On 1 October 2017, the Pre-Action Protocol for Debt Claims (Protocol) will come into force. It will apply to all debt claims where:

• the creditor is a business (including sole traders and public bodies)
• the debtor is an individual (including sole traders), and
• no other specialised Protocol applies.

Why is this new Protocol being introduced?

The express purpose of the new Protocol is to:

Breyer Group Plc v RBK Engineering Ltd

The High Court's recent judgment in Breyer Group Plc v RBK Engineering Limited [2017] EWHC 1206 provides a timely reminder for parties to construction contracts of the appropriate (and inappropriate) uses of winding-up petitions.

The case concerned a successful application made by Breyer Group PLC (Breyer) for an order preventing RBK Engineering Limited (RBK) from continuing with a petition to wind up Breyer on the basis of a disputed debt.

How did the dispute arise?

In summary:

In Randhawa and Randhawa v Turpin and Hardy [2017] the Court of Appeal considered the comparatively simple question of whether the sole director of a company with articles that required two directors for a board meeting to be quorate, could validly appoint administrators under paragraph 22(2) of Schedule B1 to the Insolvency Act 1986 (paragraph 22(2)). The complicating feature was that, whilst 75% of the shares in the company were held by the sole director, the remaining 25% were registered in the name of a long-dissolved Manx company.

Background

“… [A]ny sale of [a foreign] debtor[’s] property [in the U.S.] outside of the ordinary course of business can be approved by the bankruptcy court only after notice, hearing, and a finding of good business reasons to permit the sale,” held the U.S. Court of Appeals for the Second Circuit on May 22, 2017. In re Fairfield Sentry Ltd. (“Sentry II”), 2017 U.S. App. LEXIS 8860, at *11 (2d Cir. May 22, 2017).

The Bankruptcy Code (“Code”) “requires the use of replacement value rather than a hypothetical [foreclosure] value … that the reorganization is designed to avoid,” held a divided U.S. Court of Appeals for the Ninth Circuit on May 26, 2017.

Claimant Litigant in Person recovers 150 per hour for his time

Spencer and another v Paul Jones Financial Services Ltd (unreported), 6 January 2017 (Senior Courts Costs Office)

Summary

A claimant litigant in person can recover costs at his typical hourly rate (150). Whilst the burden of proving such financial loss lies on the claimant, the burden is not impossibly high.

Facts

“[T]he debtor … did not retain sufficient rights in the assigned rents under Michigan law for those rents to be included in the bankruptcy estate,” held the U.S. Court of Appeals for the Sixth Circuit on May 2, 2017. In re Town Center Flats LLC, 201 U.S. App. LEXIS 7733, *2 (6th Cir. May 2, 2017). Relying on Michigan law and the language of the relevant documents, the court reversed the bankruptcy court’s holding that gave the Chapter 11 debtor access to the assigned rents as operating funds during its reorganization.

Relevance

Claims held by employees of a Chapter 11 debtor based on “restricted stock units (‘RSUs’) … must be subordinated [under Bankruptcy Code § 510(b)] to the claims of general creditors because … (i) RSUs are securities, (ii) the claimants acquired them in a purchase, and (iii) the claims for damages arise from those purchases or the asserted rescissions thereof,” held the U.S. Court of Appeals for the Second Circuit on May 4, 2017. In re Lehman Brothers Holdings, Inc., 2017 U.S. App. LEXIS 7920, *6 (2d Cir. May 4, 2017).

The U.S. Bankruptcy Court for the Southern District of New York, after a lengthy trial, dismissed on April 21, 2017 a litigation trustee’s multibillion-dollar bankruptcy-related claims arising out of a December 2007 merger, finding that:

The opening of the retail water market next month (April 2017) will change the water sector on a fundamental level with most businesses in England being able to choose their preferred suppliers. There is no doubt that the opening of the market presents both opportunities and risks for water suppliers. The already low margins in the industry will naturally be squeezed through competition, but the race for new business could also drive behaviours that further damage suppliers' profitability.

Potential pitfalls of contracting in the new market