Introduction

The recent decision of Andrew Burrows QC, sitting as a Judge of the High Court, in Palliser Limited v Fate Limited (In Liquidation) [2019] EWHC 43 (QB), is a useful reminder of the difficulties that can arise where one party (here a tenant) relies on another (its landlord) to take out insurance.

The Facts

In 2010, a fire started at the ground floor restaurant owned and operated by a company called Fate Limited (“Fate”). It was not in dispute that the fire was caused by Fate’s negligence.

Re SHB Realisation Ltd (formerly BHS Ltd); Wright and another (as joint liquidators of SHB Realisations Ltd (formerly BHS Ltd)) v Prudential Assurance Companies Ltd [2018] EWHC 402 (Ch); [2018] All ER (D) 58 (Mar)

Synopsis

In its ruling in FTI Consulting, Inc. v. Sweeney (In re Centaur, LLC), the United States Bankruptcy Court for the District of Delaware addressed the Supreme Court’s recent clarification of the scope of Bankruptcy Code Section 546(e)’s “safe harbor” provision, affirming a more narrow interpretation of Section 546(e).

Daniel Gatty discusses the recent High Court ruling in Leon v Her Majesty’s Attorney General and others [2018] EWHC 3026 (Ch) and its impact on the grant of vesting orders following the disclaimer of a lease.

Readers of this column will be aware of the complications that can ensue when a lease is disclaimed by a tenant’s liquidator under section 178 of the Insolvency Act 1986 (IA 1986), by a tenant’s trustee in bankruptcy under section 315 of the IA 1986 or by the Crown under section 1013 of the Companies Act 2006 (CA 2006) following dissolution of a tenant company.

This is the third occasion on which I have posted on this blog on the issue of after the event insurance (ATE) policies and the impact which they have on applications for security for costs.

In the first post on 16 November 2017, I praised the judgment of Snowden J in Premier Motorauctions v Pricewaterhouse Coopers for appearing to bring clarity to an area which had for some time struggled with near irreconcilable decisions.

The United States Supreme Court has agreed to address “[w]hether, under §365 of the Bankruptcy Code, a debtor-licensor’s ‘rejection’ of a license agreement—which ‘constitutes a breach of such contract,’ 11 U.S.C. §365(g)—terminates rights of the licensee that would survive the licensor’s breach under applicable nonbankruptcy law.” The appeal arises from a First Circuit decision, Mission Prod. Holdings, Inc. v.

Can an adjudicator have jurisdiction over claims for sums owed to a referring party in liquidation? The TCC has decided in Lonsdale v Bresco that insolvency set-off precludes adjudication of such claims.

Background

Bresco had agreed to perform electrical installation works for Lonsdale in August 2014. Those works were not completed and both parties alleged wrongful termination. Bresco later became insolvent and entered into liquidation in March 2015.

The global M&A market has remained strong from the end of 2017 into 2018, with the total deals announced in the first half of 2018 making it the best period for global M&A yet. With stockholders pressuring larger companies to grow their revenues and the strong liquidity position of many companies, it is a sellers’ market.

A recent Ninth Circuit Court of Appeals decision provides insight into “bad faith” claims-buying activity; specifically whether a creditor’s purchase of claims for the express purpose of blocking plan confirmation is permissible. In In re Fagerdala USA-Lompoc, Inc., the Court found it was—the secured creditor did not act in bad faith when it purchased a subset of all general unsecured claims and voted those claims against confirmation because it was acting to further its own economic interest as a creditor, without some extrinsic ulterior motive.

It is not unusual for a creditor of a debtor to cry foul that a non-debtor affiliate has substantial assets, but has not joined the bankruptcy. In some cases, the creditor may assert that even though its claim, on its face, is solely against the debtor, the debtor and the non-debtor conducted business as a single unit, or that the debtor indicated that the assets of the non-debtor were available to satisfy claims. In these circumstances, the creditor would like nothing more than to drag that asset-rich non-debtor into the bankruptcy to satisfy its claims. Is that possible?