The Court of Appeal has resolved previously conflicting case law to confirm that a bankrupt cannot be obliged to crystallise his pension benefits in order to produce income to pay off creditors.

The recent Court of Appeal decision in Rawlinson and Hunter Trustees SA & others v Akers & another [2014] serves to emphasise that third party reports commissioned by liquidators to enable them to consider whether litigation should be commenced in order to make recoveries for the benefit of creditors will not always attract litigation privilege.

In June 2011, the United States Supreme Court issued its opinion in the case known as Stern v. Marshall. The U.S. Supreme Court held that filing a proof of claim in a bankruptcy case does not constitute consent to the bankruptcy court’s jurisdiction over all counterclaims or actions that the bankruptcy estate may later bring against the creditor.

In fact, filing the proof of claim constitutes consent only to those claims or actions that either (1) stem from the bankruptcy case itself; or (2) are necessary to the resolution of the creditor’s proof of claim.  

When a traditional nonbanking company files a case under the Bankruptcy Code, a judge is appointed to be the neutral arbiter of disputes that arise between the debtor and its creditors.

Introduction