Valuation evidence

The court has reaffirmed that comparable sales evidence is the best evidence when determining the retrospective valuation of a property.

The UK Supreme Court has recently considered the role of commercial common sense in interpreting a contract.  Rainy Sky v Kookmin Bank concerned the interpretation of bonds issued by Kookmin Bank to guarantee the return of advance payments made by six purchasers under separate shipbuilding contracts. The shipbuilder had suffered an insolvency event and the purchasers were claiming refunds of the advance payments made to the shipbuilder under the bonds. The Bank contended that the bonds did not guarantee repayment of the advances on insolvency.

Rayford Homes granted security to two lenders, its trustee shareholder and the Bank of Scotland (BoS). The parties entered into an intercreditor agreement (ICA) using the BoS standard form. In a schedule to that agreement was a definition of the term ‘BoS Priority’ over ‘BoS Debt’ up to a monetary limit. The amount was not filled in, nor was the term ‘BoS priority’ actually used in the ICA.

Kookmin Bank v Rainy Sky SA & Others

[2011] UKSC 50

We covered this case back in Issue 120. The case has now reached the Supreme Court where the decision of the Court of Appeal was overturned. In doing so, Lord Clarke adopted the interpretation of the bond which was most consistent with business common sense.

The respected Financial Markets Law Committee sponsored by the Bank of England has published a paper, dated October 2011, containing an analysis of legal uncertainty in the FSA’s Client Assets Sourcebook (CASS) and arising from judicial decisions relating to the administration of Lehman Brothers International (Europe).

BIS and Treasury have published their response to the consumer credit elements of the Government review of consumer credit and personal insolvency. The response explains the initiative that will ensure that over 85% of customers with personal current accounts will see clearer, fairer and more manageable charges for unarranged overdrafts. Customers will be able to get alerts when their balance is low and will not incur a fee if they exceed their limit by a small amount. Also, from late 2013 there will be guaranteed account switching within seven days.

The Court of Appeal decision in the Nortel case upheld the High Court ruling that FSD/CN liability is an expense of the administration and therefore ranks ahead of administrators' remuneration, floating charges and unsecured creditors. Much of the press coverage which has followed in the immediate aftermath seems to have assumed that the decision is a victory for "good" pensioners over the "bad" banks.

The FOS opened last week for the business of being open. It is now subject to the Freedom of Information Act. However, theFOS web page on the point suggests the Service is trying to limit what will no doubt be a flood of requests.

The FOS’ web page sets out a long list of facts and figures it is most frequently asked about, organised into seven categories adopting the Information Commissioner’s model publication scheme for non-departmental public bodies covered by the FoIA.

The Supreme Court’s decision in a dispute over a parent company guarantee will change the way insolvency practitioners deal with the distribution of assets when a corporate group collapses.

In Rainy Sky S.A and six others v Kookmin Bank [2011] UKSC 50, the Supreme Court provided useful guidance on the role of business common sense in construing a clause in a commercial contract, particularly in circumstances where there are competing plausible constructions, neither of which is clearly preferable on the language used alone.

The facts