Traditional DIP Order Carve Outs Do Not Cap the Administrative Claims of Committee Professionals

On January 6, 2017, Judge Robert D. Drain of the Bankruptcy Court for the Southern District of New York orally approved a prepackaged plan of reorganization (a “Prepack”) in In re Roust Corporation, et al. (Case No. 16-23786), only seven days after Roust Corporation (“Roust Corp”) and two of its affiliates, CEDC Finance Corporation LLC (“CEDC Finco”) and CEDC Finance Corporation International, Inc. (together with Roust Corp, the “Debtors”), filed petitions for relief under Chapter 11.

The Barton doctrine, which has been imposed in “an unbroken line of cases … as a matter of federal common law,” In re Linton, 136 F.3d 544, 545 (7th Cir. 1998) (Posner, J.), requires that plaintiffs “obtain authorization from the bankruptcy court before initiating an action in another forum against certain officers appointed by the bankruptcy court for actions the officers have taken in their official capacities.” In re Yellowstone Mountain Club, LLC, No. 14-35363, ___ F.3d ___, 2016 WL 6936595, at *2 (9th Cir. Nov.

The Pension Protection Fund (PPF) has issued a guidance note on Insolvency Practitioner remuneration which will apply where the insolvent company has a Defined Benefit Pension Scheme. The guidance note applies to pre and post appointment work.

The Guidance Note can be found here.

The Supreme Court has handed down its judgment in the case of The Trustees of Olympic Airlines SA Pension and Life Assurance Scheme –v- Olympic Airlines SA. Pitmans’ Trustee company, PTL, were the Appellants.

The question at issue was what connection must a foreign company, that has its Centre of Main Interests (COMI) in another EU country, have within the United Kingdom, to entitle an English Court to wind it up.

In the recent decision of Horton v Henry [2014] EWHC 4209 (Ch) the High Court held that a Bankrupt’s unexercised rights to draw his pension did not represent income to which the Bankrupt was entitled within the meaning of section 310(7) of the Insolvency Act 1986 and so refused to make an Income Payments Order. This contradicted the controversial decision in Raithatha v Williamson [2012] EWHC 909 (Ch) and has created uncertainty as to which is the correct position. The Horton case is being appealed.

The High Court has held that a bankrupt’s unexercised rights to draw his pension did not represent income to which the bankrupt was entitled and so refused to make an income payments order, contradicting the controversial decision in Raithatha v Williamson which held that a bankrupt’s right to draw income from a personal pension may be subject to an income payments order even if the individual has yet to draw his pension.

Horton v Henry [2014] EWHC 4209 (Ch)

Since the Welfare Reform and Pensions Act 1999 (“1999 Act”), it has been understood that the rights of a bankrupt under a tax approved pension plan are excluded from the bankruptcy estate and do not vest in his Trustee in Bankruptcy.

That said, where a Bankrupt was already drawing an income from his pension, his Trustee could seek an Income Payments Order over that income.

The Court of Appeal has handed down an important judgment for landlords and insolvency practitioners, in the case of Jervis v Pillar Denton; re Games Station (“Game”).

According to The Times (25 October 2013) the British Property Federation has advised landlords to take larger rent deposits to reduce losses caused by the insolvency of a tenant.