The ability to "surcharge" a secured creditor's collateral in bankruptcy is an important resource available to a bankruptcy trustee or chapter 11 debtor in possession ("DIP"), particularly in cases where there is little or no equity in the estate to pay administrative costs, such as the fees and expenses of estate-retained professionals. However, as demonstrated by a ruling handed down by the Third Circuit Court of Appeals, the circumstances under which collateral may be surcharged are narrow. In In re Towne, Inc., 2013 BL 232068 (3d Cir. Aug.

In the bankruptcy proceedings in respect of Mr Gabriel Ricardo Dias-Azedo (the "Bankrupt"), the Court of First Instance recently exercised its discretion under sections 37(2) and 97 of the Bankruptcy Ordinance (Cap. 6) (BO) in favour of two creditors and granted them a priority claim against the Bankrupt's estate for their costs in preserving his assets incurred before receiving notice of the bankruptcy petition.

Background

In the recent case of Lau Siu Hung v. Krzystof Marszalek (HCCW 484/2009, 17 June 2013) the Court of First Instance held that an annulment of bankruptcy does not debar a creditor, who has not proved his provable debt, from asserting his claim after the annulment.

Procedural Background

In The Joint and Several Liquidators of QQ Club Limited (in liquidation) v. Golden Year Limited (HCCW 245/2011, 9 April 2013) (QQ Club), the Court of First Instance held that a liquidator's costs in pursuing an avoidance claim are "fees and expenses properly incurred in preserving, realizing or getting in the assets", and are payable out of the company's assets in priority to all other payments prescribed in rule 179 of the Companies (Winding-up) Rules. In reaching this conclusion, the court distinguished the English Court of Appeal's decision in Lewis v.

Did you know that the court's guiding principle on assessing remuneration for liquidators in respect of their administration of trust assets held by the company is similar to the principle applicable to liquidation work, that is, on a "value for money" basis rather than as an indemnity against cost?

Section 506(a) of the Bankruptcy Code contemplates bifurcation of a debtor's obligation to a secured creditor into secured and unsecured claims, depending on the value of the collateral securing the debt. The term "value," however, is not defined in the Bankruptcy Code, and bankruptcy courts vary in their approaches to the meaning of the term. In In re Heritage Highgate, Inc., 679 F.3d 132 (3d Cir.

DID YOU KNOW...that interim fees incurred by provisional liquidators (including agents’ fees), previously thought to have been payable from the funds of an insolvent estate without formal taxation, are now required to be taxed.

The ability to sell an asset in bankruptcy free and clear of liens and any other competing “interest” is a well-recognized tool available to a trustee or chapter 11 debtor in possession (“DIP”). Whether the category of “interests” encompassed by that power extends to potential successor liability claims, however, has been the subject of considerable debate in the courts. A New York bankruptcy court recently addressed this controversial issue in Olson v. Frederico (In re Grumman Olson Indus., Inc.), 445 B.R. 243(Bankr. S.D.N.Y. 2011).

The insolvency proceedings of the Lehman Brothers' group of companies worldwide ("Group") are among the most complicated ones we have seen. A significant factor contributing to the complexity is that many Group entities hold segregated assets (principally securities and funds) for their clients, which may be individuals or entities within or outside the Group.