Tradition Financial Services Ltd v Bilta (UK) Ltd and others [2023] EWCA Civ 112

Key Takeaways:

In a decision widely anticipated by investors in emerging market and distressed debt, the Court of Appeal has upheld the decision of the High Court to refuse to grant an indefinite moratorium on claims under certain English law debts under the Cross Border Insolvency Rules (“CBIR”). In doing so, the Court of Appeal has reaffirmed a long-standing principle of English common law that provides important protection to creditors; known as the Rule in Gibbs, the rule provides that a debt may only be discharged according to its own governing law.

In a 2-1 opinion, the Second Circuit overruled the district court in Marblegate Asset Management LLC v. Education Management Corp., finding no violation of the Trust Indenture Act (“TIA”) in connection with an out-of-court debt restructuring.

Background

In Berryman v Zurich Australia Ltd [2016] WASC 196 it was decided that a bankrupt's entitlement to claim a TPD benefit under a life insurance policy is not an entitlement that is divisible amongst the bankrupt's creditors, and therefore such an entitlement does not vest in the Official Trustee in bankruptcy. Tottle J of the Supreme Court of Western Australia ruled that the bankrupt insured could continue an action in his own name to recover the TPD benefit. Life insurers may need to adjust their claims' payment practices in light of the Berryman decision.