Fomento De Construcciones Y Contratas SA v Black Diamond Offshore Ltd (Court of Appeal hearing)

The Court of Appeal has rejected an appeal brought by a leading Spanish company ("FCC") against a first instance decision that an event of default had occurred in respect of a debt instrument.

Background

For officeholders seeking to recover sums pursuant to s.127 Insolvency Act 1986, the recent Court of Appeal judgment in Express Electrical Distributors Ltd v Beavis and Others[2016] EWCA Civ 765 provides an interesting development (equally in relation to retrospective validation applications).

The recent case of Re Newtons Coaches Limited [2016] EWHC 3068considered whether a partnership falls within the remit of s.216 Insolvency Act 1986 (“IA 86”).

Savers who become bankrupt but have not yet drawn their pensions will not have to hand them to creditors after a ruling of the Court of Appeal put an end to fears that pension pots were at risk.

The Court of Appeal upheld the High Court’s ruling on Horton v Henry, originally heard in 2014, settling legal difficulties arising from a conflicting judgment of Raithatha v Williamson (2012); and the introduction of the pension freedoms.

Summary

Court of Appeal has confirmed that a bankrupt cannot be compelled to draw down pension rights for the benefit of creditors.

Facts

Following the supportive High Court decision in the case of Raithatha v Williamson [2012] EWHC 900 (Ch), the trustee in bankruptcy in this case applied for an order compelling a discharged bankrupt to draw down his pension rights for the benefit of his creditors.

Farm businesses often borrow from a variety of sources simultaneously, providing security through mortgages or charges over land and agricultural charges over other farm assets. What farmers may not realise, however, is how priority between lenders works to distribute funds realised, if the business gets into financial difficulties and the assets are sold.

McLean decision

When this topic was last considered two years ago, there was a real danger of pension rights (previously thought of as sacrosanct) being within the reach of trustees in bankruptcy by way of an income payments order (IPO). There were also two conflicting first instance decisions in play. The issue? Whether a pension entitlement capable of drawdown by election, but not yet in payment, can fall within the definition of income in section 310(7) of the Insolvency Act 1986 (IA86), and so be the potential subject of an IPO.

Summary

This is the latest case in the long running saga of attempts to make Mr Maud bankrupt.

Facts

The saga centres around a high value property complex in Spain. Mr Maud and objecting creditors contended on his appeal against a bankruptcy order made by the Registrar against him that the reason why the petitioners sought a bankruptcy order was for the ulterior motive of taking control of the property structure and that the order should be overturned.

The effects of bankruptcy are invariably demoralising and can have wider, sometimes unexpected, results for other members of the family. In no other area can this be as distressing as the potential loss of the family home.

Between family partners, whether or not married, it is usual for the family home to be owned jointly. If one of those partners is declared bankrupt, then, even if the other is blameless in connection with their finances, the effects on that blameless partner and any children can be devastating.

Key Points

• A dividend is a ‘transaction’ and therefore can be challenged under s 423 IA 86
• A duty to act in the best interests of creditors does not arise simply because there is a risk of insolvency which is not ‘remote’

The Facts