Several tort claims were made against T & N Limited (“the Insured”) arising out of its use of asbestos. As a consequence it became unlikely to be able to pay its debts. Administrators were appointed for the purposes of approving a scheme of arrangement under section 425 of the Companies Act 1985.

Freakley v Centre Reinsurance International Company & Ors [2006] UKHL 45

This case concerns whether a claim to reimbursement of claims-handling expenses should have priority over other creditors on insolvency of the insured.

On 2 March 2007 the High Court handed down the first decision on whether non-domestic rates are payable by an administrator as an expense, and in priority to his remuneration, under Rule 2.67 Insolvency Rules 1986 ("IR"). The judge determined that rates in respect of occupied business premises are a "necessary disbursement" (Rule 2.67(f) IR) of an administration.

Although it was not argued, the judge also expressed the view that this liability to pay rates incurred during the period of the administration would be unaltered if the property were unoccupied during this time.

In a decision handed down on February 23, the High Court granted a winding-up petition brought by the Financial Services Authority under section 367 of the Financial Services and Markets Act 2000 (FSMA).

The High Court has considered the payment of business rates as expenses in new-style administrations. Business rates in respect of premises occupied by a company during the course of its administration are ‘necessary disbursements’ under rule 2.67(1)(f) and payable as expenses of the administration, as they are in a liquidation under rule 4.218(1)(m). Rates for unoccupied premises would also appear to be payable as administration expenses, although not as liquidation expenses.

The Facts

This was an appeal by liquidators to the Court of Appeal from a decision refusing to grant an order that payments made to the respondent directors totalling nearly £450,000 were preferences.

By the time of the appeal, it was accepted that the payments were made within the relevant time and with the requisite intention to prefer.

Previous Decision

Facility agreements almost always contain events of default based on a borrower's insolvency. Defining insolvency is therefore key. In this article published in July 2013 we discussed how, following Eurosail¹ , the common law was beginning to move the statutory tests of insolvency towards a more commercial view.

On 25 May 2016, the Insolvency Service published a consultation paper aimed at reforming various aspects of the UK's corporate insolvency regime. It has now collected responses from various interested parties including Dentons. Some proposals focus on the issue of rescue finance, and how to make sure businesses have access to suitable finance to continue to trade out of financial difficulty or achieve a suitable restructuring.

In the recent judgment of Gorbunova v The Estate of Boris Berezovsky (deceased) and others¹ the High Court has provided useful guidance as to when summary judgment is appropriate in deciding whether a trust was established.