Section 1141(d)(6)(A) and section 523(a)(2) of the Bankruptcy Code together provide that debts owed by a corporation to a government entity are not dischargeable if such debts were obtained by false representations. Does this rule apply to claims by government entities seeking to enforce consumer fraud laws, where the government entities were not themselves the victims of the fraud?

In Dahlin v. Lyondell Chemical Co., 2018 U.S. App. LEXIS 1956 (8th Cir. Jan. 26, 2018), the Eighth Circuit Court of Appeals rejected an argument that bankruptcy debtors were required by due process to provide more prominent notice of a case filing than they did, such that the notice might have been seen by unknown creditors with claims to assert.

Bankruptcy courts lack the power to impose serious punitive sanctions, a federal district judge ruled recently in PHH Mortgage Corporation v. Sensenich, 2017 U.S. Dist. LEXIS 207801 (D. Vt. Dec. 18, 2018). Judge Geoffrey Crawford reversed a bankruptcy judge’s ruling that had imposed sanctions against a creditor based on Rule 3002.1(i) of the Rules of Bankruptcy Procedure, the bankruptcy court’s inherent authority, and Bankruptcy Code section 105.

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

On November 9, responding to a request from the U.S. Supreme Court, the Solicitor General filed a brief at the Court recommending that the petition for writ of certiorari in Lamar, Archer & Cofrin, LLP v. Appling, No. 16-11911, be granted. The petition, seeking review of a unanimous panel decision of the Eleventh Circuit, presents the question of “whether (and, if so, when) a statement concerning a specific asset can be a ‘statement respecting the debtor's . . .

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:

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