Following the Enterprise Act 2002, the preferential status which HMRC had enjoyed in an insolvency was abolished, rendering HMRC the same as any other unsecured creditor. The effect of this was to swell the pot of assets available to be applied to all unsecured creditor claims.

Philip Hammond announced in Monday’s budget that HMRC’s preferential status is to be restored. What does this mean for HMRC and unsecured creditors?

The Budget provided that:

On 31 October the Supreme Court handed down the judgment in the case of Dooneen Limited t/a McGuiness Associates v David Mond.

The judgment confirmed that a trustee is not entitled to property discovered after a trust deed has been terminated and the trustee discharged and therefore provides some much needed clarity for banks, debtors and trustees who face this situation.

The facts

Amid all the usual politics of the Government’s Budget this week, one seemingly low-key change might be of considerable interest to lenders and insolvency practitioners. The Chancellor announced that from 6 April 2020 HMRC will once again benefit from a Crown preference.

On 31 October 2018 the Supreme Court issued its Judgment in the appeal of Dooneen Ltd (t/a McGinness Associates) and another (Respondents) v Mond (Appellant) (Scotland) [2018] UKSC 54.

The appeal had been brought by Mr Mond who had sought to overturn the decision of the Inner House of the Court of Session (Dooneen Ltd & Others V Mond [2016] CSIH 59).

Factual background

In August 2018, in Michael J Lonsdale (Electrical) Limited v Bresco Electrical Services Limited (In Liquidation) 1 Mr Justice Fraser had the opportunity in the context of CPR Part 8 proceedings to clarify whether or not a liquidator can pursue a claim in adjudication arising out of a construction contract.

2018 has seen a wave of company voluntary arrangements ("CVAs") hit the market, with high profile companies such as House of Fraser, Carpetright, New Look and Homebase (to name a few) all making use of this restructuring tool. This briefing note explains how a CVA works, provides an overview of current "market" themes, and makes some predictions on the future of CVAs

EVOLUTION OF THE CVA

Judge decides whether an insurance company proposing a scheme of arrangement should convene a single class meeting of creditors

As part of its toolkit to improve rescue opportunities for financially-distressed companies, the Government has announced that:

"Companies will be supported through a rescue process by the introduction of new rules to prevent suppliers terminating contracts solely by virtue of a company entering an insolvency process."

The right to terminate contracts on this basis is already restricted for supplies of essential utilities and IT services. However, this only affects quite a narrow range of suppliers.

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 a decision of interest to construction industry participants, the English Technology and Construction Court confirmed that, in some circumstances, the directors of an insolvent company may be liable in tort for the failings of that company.

It is not uncommon that, after performing works, a contractor finds out that the employer is insolvent. This may have serious consequences as the contractor will be most likely ranked behind other categories of the employer's creditors in any insolvency process. In this situation, what are the contractor’s other options?