A possible alternative to the freezing injunction.

A judgment has recently provided helpful guidance on a creative form of injunction. The “notification order” compels a defendant to give notice to the claimant before disposing or dealing with its assets. This notification order is less onerous than a freezing injunction, and although it usually accompanies the freezing injunction, in this case, the order was issued as standalone relief. The notification would alert the claimant to apply for a freezing injunction prior to dissipation of any assets.

Here the Court of Appeal granted an injunction which restrained a building contractor (Harbour View) from presenting a winding-up petition, overturning the high court's decision at first instance.  Harbour View had been engaged under two separate contracts based on a JCT Intermediate WCD (2011) to carry out works at two separate sites.  The employer (Wilson) failed to pay against two interim certificates (August 2013 and September 2013), leaving a sum of over GBP 1.6 million owing.

The English High Court has granted an injunction to trustees in bankruptcy and pierced the corporate veil of companies which were operated by a bankrupt as his agents and nominees and which held assets on his behalf (Wood and another v Baker and others [2015] EWHC 2536 (Ch)).

Background

SwissMarine Corporation Limited v O.W. Supply & Trading A/S (in bankruptcy) [2015] EWHC 1571 (Comm)

The Commercial Court has recently refused to grant an anti-suit injunction to SwissMarine Corporation Limited (SwissMarine) to restrain proceedings brought by O.W. Supply & Trading A/S (OW) against SwissMarine in Denmark.

Summary

Following the US case of Morning Mist Holdings when a Court of Appeals decided that COMI had to be analysed on the date of the Chapter 15 case petition, we look again at the case of Kemsley where the US bankruptcy court held that COMI had to be analysed on the date of the filing of the UK bankruptcy. We consider whether this could have affected the outcome of the Kemsley case and look at the factors used by the English and US Courts to interpret an individual debtor’s COMI.

Background

The compulsory liquidation of Carillion is likely to have a wide ranging effect on the construction industry in the UK. The impact may well be felt by other contractors, sub-contractors and suppliers as well as engaged professionals such as architects, engineers and project managers. The insolvency may give rise to calls on bonds or guarantees and affect insurance arrangements.

In this bulletin we summarise what has happened and offer immediate advice.

On April 26th, the Eleventh Circuit held that the anti-injunction provision of the Financial Institutions Reform, Recovery and Enforcement Act prohibits a federal district court from enjoining the FDIC. A trial court had initially imposed a TRO against a failing bank prohibiting it from taking any action with respect to $1 billion worth of mortgage proceeds it held in trust for petitioner, Bank of America, who held legal title. When the FDIC was appointed receiver, the FDIC moved to dissolve the TRO. The trial court refused converting the TRO into a preliminary injunction.

A recent bankruptcy New York court decision1 highlights a less commonly used option for lenders to take control of troubled real estate projects. The lender obtained relief from the automatic stay to foreclose on membership interests pledged to secure its mezzanine loan instead of foreclosing on its mortgage against the underlying real property.  

Here is the case, and what lenders can learn from it.  

The Case

On 18 May 2010, Lehman Brothers Holdings Inc. and its associated debtors (together, the "Debtors") filed a further six omnibus objections to claims filed in their Chapter 11 proceedings with the US Bankruptcy Court (the "Objections"). The Objections contain orders prepared by the Debtors on behalf of the US Bankruptcy Court which, if granted, will enable the Debtors to disallow and expunge the claims identified in each of the Objections from the register of claims.

A. United States v. Delfasco, Inc., 409 B.R. 704 (D. Del. July 15, 2009).

This suit involved a motion to withdraw from Bankruptcy Court to District Court. Defendant/Debtor Delfasco, Inc. (“Delfasco”) filed for Chapter 11 protection under the Bankruptcy Code following the EPA’s issuance of a RCRA Order requiring Delfasco to install and maintain mitigation systems for trichloroethylene that it discovered on its property. The United States, on behalf of the EPA, filed an Adversary Complaint against Delfasco, followed by this motion to withdraw.