In a recent decision, Anchorage Capital Master Offshore Ltd v Sparkes [2023] NSWCA 88, lenders to the Arrium Group, a company that collapsed, have lost their appeal regarding the personal liability of the Chief Financial Officer and Group Treasurer. The NSW Supreme Court had previously dismissed the lenders' claims, and the Court of Appeal has now affirmed that decision.

In the case of Anchorage Capital Master Offshore Ltd v Sparkes (No 3); Bank of Communications Co Ltd v Sparkes (No 2) [2021] NSWSC 1025 (Anchorage v Sparkes), the Supreme Court of NSW considered the obligations of company officers to sophisticated commercial lending entities, and whether company officers could be personally liable for making misleading statements.

Significance

On Monday, March 10, 2014, the companies that own and operate the Sbarro pizza chain, Sbarro LLC and 33 affiliates, filed for bankruptcy reorganization under Chapter 11 of the federal Bankruptcy Code.  The Sbarro companies operate 217 restaurants in the U.S. and there are 582 franchised restaurants, 176 in the U.S. and 406 at international locations.

Overview of this submission

Some 13 years ago, Lehman Brothers' sudden and unexpected insolvency sent ripples across the banking and financial services market, some of which are still felt today.

The Court of Appeal's decision in the consolidated cases of Lehman Brothers Holdings Scottish LP 3 v Lehman Brothers Holdings plc (in administration) and others¹ [2021] EWCA Civ 1523 was the latest in a long line of cases seeking to unwind the issues arising from Lehman Brothers' unexpected collapse.

The background

In Stephen John Hunt (Liquidator of Marylebone Warwick Balfour Management Ltd) v Richard Balfour-Lynn and others [2022] EWHC 784 (Ch), the High Court decided that the directors of a company which went into liquidation after participating in an ineffective tax avoidance scheme did not breach their fiduciary duties and payments made pursuant to the scheme were not transactions defrauding creditors.

Background

The U.S. Bankruptcy Appellate Panel for the Eighth Circuit recently held that, at a minimum, a substantial change in circumstances is required to justify modification of a bankruptcy plan under Section 1229.

The Eighth Circuit BAP also determined that the bankruptcy court’s ruling that the debtors met their burden of showing an unanticipated, substantial change in circumstances was not clearly erroneous, despite multiple changes by the debtor, nor was the bankruptcy court’s finding that the fourth modified plan was feasible and confirmable.

Background

On 5 October 2022, the Supreme Court handed down its long-awaited judgment in BTI 2014 LLC v. Sequana S.A. [2022] UKSC 25 concerning the trigger point at which directors must have regard to the interests of creditors pursuant to s.172(3) of the Companies Act 2006 (the "creditors' interests duty").

Is an insolvent debtor’s pre-bankruptcy termination of a commercial lease a fraudulent transfer? The Third Circuit said no when it held that a lessor’s pre-bankruptcy termination of the debtors’ lease and purchase option “was not a transfer under Bankruptcy Code §548(a) (1)(B).” In re Pazzo Pazzo Inc., 2022 WL 17690158 (3d Cir. Dec. 15, 2022). But the Seventh Circuit held that a chapter 11 debtor’s pre-bankruptcy “surrender of [two] … leases to [its landlord] could be regarded as a preferential [or fraudulent] transfer.” In re Great Lakes Quick Lube L.P., 816 F.3d 482 (7th Cir. 2016).

In Re Guy Lam Kwok Hung [2023] HKCFA 9, the Court of Final Appeal clarified when a debtor can resist a bankruptcy petition based on an exclusive jurisdiction clause (EJC) in his contract with the petitioner creditor. It is important to appreciate the Court’s reasoning and how it can be applied to various factual scenarios.