The Powerhouse CVA, which sought to strip away guarantees provided by the parent company to landlords of Powerhouse, has been struck down as unfairly prejudicial by the High Court. However, certain aspects of the judgement remain unclear and could be subject to future appeal…
BACKGROUND TO THE POWERHOUSE CVA
Powerhouse (an electrical retailer) proposed a CVA on 1 February 2006 with the intention of closing 35 of its stores (the Closed Premises).
In an important decision for commercial property landlords, the High Court in Prudential Assurance Co Ltd and Others v PRG Powerhouse Limited and Others has ruled that a CVA (defined below) cannot operate so as to prevent landlords from enforcing a parent company guarantee. The Court's decision however was reached on the basis that to determine otherwise would have been "unfairly prejudicial" to the landlords.
Defendants in a lawsuit didn’t waive their right to arbitrate even after moving to dismiss and answering a complaint, a court held last week. Arbitration wasn’t waived because the defendants hadn’t filed affirmative defenses or counterclaims and had taken no discovery. Trevino v. Select Portfolio Servicing, Inc. (In re Jose Sr. Trevino), Adv. Pro. No. 16-7024, 2018 Bankr. LEXIS 3605 (Bankr. S.D. Tex. Nov. 14, 2018).
On May 8, 2017, the U.S. Bankruptcy Court for the Middle District of Florida entered an order compelling production of attorney-client communications between Regions Bank and its counsel, finding that Regions had put those communications “at issue” by raising a good faith affirmative defense under 11 U.S.C. § 548(c) in response to a fraudulent transfer claim brought against it. Welch v. Regions Bank (In re Mongelluzzi), No. 8:14-ap-00653-CED (Bankr. M.D. Fla. May 8, 2017), ECF No. 319 (Delano, J.) (herein Mongelluzzi).
Not uncommonly, a preference complaint fails to adequately allege that the transfers sought to be recovered by the trustee were made “for or on account of an antecedent debt owed by the debtor before such transfer was made”, as required under Section 547(b) of the Bankruptcy Code. Thus, when faced with a complaint to recover alleged preferential transfers, a defendant can proceed in one of two ways: (i) file an answer and raise affirmative defenses, or (ii) move to dismiss under Rule 12(b)(6).
The Second Circuit’s recent opinion in The Matter of: Motors Liquidation Company, 2016 WL 3766237 (2nd Cir. 2016) should give pause to all buyers of assets from bankruptcy estates.
The power of a bankruptcy court to authorize the sale of assets “free-and-clear” of liens and any other interests is a powerful tool that is used to realize value from distressed businesses. Indeed, purchasers will occasionally insist that sellers file a chapter 11 case in order to “cleanse the assets” by conducting their sale under Bankruptcy Code § 363(b). But how far does this power reach? Can bankruptcy be used to protect the purchaser from potential successor liability claims?
Vanquish Properties (UK) Ltd Partnership v Brook Street (UK) Ltd [2016] EWHC 1508 (Ch)
Vanquish, a developer, was a Limited Partnership under the Limited Partnerships Act 1907 with one General Partner, liable for all obligations of the business, and four Limited Partners.
It was granted an overriding lease by the City Corporation in the name of the Limited Partnership, “acting by” its General Partner. There was no mention of the four Limited Partners.
In my May 2018 article ‘Insolvency calls time on pursuing claims’, I looked at how various moratoria apply to stop claims when a party enters into certain insolvency processes. I offered a taster when I said that adjudicator’s awards were a strange species because they are not final and binding, that this complicates their enforcement, and that I would look at the complex interaction between insolvency and the enforcement of adjudicator's awards soon.
IN RE: REPOSITORY TECHNOLOGIES, INC