S271 Insolvency Act 1986 provides that a bankruptcy petition may be dismissed if the court is satisfied that a debtor can pay his debt, or has made an offer to secure or compound the debt, the acceptance of which offer would lead to the petition being dismissed and that the offer has been unreasonably refused. But what is a reasonable refusal?
A commercial landlord should never assume that, if his tenant goes into administration or liquidation, he will not be able to obtain rent from the administrator or liquidator in respect of the period following appointment of the administrator or liquidator.
Nortel Networks UK Limited (the company) was a tenant under two leases. The company went into administration. The administrators occupied a small proportion of each of the premises to enable them to carry out the administration. Under the terms of both leases rent was payable quarterly in advance.
The landlord applied to the court for an order directing the administrators to pay the rent as an expense of the administration.
In September 2009 we reported on the first instance decision in Butters and ors v BBC Worldwide Ltd and ors, accessible here in which the Court held that contractual provisions in a joint venture agreement taken together with termination provisions in a licence of IP rights were void since the effect of those provisions on insolvency was to deprive creditors' access to assets and therefore contrary
Summary and implications
Two recent cases involving company administrations have seen the court take very different approaches to an administrator’s demands. The court has shown that it will look at the overall purpose of the administration before deciding whether to allow administrators to use their powers. Clients should consider:
Summary and implications
Whilst the property market remains challenging, the possibility of landlords entering into administration increases and many redevelopment schemes have been put on hold.
THE PERENNIAL PROBLEM OF UNPAID DEBTS – YOUR RECOVERY OPTIONS
In Clydesdale Financial Services Ltd and others v Robert Smailes and others [2009] EWHC 3190 (Ch), the principal issues before the Court were whether the third claimant, Focus Insurance Company Ltd (Focus), had a real prospect of success in its claims to be, first, a creditor (under the Insolvency Act 1986) of the fifth defendant, Alexander Samuel LLP (LLP) in respect of unpaid premiums and, second, a "victim" under ss.423-425 of the Insolvency Act 1986 of the sale of LLP's business to Jiva Solicitors LLP (Jiva) effected around the same time as it went into administration.
At the urging of U.S. policyholders, a Scottish court recently rejected a Scottish insurance company’s efforts to close its books and avoid full liability for long-tail claims when the insurance company is solvent and entirely capable of paying claims.
The High Court has ruled in the case of Goldacre (Offices) Limited v Nortel Networks UK Limited (in administration) [2009] that rent for premises that continue to be used for the beneficial outcome of an administration must be paid as an expense of the administration. This decision confirms that the court has no discretion in these circumstances and that it does not matter if only part of the premises are being used. This contrasts with the position where a landlord wishes to take action against a tenant in administration such as bringing forfeiture or injunction proceedings.