First published in the International Arbitration 1/3LY, Issue 7

Insolvency law contains summary processes for dealing with claims and protections against certain proceedings commencing or continuing. There has been some debate, and recent case law, concerning the primacy of these rules over agreements to arbitrate. In the following article, we look at what the current position is under English law and beyond.

General position under English law

Facts

The company (‘Goldtrail’) was a tour operator. The director, who owned 100% of the company, had attempted to sell 50% of his shares to each of two companies without one knowing about the other. Goldtrail went into liquidation leaving passengers stranded overseas and owing £20m for repatriation.

FACTS:

InHinton v Wotherspoon [2016] EWHC 623 (CH), Jason Freedman and Aziz Abdul successfully secured an Income Payments Order (“IPO”) on behalf of the Trustee in Bankruptcy.

The court also provided useful guidance on the correct position where a bankrupt has made an election to draw down from his private pension but not given specific instructions as to application of the funds.

LEGAL BACKGROUND:

The Facts

On 31 July 2012, a bankruptcy order was made in respect of Mr Dean Jonathan D’Eye on the basis of a statutory demand dated 11 July 2011.

During their investigations, his trustees in bankruptcy discovered that Mr D’Eye had made a payment of £321,919 to his father on 24 January 2012 (the Payment) and, after the presentation of the bankruptcy petition on 28 May 2012, a significant portion of this money had then been used to purchase a flat (the Flat).

Much like the English Scheme of Arrangement which has become a popular debt restructuring solution for international debtors, the English High Court is an attractive forum for insolvency litigation thanks to the potent combination of wide-ranging powers available to Insolvency Practitioners (IPs) under the Insolvency Act 1986, and the increasing availability of litigation funding arrangements in the London market.

Does section 127 of the Insolvency Act 1986 void payments made by the insolvent company’s bank after the presentation of a winding-up petition but pursuant to payment instructions issued by the company before presentation of the petition?

Varden Nuttal Ltd v Michelle Louise Baker (2016)

It was decided that a bankruptcy order should have been made in circumstances where the debtor had misled the creditors when agreeing and entering into an Individual Voluntary Arrangement (“IVA”).

Background

Directors can be held liable to contribute to company assets if they knew or ought to have known at a point before the commencement of administration or insolvency that there was no reasonable prospect that the company would avoid this process. This is known as wrongful trading (section 214 of the Insolvency Act).

As we reach the 30th anniversary of the Insolvency Act 1986, the legislators have clearly decided it is time to dust the profession down and bring out a shiny new model for us to hop aboard and take a journey (for some) into the unknown.

But what do all these changes mean in practice, and is there any theme running through them?

Fee regime

OTL was placed into compulsory liquidation. Prior to this it transferred monies to a trust located in HK of which N was perceived to be the principal trustee. The OR as liquidator applied for an order under s 236(3) of the Insolvency Act 1986 (IA 1986) that N produce a witness statement with supporting documents in relation to the company’s affairs. The primary question for HHJ Hodge QC was whether s 236(3) of the IA 1986 could have extra-territorial effect as N was resident in HK.

Held