Fibria Celulose S/A v. Pan Ocean [2014] EWHC 2124 (Ch)

In a significant case regarding the application of the Cross Border Insolvency Regulations 2006 (“Regulations”), the English High Court decided it would not intervene to prevent termination of an English law contract for insolvency even though such termination was inoperative or invalid under the foreign law governing the insolvency.

When trying to enforce security over property, it is important for a lender to consider the order in which the proceeds of sale will be distributed – a matter decided by the priority of any charges that exist. The general rule is that whichever legal charge is entered onto the charges register has priority, but this isn’t always the case.   

Scenarios where priority may be different 

Partnerships which are breaking up face a series of urgent problems – particularly where the business itself is becoming insolvent. These difficulties can be amplified by failing relationships between the partners (who have to work together to wind up the business) and the potential need to realise assets rapidly to stave off the appointment of liquidators.

Heads of Terms’ or ‘Memoranda of Agreement’ (“MoA”) are commonly agreed by parties as a precursor to entering into more substantial agreements.

MoA are often intended by the parties to be broad statement  of commercial intent to enter into a contract, rather than having contractual force themselves. Accordingly, MoA are often drafted with a more relaxed attitude towards their contents

However, no matter what the parties may have intended, a MoA can easily amount to a contract depending on its drafting, exposing the parties to unintended liabilities.

The PPF is going ahead with the new insolvency scoring system developed by Experian.

It is also raising its requirements for contingent asset guarantees.

D & D Wines was a leading distributor of wines, which went into administration. One of its clients was an Australian wine producer called Angove. Two of Angove’s customers, who dealt through D & D, paid the company shortly after it had gone into administration and after Angove had terminated the agency agreement. Despite this, the Court of Appeal ruled that the money belonged to the company in administration for the benefit of all its creditors and was not held on trust for Angove.

Earlier this year, the Pension Protection Fund (PPF) published its consultation on the second PPF Levy Triennium (2015/16 to 2017/18) which proposed wholesale changes to the measure of insolvency risk and significant changes in respect of contingent assets and the PPF’s treatment of asset-backed contributions. 

As we await the outcome of the consultation, employers and trustees may find a summary of the proposals helpful in trying to gauge how they could impact their scheme’s PPF levy. 

The PPF-specific insolvency risk model

The English Court does not have the power under the Cross Border Insolvency Regulations to grant relief in aid of insolvency proceedings in a foreign jurisdiction which it would not have the power to grant in purely domestic proceedings. So held the Companies Court of the English High Court (Morgan J) in Re Pan Ocean Co Limited [2014] EWHC 2124 (Ch).

Shantanu Majumdar, Radcliffe Chambers, Lincoln's Inn

In our “Insolvency in the fashion retail sector: the risks and opportunities” article in the Q2 edition of Global Insight, we looked at the challenges the fashion retail industry faces today and the opportunities available for both existing players and new market entrants in the context of insolvent business acquisitions. In this article we comment in more detail on these opportunities and consider some of the factors and risks to be aware of when purchasing an insolvent fashion retail business and its assets.

OPPORTUNITY ARISES OUT OF ADVERSITY

Directors of ‘can pay, won‘t pay’ award debtors face the prospect of an extended stay in England should they choose to defy a receivership order granted by the English Court in aid of enforcement.

Introduction