The webinar looked at the widely debated issue of whether a company in liquidation can commence an adjudication by examining three recent cases on this topic.

Bresco v Michael J Lonsdale

The first being the Court of Appeal decision in Bresco Electrical Services Ltd (in liquidation) v Michael J Lonsdale (Electrical) Ltd [2019] EWCA Civ 27, which has recently been heard in the Supreme Court but whose judgment is awaited.

Background

The Corporate Insolvency and Governance Bill is currently being fast-tracked through Parliament, but is the Government making a mistake in seeking to combine a short-term breathing space for businesses during the current Covid-19 crisis with introducing the greatest changes we have seen to UK insolvency laws for decades?

Whilst the government has taken significant steps to help protect businesses from collapsing as a result of the current pandemic, it is evident that companies across the board are acutely aware that such protection cannot last forever.

In a decision released on March 11, 2020, the Ontario Court of Appeal provided reassurance for those in the construction industry of the effectiveness of section 9(1) of the Construction Act, RSO c C.30 (“CA”) in insolvency proceedings. This decision did not overturn the previous decision rendered in Re Veltri Metal Products Co (2005), 48 CLR (3d) 161 (Ont CA) (“Veltri”); rather, the Court of Appeal distinguished the two cases on the facts.

Whether or not the impact of the COVID-19 crisis on a party’s ability to perform its obligations will constitute a force majeure event enabling them to claim relief depends on the terms of the contract as applied to the precise circumstances. Where there is no force majeure clause, a party may in rare circumstances be able to invoke the doctrine of frustration.

We now have further evidence of the court's willingness to act within the spirit of the Corporate Insolvency & Governance Bill ("CIG Bill").

Under English law, there is no common law right to terminate a contract on a counterparty’s insolvency. As a result, in all well-drafted commercial contracts it common to see a contractual right to terminate on the event of a party’s insolvency.

The Corporate Insolvency and Governance Bill was first read to Parliament on 20 May 2020. It is set to be fast tracked into legislation and will likely be law by 10 June 2020.

The Government has announced proposals for retrospective changes for the urgent reforms to UK insolvency law, designed to protect companies and their directors during the COVID-19 outbreak.

Wrongful trading

These changes will include a temporary suspension (to the end of June 2020) of section 214 Insolvency Act 1986 in relation to wrongful trading, subject to passage of the upcoming Corporate Insolvency & Governance Bill through Parliament in the coming weeks.

Background: Financial Backdrop

The Stats