Application for an administration order in respect of FM Front Door Ltd. The application followed FM’s failure to make payments under a loan from the Dunfermline Building Society obtained to assist with the purchase of flats at the Skyline development on Finniestoun Street in Glasgow. The loan was secured by a floating charge and standard securities over each of the flats. FM’s parent company FM Developments also granted a guarantee for the loan.
Clause 13 of the loan agreement provided that the grounds for default included:
What happens if one party to a contract fails to perform? Can the innocent party get all of its losses back? What happens if the losses are difficult to prove?
Here, we look at what you can claim and how to protect your position.
The general rule
Damages for breach of contract are usually intended to compensate the injured party for its losses arising naturally from the breach or which were within the parties' contemplation when the contract was made.
The Masri litigation has yet again troubled the English Court on the principle of comity and provided the Court of Appeal with the opportunity to say just how important it is in international debt enforcement.
The background on Masri
In Rainy Sky S.A and six others v Kookmin Bank [2011] UKSC 50, the Supreme Court provided useful guidance on the role of business common sense in construing a clause in a commercial contract, particularly in circumstances where there are competing plausible constructions, neither of which is clearly preferable on the language used alone.
The facts
FSA has published three consultation papers on the Retail Distribution Review (RDR). The papers cover:
On 31 October 2011, MF Global UK Limited, an insolvent investment broker, became the first investment firm to enter the special administration regime (the “SAR”) created by the Investment Bank Special Administration Regulations 2011 (SI 2011/245).
The SAR was adopted in February 2011 following the collapse of Lehman Brothers and has the advantage over ordinary corporate administration in that it sets special objectives for the administrator and this is the first time the SAR has been used. The SAR sets three objectives for a special administrator:
Clients active in commodities markets (e.g. large consumers of copper and other metals) may be affected by the collapse of MF Global which was recently placed into Chapter 11 process in the US and into Administration in the UK. MFGlobal was an active clearing agent on numerous metal exchanges including the London Metal Exchange.
MF Global UK Limited In Special Administration
The Financial Services Authority (“FSA”) has confirmed that MF Global UK Limited (“MF Global UK”) has entered the Special Administration Regime created under the Investment Bank Special Administration Regulations 2011 (“Regulations”).1 MF Global UK is the first investment bank to enter the Special Administration Regime. The decision to apply for special administration was initiated by the board of MF Global UK.
When is a company in insolvent? When is a company's assets less than its liabilities (taking account of contingent and prospective liabilities)?
Under English law this is a commercial test and requires that a company has reached a "point of no return" and is not based solely on a review of the company's balance sheet:
One of the many issues which arose from the collapse of Lehman Brothers was whether “flip provisions”, which reverse a swap counterparty’s priority in the order of payment on insolvency, were invalid on the basis that they contravened the anti-deprivation principle. This is a long-established common law principle which seeks to prevent an insolvent party from arranging its affairs to frustrate the legitimate claims of creditors.