In a judgment issued yesterday (Francis v Gross [2024] NZCA 528), the Court of Appeal unanimously overturned the controversial High Court decision in Francis v Gross [2023] NZHC 1107 and held that purchasers of partly constructed modular buildings (pods) did not have equitable liens (at all, and especially not in priority to secured creditors) over those pods.

A bedrock principle underlying chapter 11 of the Bankruptcy Code is that creditors, shareholders, and other stakeholders should be provided with adequate information to make an informed decision to either accept or reject a chapter 11 plan. For this reason, the Bankruptcy Code provides that any "solicitation" of votes for or against a plan must be preceded or accompanied by stakeholders' receipt of a "disclosure statement" approved by the bankruptcy court explaining the background of the case as well as the key provisions of the chapter 11 plan.

The High Court has reaffirmed the test to be applied in considering an application to dismiss a bankruptcy summons grounded on a judgment.

The bankruptcy process in Ireland involves multiple steps and the debtor can seek to bring it to a halt at each step. Debtors often seek to rerun effectively the same arguments at each step, ignoring previous findings by the courts. One such step is an application to dismiss a bankruptcy summons.

This morning, after much anticipation, the Supreme Court has released its judgment in Yan v Mainzeal Property Construction Limited (in liq) [2023] NZSC 113, largely upholding the Court of Appeal's decision, and awarding damages of $39.8m against the directors collectively, with specified limits for certain directors. The decision signals that a strong emphasis on 'creditor protection' is now embedded in New Zealand company law.

The Irish High Court has determined that the liquidation of an Irish aircraft leasing company, which was a 100% subsidiary of a Russian company expressly subject to EU sanctions, rebuts the presumption that the company was controlled by the Russian parent for the purpose of EU sanctions.

This enables the liquidators to deal with the assets without costly and time-consuming derogation applications.

Background

In recent years much ink has been spilled opining on the so called 'Quincecare' duty of care, and the limits of it (see links to our recent insolvency law updates covering the topic below). The judgment in Barclays Bank plc v Quincecare Ltd [1992] 4 All ER 363 was a first instance decision on Steyn J, in which he found that a bank has a duty not to execute a payment instruction given by an agent of its customer without making inquiries if the bank has reasonable grounds for believing that the agent is attempting to defraud the customer.

In Short

The Situation: The U.S. Supreme Court considered whether § 363(m) of the Bankruptcy Code, which limits a party's ability to undo an asset transfer made to a good-faith purchaser in a bankruptcy case, is jurisdictional.

Irish company law provides that if a charge granted by a company is not registered in the Companies Registration Office (CRO) within 21 days of its creation, it is void against a liquidator and any creditor of the company. There is a duty imposed on a company which grants a charge to register the charge in the CRO but the creditor taking the charge can also do so.

Diamond Rock Developments Ltd (the Company) granted a mortgage over a property. That mortgage was registered in the Land Registry but was not registered in the CRO.

If you supply goods, the simplest step that you can take to reduce your exposure to a customer’s insolvency is to use effective retention of title (RoT).

However not all RoT clauses are effective and we see many RoT claims rejected in insolvency.

By default, once you sell goods on credit:

• the goods belong to the customer; and
• the customer owes you the purchase price.

This means that if an insolvency practitioner (IP) is appointed to the customer:

The ability of a bankruptcy trustee or chapter 11 debtor-in-possession ("DIP") to assume, assume and assign, or reject executory contracts and unexpired leases is an important tool designed to promote a "fresh start" for debtors and to maximize the value of the bankruptcy estate for the benefit of all stakeholders. However, the Bankruptcy Code establishes strict requirements for the assumption or assignment of contracts and leases.