Despite discussion in 2019 about corporate insolvency reforms and the reintroduction of the Crown Preference for certain tax debts, the Queens Speech on 19 December 2019 did not indicate any concrete plans to legislate for these areas this year. Airline insolvency, however, has made the list for 2020.
Why is airline insolvency a priority?
With the States of Guernsey's approval yesterday of the Companies (Guernsey) Law, 2008 (Insolvency) (Amendment) Ordinance, 2020 (the "Ordinance"), Guernsey took a step towards further enhancing its reputation as a robust jurisdiction for restructuring and insolvency.
First, there was the HMV case, then Skeggs Beef and SJHenderson. Following which we had further judicial decision in All Star Leisure and now Keyworker Homes, all of which considered the validity of appointment of administrators using the e-filing system.
Keyworker Homes deals with these questions:
On 4 December 2019, the Supreme Court handed down its judgment in MacDonald and another (Respondents) v Carnbroe Estates Ltd (Appellant) (Scotland) [2019] UKSC 57. The appeal concerned the interpretation of ‘adequate consideration’ under section 242 of the Insolvency Act 1986 (the “Act”) and the remedies that courts can apply if there is a gratuitous alienation, and inadequate consideration paid for the transaction in question.
Retail, as a sector, has long been under pressure from increased competition from online retailers, which has resulted in reduced footfall on the high street, affecting many companies, including many well-known names.
Between 2016 and 2019, 13 of 23 company voluntary arrangements (CVAs), which are used by UK businesses to reduce their debts, saw their group going into administration, while other companies that did not agree a CVA ended up seeking investors to buy the business.
What is a CVA?
The High Court decision in Re All Star Leisure (Group) Limited (2019), which confirmed the validity of an administration appointment by a qualified floating charge holder (QFCH) out of court hours by CE-Filing, will be welcomed.
The decision accepted that the rules did not currently provide for such an out of hours appointment to take place but it confirmed it was a defect capable of being cured and, perhaps more importantly, the court also stressed the need for an urgent review of the rules so that there is no doubt such an appointment could be made.
Judge Barber has considered the order of priority of payments in an administration and - more specifically - whether the Lundy Granite principle applies to both the rent payable once a company has gone into administration, and to the “top up” obligation requiring the company to replenish a rent deposit, where a landlord had drawn down on the deposit against unpaid rent (Re London Bridge Entertainment Partners LLP (in administration) [2019] EWHC 2932 (CH)).
The Rules
Causer v All Star Leisure (Group) Ltd [2019] EWHC 3231 (Ch) (Causer) is yet another case which highlights the issues that e-filing can cause for practitioners when using the system to appoint administrators.
The decision in Causer followed Skeggs Beef in concluding that whilst the appointment of an administrator by a QFCH out of hours using the e-filing system is defective it is a defect capable of remedy. The case is nevertheless worthy of note because:
The UK Court of Appeal has held that legal privilege outlasts the dissolution of a company in Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600.
Legal advice privilege applies to communications between a client and its lawyers. The general rule is that those communications cannot be disclosed to third parties unless and until the client waives the privilege.