The Government continues to develop its response to the COVID-19 pandemic. In this Insight we examine the weekend's announcement from the Business Secretary that provides some welcome good news for directors.

The Technology and Construction Court (TCC) has delivered a significant judgment in Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd (in liquidation) [2018] EWHC 2043 (TCC) where the company seeking to refer a dispute to adjudication was in liquidation. The substance of the dispute related to the contractor's claim for payment allegedly due for work completed, and damages for loss of profits.

The contract and the facts

We're now at the halfway mark of Pensions in 30 Podcasts and episode 15 provides an overview of the Pensions Protection Fund (PPF). We look at how a scheme qualifies for entry into the PPF, funding and compensation.

Click here to listen to the podcast. 

Key Points

In the High Court decision of Jackson v Baker Tilly (unreported, 10 April 2014), the liquidators of an insolvent company successfully applied for the company's accountants to produce documents detailing their dealings with the company.

The court has a limited discretion not to make a bankruptcy order where the debt is the subject of a statutory demand which has not been paid and is outstanding at the time of the bankruptcy petition hearing.

We first reported on The Trustee in Bankruptcy of Louise St John Poulton v Ministry of Justice in the October 2009 banking update. In short, the Court Service had failed to give notice of a bankruptcy petition to the Chief Land Registrar. As a result, no pending action had been registered against the name of the debtor and no notice had been registered against the debtor's property.

For debtors with limited liabilities, little surplus income and minimal gross assets, the new Debt Relief Order (DRO) is a further tool to consider in managing their debts. DROs, which came into force on 6 April 2009, are aimed at those who find they are unable to pay off their debts within a reasonable time but for whom other forms of debt relief, such as bankruptcy or Individual Voluntary Arrangements, are unavailable, or perhaps unaffordable.

What are the criteria for a DRO?

A DRO can be applied for where the debtor:

Secured creditors with an unsecured shortfall cannot claim a share of the prescribed part of the floating charge realisations set aside for unsecured creditors under Section 176A of the Insolvency Act 1986. This applies whether the secured creditor is the holder of a fixed or a floating charge (or both).

The bank took a charge on the borrowers’ property. In January 1992, it demanded payment of the balance due under the secured facilities. In June 1992, it made a further formal demand specifically relying on the mortgage. One of the borrowers was subsequently made bankrupt. Periodically, the bank informed the borrowers that they continued to be liable and made demands for payment and referred to the mortgage.

When used correctly, pre-pack administrations can be an effective means of creating an opportunity for the rescue of an insolvent business. However, concerns are regularly expressed about the lack of transparency in the sale process and the potential for poor outcomes for unsecured creditors, particularly where a disposal involves connected parties. These concerns have been exacerbated by some unfavourable media reports about a limited number of high-profile cases, and the speed at which transactions are often required to take place in order to preserve value and jobs.