SUPREME COURT RULING NO. 44/2103, OF FEBRUARY 19, 2013: INSOLVENCY CLASSIFICATION OF FINANCE LEASE INSTALMENTS DEPENDS ON SPECIFIC PROVISIONS OF THE LEASE AGREEMENT

Supreme Court finds that where a finance lease agreement releases the lessor from liability for defects, credits resulting from payments due before the declaration of insolvency and for those falling due after it are insolvency credits  

LE PRINCIPE DE PRIMAUTE DU DROIT COMMUNAUTAIRE NE SAURAIT FAIRE ECHEC AUX REGLES TRES RESTRICTIVES DE DROIT INTERNE DES PROCEDURES COLLECTIVES (CASS. COM., 23 AVRIL 2013, F-P+B, N°12-19.184)

The Supreme Court handed down an important judgement last week in the case of BNY Corporate Trustee Services Limited v Eurosail - UK 2007 - 3BL PLC ("the Eurosail Case"), which needs to be considered by anyone who is a party to a contract which contains events of default relating to the insolvency of a party to that contract.

Background

PROCEDURE INTERNATIONALE D’INSOLVABILITE

SEUL LE TRIBUNAL QUI OUVRE LA PROCEDURE PRINCIPALE A L’ENCONTRE D’UNE PERSONNE MORALE EST COMPETENT POUR PRONONCER UNE INTERDICTION DE GERER CONTRE LE DIRIGEANT DE CELLE-CI (CASS.COM. 22 JANVIER 2013 N°11-17.968 (N°55 F-PB), MAJOT C/ STE BECHERET- THIERRY-SENECHAL- GORRIAS ES. QUAL.)

The Madrid Provincial Court (Section 28) ruling of December 7, 2012, and the Barcelona Provincial Court (Section 15) ruling of October 4, 2012, judged the insolvency categorisation of a credit the receivers had categorised as subordinate because they held that the creditor company belonged to the same corporate group as the insolvent company.⁶ In both cases, the provincial courts analysed the concept of group for the purposes of insolvency before and after the reform of the Insolvency Act introduced under Act 38/2011.

The Supreme Court clarified the insolvency categorisation for interest rate swap contracts, classifying them as insolvency credits, as they fail to meet the functional synallagma requirement, which establishes functional reciprocal obligations.

On 8 March 2013 the Insolvency Service released details of a director's disqualification undertaking given by a John Boyd Blackwood, a Director of a rural business in Midlothian. He had given the undertaking not to act as a director of a limited company from 15 March 2013 for five years.

Matthew Purdon Henderson v. Foxworth Investments Limited and 3052775 Nova Scotia Limited

Inner House case of some complexity in which the Liquidator of the Letham Grange Development Company sought reduction of a security over the Letham Grange resort near Arbroath. The case involves a number of companies all controlled by a Mr Liu and his family.

Compensation of a debt made after the debtor’s bankruptcy declaration via the appropriation of securities pledged by virtue of a financial guarantee, is admitted.

The validity of a transaction assessed as “compensation” that was carried out after the bankruptcy declaration of the company in debt was questioned before the Supreme Court. The credit entity applied the value obtained from the reimbursement of an investment fund that had been pledged to secure a credit policy to reduce the debt.

JUDGEMENTS NO. 541/2012, OF OCTOBER 23, 2012, BY THE ZARAGOZA BRANCH OF THE COURT OF APPEALS, NOS. 413/2011, OF DECEMBER 19, AND 18/2012, OF JANUARY 18, BY THE BURGOS BRANCH OF THE COURT OF APPEALS, NO. 132/2012, OF APRIL 10, BY THE RULING OF THE VALENCIA BRANCH OF THE COURT OF APPEAL, AND NOS. 210/2012 AND 211/2012, BOTH OF JULY 20, BY THE ALICANTE COMMERCIAL COURT