Following the Court of Appeal’s decision in Game it is necessary to consider the effect of the court’s decision on the treatment of rents in administration and by analogy liquidation – and the potential consequences of that change.
What types of insolvency does the decision affect?
The Court of Appeal’s decision explicitly states that it is applicable as to the treatment of rents in both administration and liquidation.
What about existing cases?
Michael John Andrew Jervis v Pillar Denton Limited (Game Station) and others [2013] EWHC 2171 (Ch) (“Game”)
Game has come to the courts against the background of two previous High Court decisions on the treatment of lease rents in administration. Recent decisions on this point have arisen out of cases where landlords made claims for rent in the administration of tenant companies.
In a recent judgment, HHJ Cooke found in favour of the defendant solicitors in a claim by the Trustees in Bankruptcy of Clifford Shore that Irwin Mitchell had failed properly to advise Mr Shore as to the risk of pursuing litigation that was subject to limitation arguments.
Kevin Hellard, Amanda Wade v Irwin Mitchell [2013] EWHC 3008 (Ch)
Background
Section 546(e) of the Bankruptcy Code offers a strong defense for holders of bonds, notes and other securities to preference and fraudulent transfer actions brought in bankruptcy proceedings. Essentially, any payment made to settle or complete a securities transaction, including repurchases and redemptions of bonds, notes and debentures, is protected from avoidance under the Bankruptcy Code. For many years, however, this powerful defense was rarely used. When the defense was raised, it was usually in the context of protecting payments made in leveraged buy-outs.
Can a secured creditor decide not to participate in a bankruptcy proceeding and thereby avoid any impact the bankruptcy may have on its lien? According to a recent decision by the United States Court of Appeals for the Fifth Circuit in S. White Transp., Inc. v. Acceptance Loan Co., 2013 WL 3983343 (5th Cir. Aug. 5, 2013), the answer appears to be that at least in the Fifth Circuit, the secured creditor can avoid the impact a bankruptcy plan has on its lien by simply declining to participate in the bankruptcy proceeding.
Over the last two decades, many companies faced with excessive asbestos-related liabilities have successfully emerged from bankruptcy with the help of section 524(g) of the Bankruptcy Code, which channels all asbestos-related liabilities of the reorganized company to a newly formed personal injury trust. The injunctive relief codified in section 524(g) is modeled on the channeling injunction first crafted in the bankruptcy case of Johns-Manville Corporation, once the world’s largest producer of asbestos-containing products.
In drafting the provisions of the Bankruptcy Code relating to nonresidential real property, Congress intended commercial landlords to be “entitled to significant safeguards.”1 Examples of the protections afforded to commercial landlords include requiring a debtor to remain current in its payment of post-petition rent;2 allowing landlords to drawdown on a letter of credit without prior bankruptcy court approval;3 permitting landlords to setoff pre-petition unpaid rent against a security deposit and/or lease rejection damages;4 recognizing that a tenant’s possessory rights in nonresident
On August 8, 2013, the Executive Life Insurance Company of New York (ELNY) Restructuring Agreement closed, following the denial of the last relevant appeal of the trial court’s Order of Liquidation and Approval of the Restructuring Agreement in May 2013.
Last month’s decision out of the Delaware District Court in Woolery, et al. v.
The long ELNY saga continues, at least for the time being, with two recent developments.