The Supreme Court has delivered a judgment providing welcome clarification on the construction and effect of section 123(2) of the Insolvency Act 1986 (the "balance-sheet" insolvency test) and its interaction with section 123(1)(e) of the Act (the "cash flow" insolvency test).
In a keenly anticipated judgment, the Court of Appeal today handed down its verdict in four appeals1 concerning the interpretation of various terms of the 1992 ISDA Master Agreement.
In a decision handed down just before the end of term, auditors have won an important House of Lords ruling limiting their liability in cases where a “one man” company is used as a vehicle for fraud. The Law Lords dismissed by a majority of three to two a negligence claim brought against an audit firm for failing to detect a massive fraud at Stone & Rolls, a trading company that fell in the late 1990s – holding that the liquidators could not bring a claim for damages when the company itself was responsible for the fraud.
Background
Background
Article 4.1 of Council Regulation (EU) No 1346/2000 of 29 May 2000 on Insolvency Proceedings (the "Regulation") states: "Save as otherwise provided in this Regulation, the law applicable to insolvency proceedings and their effects shall be that of the Member State within the territory of which such proceedings are opened..."
Article 4.2 of the Regulation sets out a non-exhaustive list of the matters which the law of the state of the opening of insolvency proceedings is to determine, including:
Peter Bloxham has completed the first phase of his independent review of the Investment Bank Special Administration Regulations 2011 and in February 2013 presented an interim report, which HM Treasury has now published. In addition to making a number of immediate recommendations, the interim report sets out further areas to be reviewed as part of a second phase of work.
In the current economic climate, brokers will find the decision of the High Court in Euroption Strategic Fund Limited v Skandinaviska Enskilda Banker AB[2012] EWHC 584 (Comm) of considerable interest, since it considers the duties of a broker who is conducting a close out and liquidating the position of a client who is in a state of default, in this case for failure to meet margin requirements.
The Court ruled that:
In a recent opinion (Masri v Consolidated Contractors International Co. SAL and others [2009] UKHL 43) handed down in the final days of the House of Lords, their Lordships clarified a point which may be of some significance for successful claimants seeking to enforce a Court order against corporate defendants.
In Butters and ors v BBC Worldwide Ltd and ors, decided on 20 August 2009, the Court held that contractual provisions in a joint venture agreement taken together with termination provisions in a licence of IP rights were void since the effect of those provisions on insolvency was to deprive creditors access to assets and therefore contrary to public policy in the light of insolvency laws.
BUSINESS IMPACT
The Court of Appeal has held that a settlement agreement, in which the defendant acknowledged that a debt was payable in full and agreed the mechanics and timing of payments, had the effect of excluding the defendant’s right of equitable set-off: IG Index Ltd v Ehrentreu [2013] EWCA Civ 95. The claimant was therefore entitled to summary judgment on the debt. The defendant however remained free to pursue his cross-claim for damages against the claimant.
The Supreme Court handed down its judgment in relation to the client money application in the matter of Lehman Brothers International (Europe) (LBIE). The judgment has a number of implications for firms who hold client money, and for firms who hold money with banks and other firms as clients themselves. The complicated and controversial nature of the appeal is reflected in the sharply opposing opinions of the Lords in relation to two of the three issues considered.