In light of the radically and rapidly changing face of bricks and mortar retail, cases providing guidance on the way in which liabilities are to be dealt with in the course of the restructuring / insolvency process are extremely valuable not only for stakeholders and practitioners dealing with the consequences of those processes but also to those guiding and devising the strategies in the first instance.

Wright and Rowley v Prudential Assurance Company Limited is one such case arising out of the collapse of the British Home Stores (‘BHS’) retailing group in 2016.

The securities safe harbor protection of Bankruptcy Code (“Code”) § 546(e) does not protect allegedly fraudulent “transfers in which financial institutions served as mere conduits,” held the U.S. Supreme Court on Feb. 27, 2018. Merit Management Group LP v. FTI Consulting Inc., 2018 WL 1054879, *7 (2018). Affirming the Seventh Circuit’s reinstatement of the bankruptcy trustee’s complaint alleging the insolvent debtor’s overpayment for a stock interest, the Court found the payment not covered by §546(e) and thus recoverable. The district court had dismissed the trustee’s claim.

Facts

Mr Mikki is a photographer (‘the Bankrupt’). Bankruptcy was 2010 when pertinently he had a bank account with £1,500 in it and a car.

The £1,500 was spent, but £3,000 was subsequently paid in. When the account was frozen it again had £1,500 in it. After investigations it was determined that this money derived from post-bankruptcy income and was returned. Those investigations took some time and the Bankrupt demanded penal interest.

Original news

Mikki v Duncan [2016] EWCA Civ 1312, [2017] All ER (D) 157 (Feb)

The Federal Rules of Bankruptcy Procedure (“Bankruptcy Rules”) require each corporate party in an adversary proceeding (i.e., a bankruptcy court suit) to file a statement identifying the holders of “10% or more” of the party’s equity interests. Fed. R. Bankr. P. 7007.1(a). Bankruptcy Judge Martin Glenn, relying on another local Bankruptcy Rule (Bankr. S.D.N.Y. R.

Facts

This case related to the leasehold ownership of hotel rooms. The applicants were the leaseholders of the hotel rooms and the respondent companies the lessors.

The safe harbor protection of Bankruptcy Code (“Code”) §546(e) does not protect “transfers that are simply conducted through financial institutions,” held the U.S. Court of Appeals for the Seventh Circuit on July 28, 2016. FTI Consulting Inc. v. Merit Management Group LP, 2016 WL 4036408, *1 (7th Cir. July 28, 2016).

A version of this article was first published in The Law Society Gazette and Prime Resi.

The Court of Appeal upheld the finding at trial of HHJ Bird (sitting in the High Court) that save where there is fraud, a debtor is not legally obliged to volunteer information to an assignee regarding his arrangement with the assignor. The dispute arose because Bibby, a factor (and ‘Assignee’), purchased debts from Morleys Ltd (‘the Assignor’), owed to it by HFD Ltd and MCD Ltd (the ‘Customers’/‘Debtors’). The contract between the Assignor and Customers was such that the latter were entitled to a rebate, at the beginning of each calendar year, on purchases made.

Bankruptcy courts may hear state law disputes “when the parties knowingly and voluntarily consent,” held the U.S. Supreme Court on May 26, 2015. Wellness Int’l Network Ltd. v. Sharif, 2015 WL 2456619, at *3 (May 26, 2015). That consent, moreover, need not be express, reasoned the Court. Id. at *9 (“Nothing in the Constitution requires that consent to adjudication by a bankruptcy court be express.”). Reversing the U.S.