Kookmin Bank v Rainy Sky

We have received a number of urgent enquiries about the outcome of the Kookmin Bank case, which was recently decided by the Court of Appeal, in London. The judgment was issued at the end of May 2010 and held, in effect, that refund guarantees -- relating to advance payments of about US$46 million -- were unenforceable by the Buyers to whom the guarantees had been issued. Given the importance of refund guarantees to our shipping and banking clients, we are issuing this summary of the judgment and its general significance.

Financial guarantees often contain non-competition clauses. This is mainly to:  

• increase the financier’s recoveries from its principal debtor, by stopping the guarantor from draining money from the principal debtor; and  
• prevent the guarantor from obstructing a restructuring of the principal debtor’s liabilities.  

A recent case suggests these clauses should expressly exclude the “rule in Cherry v. Boultbee”. Zoë Thirlwell and Alexander Hewitt explain.

Counter-indemnity rights  

In Harms Offshore AHT ‘Taurus’ GmbH & Co KG v Bloom [2009] EWCA Civ 632, the English Court of Appeal had to decide whether it would grant an order to vacate an attachment on the property of a company in administration, even though the attachment was obtained by a creditor in a foreign court.

In Pick v Sumpter and another, the first defendant's trustee in bankruptcy applied for an order for possession of the defendants' matrimonial home. At the hearing in May 2006, the evidence showed that the sum outstanding as at November 2005 was £25,571 but did not take into account legal costs. That sum was an estimate and did not take into account statutory interest on the bankrupt's debts beyond the date of the hearing, solicitor's costs of the possession hearing or any increase or decrease in the trustee's remuneration.

The court will not review a bankruptcy order where there has been no material change and evidence subsequently adduced could have been available at the original hearing.

If an administration order is made and a pending winding-up petition is subsequently dismissed, the costs of that petition are payable as an expense of the administration.1

In Griffi n v UHY Hacker Young & Partners1 the court dismissed an application for summary judgment on the basis of the ex turpi causa (or illegality) defence, and made a number of observations as to uncertainties in the law as it stands.

When people are burdened with debt, they will sometimes resort to underhand tactics to relieve themselves of the consequences. One of the most common strategies is for the debtor to dispose of an asset, which would otherwise be used to pay his or her debts, for less than its market value. In consequence, there is legislation to protect the position of the creditors, who are, unusually, described as ‘victims’ in the legislation.

The above is a new Act to make provision about the rights of third parties against insurers of liabilities to third parties in the case where the insured is insolvent, and in certain other cases.

The case of Poulton v Ministry of Justice was decided by the Court of Appeal at the end of last month. The Court decided that a trustee in bankruptcy was left without a remedy against the Court Service when a bankrupt's estate suffered loss following an oversight by the Court Service to notify the Land Registry that a bankruptcy petition had been presented (as it is required to do by rule 6.13 of the Insolvency Rules 1986).

The background