.
The Facts
An application under s112 IA 1986 was made by the joint liquidators of Alpha (Student) Nottingham Ltd to determine whether the purchasers of unbuilt flats had the benefit of equitable liens, and therefore ranked as secured creditors in the liquidation.
The Facts
Three former managers of a Russian company sought security for costs from its liquidator in respect of hearings to set aside a recognition order obtained by the liquidator pursuant to the Cross-Border Insolvency Regulations 2006 (the CBIR) and for documents pursuant to Section 236 of the Insolvency Act 1986.
The Decision
What is a freezing order?
The purpose of a freezing order is to preserve the defendant's assets until judgment can be enforced. It operates by granting an injunction prohibiting the defendant (or anyone on his behalf) from disposing of identified assets. Legally, it does not operate as security over the assets.
Taylor v Van Dutch Marine Holding Ltd
Claimant Litigant in Person recovers 150 per hour for his time
Spencer and another v Paul Jones Financial Services Ltd (unreported), 6 January 2017 (Senior Courts Costs Office)
Summary
A claimant litigant in person can recover costs at his typical hourly rate (150). Whilst the burden of proving such financial loss lies on the claimant, the burden is not impossibly high.
Facts
Karhoo, a US incorporated company able to benefit from the Chapter 15 US bankruptcy code provision for foreign insolvency proceedings following UK Administration.
A recent decision in the High Court has seen an application for pre-action disclosure of an insurance policy dismissed because the defendant was not insolvent.
Peel Port Shareholder Finance Company owned a warehouse that was damaged by a fire caused by Dornoch. They argued that their claim was highly likely to win but that, if it did, it would cause Dornoch to become insolvent.
Peel Port therefore sought ‘pre-action disclosure’, meaning Dornoch would have to disclose applicable insurance cover information to Peel Port before they decided whether to proceed.
On 2 March Cambridgeshire-based merchant WellGrain went into administration, reportedly owing at least £15m to almost 300 creditors, many of those being farmers.
The administrators' report has now been published and indicates that the unsecured creditors - including some 155 farmers - will expect to receive between 1.4 - 6.7 pence for every pound they are owed.
It is an announcement which will no doubt be met with dismay by those creditors. However, it is not unusual that unsecured creditors of an insolvent company will receive little or no payment.
Key Points
- Directors cannot file a notice of intention to appoint (NoI) without a ‘settled intention’ to appoint an administrator
- NoIs cannot be used where there is no qualifying floating charge holder (QFCH)
- The judgment has implications for validity of appointments where requirements not met
The Facts
[2017] EWHC 1206 (Ch)
Deputy Judge Alexander QC had to consider an application for an order that R be restrained from proceeding further with a creditor’s petition to wind up B. The Judge was in no doubt that the application was misconceived. First B was not unable to pay its debts. B on the evidence provided to the court was solvent with cash in hand and a substantial unused credit facility. Further, the reason B had not paid the substantial sums claimed was that it had arguable defences as well as substantial cross-claims of its own. The Judge was clear that: