In Lafferty v Official Assignee Gordon J considered Mr Lafferty's appeal of two decisions of the Official Assignee to refuse Mr Lafferty's applications under section 62(1)(a) of the Insolvency Act 1967 to enter or carry on business while bankrupt.
Gordon J dismissed the appeal on the basis that Mr Lafferty could not show that the Official Assignee had made an error of law, failed to take into account relevant considerations or was manifestly wrong in exercising its discretion under regulation 34 of the Insolvency Regulations 1970.
In a second application heard on the same day, Hildyard J considered an application by the administrators of Lehman Brothers Europe Limited (LBEL) for directions that would enable a surplus to be distributed to the sole member of LBEL while LBEL remained in administration. The proposed scheme had material benefits for both shareholders and creditors. The administrators acknowledged that the orders sought were an indirect means of circumventing the Insolvency Act 1986 (UK), which does not expressly provide for directors to make distributions during an administration.
In a comprehensive judgment arising out of the collapse of Lehman Brothers, the UK Supreme Court recently determined the ranking of creditors.
Principally, the Court held that Lehman Brothers International (Europe)'s subordinated debt holders were "at the bottom of the waterfall", behind statutory interest and non-provable debt claimants.
Nearly three years after the High Court decision on the case of BNY Corporate Trustee Services Ltd v Eurosail UK 2007 – 3BL PLC and others was handed down, the case has run its course in the Supreme Court. The case, which considers the correct interpretation of the balance-sheet insolvency test in section 123(2) of the Insolvency Act 1986, is of importance to insolvency practitioners, financial institutions, legal advisers, company directors and companies.
Court of Appeal decision
The Court has heard another case dealing with a defective appointment of administrators under paragraph 22 of Schedule B1 Insolvency Act 1986 (“Schedule B1”)1. Following hot on the tail of a recent series of conflicting cases relating to defective appointments, the Court has held that:
In BNY Corporate Trustee Services Ltd v Eurosail UK 2007 - 3BL PLC & Ors, the English Court of Appeal has decided that the mere fact that a company’s aggregate liabilities exceed its assets may not render the company to be deemed unable to pay its debts under section 123(2) of the UK Insolvency Act 1986 (commonly referred to as the “balance sheet test”). The test is whether a company has reached a point of no return such that its state of affairs is not or is unlikely to continue having regard to its contingent and future liabilities.
Arbitration proceedings in England are creatures of contract, arising out of the agreement between the parties to refer their disputes to arbitration. However, except in limited circumstances, when one of the parties to an arbitration agreement becomes insolvent, England’s statutory insolvency regime takes precedence over the rules of the arbitration.
The Insolvency Regime in England and Wales
In a recent case1 the High Court held that the purported out of court appointment of administrators over a Guernsey registered limited partnership was void because the appointor used the incorrect form when giving notice of its intention to appoint.
Background
There has been great discussion over the course of INSOL on the various restructuring and insolvency reforms being considered or implemented globally. In the break out session ‘The good, the bad and the ugly: national and regional law reforms’, panellists drilled down into the detail of some of these reforms. The panel considered reforms in the EU (Prof. Christoph Paulus, Hamboldt-Universitat zu Berlin), the UK (Mark Craggs, Norton Rose Fulbright LLP), Singapore (Sushil Nair, Drew & Napier LLC), and the US (Donald S.
The Supreme Court has delivered a judgment providing welcome clarification on the construction and effect of section 123(2) of the Insolvency Act 1986 (the "balance-sheet" insolvency test) and its interaction with section 123(1)(e) of the Act (the "cash flow" insolvency test).