ADVISORY | DISPUTES | TRANSACTIONS Financial Litigation roundup Spring 2015 Welcome to the latest edition of our Financial Litigation roundup. In this edition, we consider recent judgments and ongoing cases from the banking and financial world in the UK and Asia, as well as regulatory developments across those jurisdictions. English judgments SPL Private Finance (PF1) IC Limited and others v Arch Financial Products LLP and others; SPL Private Finance (PF2) IC Ltd and other v Robin Farrell. more> McWilliam v Norton Finance (UK) Ltd (in liquidation).
Removal of requirement for sanction
Previously under section 165 IA 86, liquidators in a voluntary winding up would have to seek sanction of the company (in members’ voluntary liquidation) or of the court or liquidation committee (in creditors’ voluntary liquidation) in order to exercise their powers to pay debts, compromise claims etc. SBEEA removes this requirement so that liquidators can exercise those powers freely. This will aid expeditious winding up of companies. Equivalent provisions have also been put into place for trustees in bankruptcy.
In April 2013, the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) came into force, making the success fee applied to a Conditional Fee Arrangement (CFA), and the After the Event (ATE) insurance premiums, irrecoverable by a successful party to litigation proceedings. However, under article 4 of LAPSO, there is an "insolvency exemption" making these costs recoverable by an insolvency practitioner.
In Allco Funds Management Limited v Trust Co (Re Services) Ltd [2014] NSWSC 1251, an inter-company loan transaction was challenged by a receiver appointed by the secured creditor to one of the companies. Common directors were involved in the transaction. The issue was whether the directors breached their fiduciary duties entitling the company via the receiver to have the transaction set aside.
The background to the case
Summary
The recent judgment of Mrs Justice Proudman in Plaza BV –v- The Law Debenture Trust Corporation1 illustrates and extends a line of authorities in which the English courts have sought to narrow the scope of the mandatory application of Article 2 of the Brussels Regulation 44/2001. These cases are a reaction to the broad interpretation of the applicability and effect of Article 2 set out in the ECJ's decision in Owusu –v- Jackson2 , and attempt to confine the influence of that decision.
A debtor company can seek to have a statutory demand set aside if there is a genuine dispute as to the existence or amount of the debt, or the company has an offsetting claim.
Because the threshold for contesting a statutory demand is relatively low, a creditor may decide it is better to issue the statutory demand for the undisputed portion of the total debt after making an appropriate allowance for the amount of the total debt in dispute or the amount of the alleged offsetting claim.
The published judgment in Abbey Forwarding[1] will not make for comfortable reading for HMRC. Having instigated the winding up of a profitable business, which led to the dismissal of 23 employees, and accused innocent directors of fraud, HMRC then withdrew all assessments made against the company and attempted to avoid undertakings it had given to the court when seeking the original winding up order.
Introduction
In the recent case of Re LDK Solar Co Ltd,(1)Justice Lam considered the approach that the court should take in deciding whether to invoke its jurisdiction to approve an arrangement or compromise between a foreign company and its creditors or members.
When a company is facing short term financial difficulties the directors or shareholders may decide to make a loan to the company to pay wages.