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
The amendments to the Insolvency Act 1986 will extend the protection of essential supplies on insolvency to most private utility suppliers. They will also extend protection to I.T. supplies, including data storage and processing and website hosting. Further protection is introduced where contracts are entered into from 1 October 2015, so that insolvency related terms which allow higher supply charges in the event of administration or company voluntary arrangement will be prohibited.
Why is the law changing?
The recent decision in Brooks and Willetts (Joint Liquidators of Robin Hood Centre plc) v Armstrong and Walker [2015] EWHC 2289 sets out guidance on the burden of proof for directors in wrongful trading claims when seeking to establish that they have taken every step to minimise the potential loss to creditors. We explore the issues raised for practitioners.
The background to the case
The Insolvency (Protection of Essential Supplies) Order 2015 which comes in to force on 1 October 2015 significantly changes the options available for suppliers of IT services in relation to their rights against insolvent customers. Any IT supplier caught within the definition of the new legislation will need to beware that they can no longer insist on payment of outstanding invoices as a condition of continued supply to an insolvent business, nor rely on clauses applying automatic price rises upon insolvency of the customer.
This article provides an essential update for insolvency practitioners on insolvency changes in 2015 and the proposed changes in 2016.
2015 Changes
The Small Business, Enterprise and Employment Act 2015
As well as serving as a useful reminder of the law surrounding wrongful trading and the operation of section 214 Insolvency Act 1986, this recent High Court decision clarified where the burden of proof lies in defending a wrongful trading case.
Background
Introduction
RE: HARVEST FINANCE LTD; JACKSON & ANOTHER V CANNONS LAW PRACTICE LLP & OTHERS [2014]
This case concerns the provision of documentation under s236 IA 1986. The documentation requested by the liquidators was extensive and the Respondents wished to claim their time costs (£40,381) of providing the same. The Court held that whilst it was within the Court’s jurisdiction to make an order for costs against the insolvent estate, it was not minded to do so in this case.
The Facts
RE: BPE SOLICITORS & ANOTHER V GABRIEL [2015] UKSC 39
The Supreme Court considered whether a trustee in bankruptcy who was considering adopting proceedings and lodging an appeal should be personally liable for historic adverse costs which had been awarded against the bankrupt prior to the commencement of the bankruptcy.
A Trustee in Bankruptcy’s liability for litigation costs
The past three months have seen the publication of a spate of forthcoming regulatory and legislative changes. In this bulletin we investigate some of the more significant developments.
Insolvency Act 1986 (Amendment) Order 2015 – threshold for bankruptcy petitions
This order, which comes into effect on 1 October 2015, makes amendments to section 267(4) IA 1986, increasing the threshold for bankruptcy petitions to £5,000 (currently £750).