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 

From April 2015, success fees and After the Event insurance premiums will no longer be recoverable as part of the costs ordered on the successful outcome of insolvency litigation.

However, this will only apply to funding arrangements entered into after April 2015. There is still time for savvy IPs to ensure that current cases can benefit from the current arrangements but in order to do so they will need to take steps now to collect and collate the evidence on which their claims will rely.

In recent Court decisions, the balance between Administrators and Landlords has shifted backward and forwards with great regularity. Both sides have just learned that the goal posts have moved once more.

The judgment from a unanimous Court of Appeal last week has overruled the previous authorities on the issue of whether rent is payable as an expense in an Administration. In light of the decision in Jervis v Pillar Denton Ltd and Others, the decisions in Goldacre and Luminar are no longer of any effect.

Understanding and managing the risks of an insolvent acquisition

OPPORTUNITY ARISES OUT OF ADVERSITY

The recent global financial crisis has seen consumers tighten their belts and the retail industry as a whole has faced increasing pressure. Profits warnings have peppered the financial pages and fashion retailers, in both the budget and luxury sectors, have been subject to formal insolvency processes.

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

Key point

This case demonstrates how reservation of legal rights can be key even if the parties are seeking a commercial solution

Facts