THE PERENNIAL PROBLEM OF UNPAID DEBTS – YOUR RECOVERY OPTIONS

Supreme Court Judgment dated 10 March 2016 (STS 151/2016)

The judgment of the Supreme Court analyses the objective scope of extension of the liability for obligations and debts for which, as appropriate, the director of a company should be liable and, more specifically, the scope of "the corporate obligations subsequent to the occurrence of the legal ground for dissolution".

This article was written by Greg Standing, partner in Wragge & Co LLP's finance, insolvency, recoveries and sales team and published in the July issue of Motor Finance.

When a claimant discontinues its claim, the usual position is that it has to pay the defendant's reasonable legal costs. This is the general presumption under the Civil Procedure Rules and applies unless there is good reason for it not to.

Where a receiver of an insolvent company brings an unsuccessful claim, a personal costs order will not be made against the receiver unless there are exceptional circumstances making it just to do so.

Recovery of legal costs in insolvency proceedings can be a difficult procedure, as the ability of counsel to claim costs depends on the work performed, the timing of the work, and for whom the work was done.

In Father & Son Investments Inc. v. Maverick Brewing Corp. (2007), 2007 CarswellAlta 1452 (Alta. Q.B.), Maverick Brewing Corporation (“Maverick”) operated a brewery in Edmonton in space leased from Five Oaks Inc. (“Five Oaks”). The two major creditors of Maverick were Father & Son Investments Inc. (“Father & Son”) and Five Oaks. Pursuant to a postponement and subordination of security interest document, Five Oaks had priority over Father & Son to the assets of Maverick.

Mana bought proceedings against the liquidators of James for legal costs resulting from the liquidator's decision to continue an appeal against Mana, in respect of successful specific performance proceedings brought by Mana against James.