The Privy Council has recently delivered a landmark judgment on the interplay between arbitration agreements and winding up petitions. The Board held that the English case of Salford Estates (No 2) Ltd v Altomart Ltd [2014] EWCA Civ 1575; Ch 589, which had adopted a pro-arbitration approach to stay or dismiss winding up petitions based on debts covered by arbitration agreements, even if the debts were not genuinely disputed on substantial grounds was wrongly decided.

Insolvency related claims in relation to contracts subject to arbitration agreements continue to result in interesting challenges for the English court. In a recent decision the court had to decide whether an application for a summary judgment amounted to a step in the proceedings such that the applicant had waived its right to seek a stay in favour of arbitration.

Background

The English courts are known for being pro-arbitration. In the recent case of Riverrock Securities Limited v International Bank of St Petersburg (Joint Stock Company) [2020] EWHC 2483 (Comm) the English High Court has granted an anti-suit injunction in relation to claims being made in foreign bankruptcy proceedings, where the underlying agreements included arbitration provisions with a London seat.

The parties

(Bankr. S.D. Ind. Dec. 4, 2017)

The bankruptcy court grants the motion to dismiss, finding the defendant’s security interest in the debtor’s assets, including its inventory, has priority over the plaintiff’s reclamation rights. The plaintiff sold goods to the debtor up to the petition date and sought either return of the goods delivered within the reclamation period or recovery of the proceeds from the sale of such goods. Pursuant to 11 U.S.C. § 546(c), the Court finds the reclamation rights are subordinate and the complaint should be dismissed. Opinion below.

(Bankr. E.D. Ky. Nov. 22, 2017)

(B.A.P. 6th Cir. Nov. 28, 2017)

The Sixth Circuit B.A.P. affirms the bankruptcy court’s dismissal of the Chapter 12 bankruptcy case. The court finds that the bankruptcy court failed to give the debtor proper notice and opportunity to be heard prior to the dismissal. However, the violation of due process was harmless error. The delay in filing a confirmable plan and continuing loss to the estate warranted the dismissal. Opinion below.

Judge: Preston

Attorney for Appellant: Heather McKeever

(6th Cir. Nov. 14, 2017)

(Bankr. W.D. Ky. Nov. 1, 2017)

The bankruptcy court grants the creditor’s motion for stay relief to proceed with a state court foreclosure action. The creditor had obtained an order granting stay relief in a prior bankruptcy filed by the debtor’s son, the owner of the property. The debtor’s life estate interest in the property does not prevent the foreclosure action from proceeding. Opinion below.

Judge: Lloyd

Attorney for Debtor: Mark H. Flener

Attorney for Creditor: Bradley S. Salyer

The Sixth Circuit affirms the B.A.P., holding the entry of summary judgment in favor of the creditors in the nondischargeability action was appropriate. The creditors obtained a default judgment against the debtor in Tennessee state court. The default judgment was on the merits and the doctrine of collateral estoppel applied. Opinion below.

Judge: Rogers

Appellant: Pro Se

Attorneys for Creditors: Keating, Muething & Klekamp, Joseph E. Lehnert, Brian P. Muething, Jason V. Stitt

(Bankr. E.D. Ky. Nov. 1, 2011)