Key points

• Information obtained by compulsion can be shared between officeholders of connected estates (parent/subsidiary)

• There must, however, be a possibility that there will be a surplus in the subsidiary estate

• The prospect must be real as opposed to fanciful

The facts

The Facts

In between the presentation of a winding up petition and making of a winding up order, a company entered into a settlement agreement with the Respondent, who founded the company and was previously a shareholder and director of the company.

The Decision

Key point

• In certain circumstances the court will look to parallel statutory provisions where existing applicable statute does not accommodate the situation, as long as the latter is not offended, expanded or altered by doing so.

The facts

This application for directions was brought by the administrators of Lehman Brothers Europe Ltd (the “Company”) on:

Key points

• Court reiterated circumstances in which it will sanction a proposed course of action by administrators

• Requirement that the course of action be “particularly momentous”

• Court sanctioned proposed settlement in the circumstances

The Facts

A recent judgment has clarified the duty of receivers when selling secured property to a company connected to a creditor.

Background

The claimant alleged that the receivers, appointed on behalf of, and selling to a party connected to the creditor, had acted in bad faith. They had placed themselves in a position of conflict and had engaged in self-dealing. As well as dealing with this issue, the court also assessed where the burden of proof lies when allegations of failing to act in good faith are raised.

Held

This was a Court of Appeal decision which focused on s423 Insolvency Act 1986, as well as the ambit of directors' duties to creditors in a distressed company scenario. The below summary relates to the courts' analysis of the latter issue.

Facts

Appleton Papers Inc (API) was a wholly owned subsidiary of BAT Industries plc (BAT).

In the decision of Justice Morawetz of the Ontario Superior Court of Justice (Commercial List) (the “Court”) in In the Matter of Aero Inventory (UK) Limited and Aero Inventory PLC, the Court held that proceeds of a fraudulent preference action recovered by a trustee in bankruptcy under section 95 of the Bankruptcy and Insolvency Act (“BIA”) may be subject to the rights of secured creditors, to the extent secured creditors had rights in the collateral in question at the time of the impugned transaction.

On August 2, the English Court of Appeal handed down its judgment on the client money directions application made in the Administration of Lehman Brothers International (Europe) (LBIE). The Court of Appeal overturned Mr. Justice Briggs’ High Court decision in part, holding unanimously that:

On September 25, the UK Financial Services Authority (FSA) announced that two UK-based firms have been placed into liquidation by the UK High Court following the FSA’s intervention. The FSA believes that these scams may have fraudulently persuaded up to 800 people into buying worthless shares. Investors are believed to have lost up to £3.5 million ($7.5 million).

Chesteroak Limited and Bingen Investments Limited were shut down following allegations that they were dealing in or arranging deals in shares without proper authorization.

In proceedings commenced by the Financial Services Authority (FSA), the UK High Court ruled in December 2004 that Adrian Sam & Co (ASC) and John Martin, one of ASC’s two partners, were knowingly involved in the UK activities of an illegal overseas investment firm (a boiler room) and they were ordered to pay £360,000 (approximately $700,000) to 63 investors involved in the boiler room scam. A bankruptcy order was granted against John Martin in August 2006.