The Privy Council has recently delivered a landmark judgment on the interplay between arbitration agreements and winding up petitions. The Board held that the English case of Salford Estates (No 2) Ltd v Altomart Ltd [2014] EWCA Civ 1575; Ch 589, which had adopted a pro-arbitration approach to stay or dismiss winding up petitions based on debts covered by arbitration agreements, even if the debts were not genuinely disputed on substantial grounds was wrongly decided.

It’s been a difficult last few years for the licensed trade and the hospitality and leisure sector generally, both in terms of recovery from the Covid-19 pandemic and, more recently, the wider economic challenges facing the industry.

The threat of insolvency looms large and with it comes various regulatory considerations for insolvency practitioners (IPs): firstly, liquor licensing considerations that might arise post-appointment and, secondly, broader health and safety issues that can shift into sharp focus.

Premises licences

The UK Supreme Court has handed down its judgment in Stanford International Bank Ltd (In Liquidation) (Appellant)v HSBC Bank PLC (Respondent) [2022] UKSC 34, striking out a significant claim (£116m) for breach of the Quincecare duty on the grounds that the claimant had suffered no loss.

A Court of Appeal decision last week has broadly upheld previous TCC guidance as to the ability of companies in liquidation or those subject to CVAs to commence and enforce adjudication proceedings against their creditors. Although theoretically possible, adjudication proceedings commenced by companies in liquidation are now liable to be restrained by a court injunction.  Adjudications by companies subject to a CVA are more likely to be appropriate and, depending on the circumstances, may be enforced without a stay of execution.

Insolvency set-off: a recap

The Court of Session has confirmed that the administration in Scotland of a Scottish company will take priority over an Indian liquidation of the same company, regardless of where the company’s business and assets are situated. The Court has also confirmed that the validity and enforceability outside the UK of a floating charge is irrelevant to the validity of an administrator’s appointment in Scotland under that floating charge.

Summary

The High Court recently handed down the judgment in Ralls Builders Ltd (In Liquidation), Re [2016] EWHC 1812 (Ch). It was held that liquidators and administrators are not able to recover their own costs and expenses of investigating a wrongful trading claim from the directors of a company, even following a finding of wrongful trading under section 214 Insolvency Act 1986.

Background

Summary

The decision of the Inner House of the Court of Session was released last week in the keenly awaited application by the liquidators of Scottish Coal who sought directions on whether a liquidator appointed to a Scottish company could:

Parties wishing to resist the enforcement of an adjudication decision on the grounds of insolvency usually need to show that the claiming party will not be in a position to repay the amount of the decision if required to do so in later court or arbitration proceedings. Two recent cases in the TCC have, however, shown that different considerations can apply in the less typical circumstances of a members’ voluntary liquidation and a creditors voluntary arrangement.

Maguire & Co v Mar City Developments

The legal effect of “limited recourse” arrangements have been thrown into fresh doubt by a first instance decision of the respected Mr Justice David Richards in the case of Arm Asset Backed Securities S.A. [2013] EWHC 3351.

This decision is relevant to the following common financing arrangements.