Commercial Litigation

When can you be deprived of costs where you better your Part 36 offer?

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

The Court of Appeal upheld the finding at trial of HHJ Bird (sitting in the High Court) that save where there is fraud, a debtor is not legally obliged to volunteer information to an assignee regarding his arrangement with the assignor. The dispute arose because Bibby, a factor (and ‘Assignee’), purchased debts from Morleys Ltd (‘the Assignor’), owed to it by HFD Ltd and MCD Ltd (the ‘Customers’/‘Debtors’). The contract between the Assignor and Customers was such that the latter were entitled to a rebate, at the beginning of each calendar year, on purchases made.

Recent developments in landlord and tenant law concerning the position of the outgoing tenant’s guarantor on the assignment of the lease can only be described as ‘bonkers’. A few years ago, the Good Harvest and House of Fraser cases confirmed that a parent company could not guarantee both of its subsidiaries on an intra-group assignment. Last month, in the EMI case, the High Court has confirmed that the assignment of a lease to the tenant’s guarantor is similarly void.

Happy anniversary

The Court of Appeal has allowed an appeal against a limitation order (providing for the restoration to the register of a dissolved company, C,  and the suspension of the limitation period during dissolution) and provided guidance on how judicial discretion should be exercised when making such an order.

Shortly before being placed into administration C entered into a sale and leaseback arrangement.  C later went into liquidation; however, the purchase price in respect of the sale was not received before the company was dissolved, over four years later.

KEY POINTS

The High Court has found two former directors of the BHS group of companies liable for wrongful trading and misfeasance under the Insolvency Act 1986 (the Act). Relief against the directors has been ordered in the amount of £18m, with further rulings still to come.

Key point

Key points

• Principles applying to exercise of liquidators’ powers are the same as those prior to legislative changes
• Views of creditors influenced by personal considerations to be disregarded
• The overriding requirement is for liquidators to exercise their professional judgment in the best interests of creditors

The facts

Key points

• Without notice applications for recognition orders carry the obligation of full and frank disclosure to the English court in relation to the effect such orders may have on third parties.
• Failure to provide full and frank disclosure may have cost consequences.

The facts