“[T]he Bankruptcy Code does not permit [an undersecured] creditor . . . to advance an unsecured claim for post-[bankruptcy] attorneys’ fees,” held the U.S. District Court for the Eastern District of North Carolina on Nov. 27, 2017. Summitbridge Nat’l Invs. Iii v. Faison, 2017 U.S. Dist. LEXIS 195267, *8 (E.D. N. C. Nov. 27, 2017). Affirming the bankruptcy court, the district court agreed that “the Code is most properly interpreted to allow only oversecured creditors to add post-[bankruptcy] attorneys’ fees.” Id., at *10.

Key points

• Where the underlying liability on which a bankruptcy order is made is subsequently set aside, the correct remedy is rescission under s.375(1) of the Insolvency Act 1986.

• Annulment under s.282(1)(a) is the appropriate remedy when, on grounds existing at the time of making the bankruptcy order, the order ought not to have been made.

The facts

“[B]ankruptcy does not constitute a per se breach of contract and does not excuse performance by the other party in the absence of some further indication that the [debtor] either cannot, or does not, intend to perform,” held the Supreme Court of Connecticut in a lengthy opinion on Nov. 21, 2017. CCT Communications, Inc. v. Zone Telecom, Inc., 2017 WL 5477540, *13 (Ct. Nov. 21, 2017) (en banc), superseding 324 Conn. 654, 153 A.3d 1249 (2017). Reversing the trial court, granting the plaintiff’s motion for en banc reconsideration of its earlier Feb.

“Officers and directors of [an operating corporate debtor] have fiduciary duties to the corporation — not the corporation’s creditors” under Texas law, held the U.S. Court of Appeals for the Fifth Circuit on Oct. 27, 2017. In re ATP Oil & Gas Corp., 2017 U.S. App. LEXIS 21337, *7 (5th Cir. Oct. 27, 2017). In affirming the district court’s dismissal of a Chapter 7 bankruptcy trustee’s complaint, the Fifth Circuit rejected the trustee’s breach of fiduciary claims against officers and directors for permitting “the payment of . . .

Key point

• In certain circumstances the court will look to parallel statutory provisions where existing applicable statute does not accommodate the situation, as long as the latter is not offended, expanded or altered by doing so.

The facts

This application for directions was brought by the administrators of Lehman Brothers Europe Ltd (the “Company”) on:

The U.S. Court of Appeals for the Third Circuit recently dismissed an appeal from “the sale of legal claims” as “statutorily moot” under Bankruptcy Code (“Code”) § 363(m) because the appellants “had not obtained a stay” of the effectiveness of the sale order pending appeal. In re Pursuit Capital Mgmt., LLC, 2017 U.S. App. Lexis 20889 (3d Cir. Oct. 24, 2017). According to the court, “we cannot give [the appellants] the remedy they seek without affecting the validity of the sale.” Id., at *37.

Relevance

Key Points

• Statutory powers are to be exercised in accordance with a company’s articles of association
• The Duomatic principle cannot simply be used as a bandage to cure a company’s procedural errors

The Facts

This appeal considered whether the sole director of a company, whose articles required two directors for its board meeting to be quorate, could validly appoint administrators under paragraph 22 Schedule B1 of the Insolvency Act 1986.

Key points

• The dismissal of the appellant’s previous application for an annulment of a bankruptcy order was a serious procedural irregularity
• A court may annul a bankruptcy order under s 282 IA 1986 if it is satisfied that the order ought not to have been made based on grounds existing at the time the order was made
• In relation to appeals made pursuant to s 375 IA 1986 to review or rescind the decision of a lower court, the court may consider fresh material.

The facts

Key points

• A practical approach was adopted by the court in respect of deadlines for submitting administration expense claims that were otherwise holding up the making of distributions to unsecured creditors.
• In the absence of a suitable statutory mechanism, the court allowed for a cut-off date by which expense claims must be submitted.

The administrators of 18 of the Nortel companies applied to court for directions on how to deal with potential claims for administration expenses.

Key Points 

• S 304 of the Insolvency Act 1986 is concerned with acts or omissions by a trustee in bankruptcy that have caused loss or damage to the estate

• However, the wording of that Section does not go so far as to state that in no circumstances can a trustee owe an enforceable duty in respect of loss or damage caused to the bankrupt personally.

The Facts