2018 was the "year of the CVA", slashing rents and forcing landlords to get to grips with long-winded CVA proposal documents in an attempt to allow struggling tenants to manage their debts, turn around their businesses and avoid terminal insolvency situations.

The unfortunate reality is that even if they are approved by landlords and other creditors, not all these CVAs will be successful and many tenants are likely to end up in administration.

The Government will consult on new laws to give consumers greater protection on retailer insolvency, but has confirmed that consumer prepayments will not be given preferential status in insolvency.

This was announced on 27 December 2018 in the Government's Response to the Law Commission's July 2016 Report on Consumer Prepayments on Retailer Insolvency.

The Law Commission's Report

The Law Commission's Report recommended that:

This is the third occasion on which I have posted on this blog on the issue of after the event insurance (ATE) policies and the impact which they have on applications for security for costs.

In the first post on 16 November 2017, I praised the judgment of Snowden J in Premier Motorauctions v Pricewaterhouse Coopers for appearing to bring clarity to an area which had for some time struggled with near irreconcilable decisions.

Freezing Injunctions

Creditor not obliged to take steps in foreign proceedings to preserve security

We are yet to see the true impact of Christmas trading in the retail industry although HMV is already a victim of the tough conditions for retailers. Additionally, Boots has announced a fall in sales and the launch of a “transformational costs management program” to save more than $1 billion and Next has confirmed that profits in store have fallen and although online sales are up, the uncertainty about the UK economy after Brexit makes forecasting difficult. Only one thing is clear – consumers remain at risk in the event of a retail business entering administration.

Daniel Gatty discusses the recent High Court ruling in Leon v Her Majesty’s Attorney General and others [2018] EWHC 3026 (Ch) and its impact on the grant of vesting orders following the disclaimer of a lease.

Readers of this column will be aware of the complications that can ensue when a lease is disclaimed by a tenant’s liquidator under section 178 of the Insolvency Act 1986 (IA 1986), by a tenant’s trustee in bankruptcy under section 315 of the IA 1986 or by the Crown under section 1013 of the Companies Act 2006 (CA 2006) following dissolution of a tenant company.

Whether liquidated damages (LDs) can be claimed after termination is a question which comes up regularly. It is very relevant in the current climate where contracts are often terminated following contractor insolvency. If I were devising a construction law exam paper, this classic question would undoubtedly appear.

A trustee in bankruptcy lost all rights to the proceeds of sale of a freehold property after he disclaimed title to it

Background

Mr Sleight was the trustee in bankruptcy of an insolvent estate. The deceased’s assets included several freehold properties that were charged to banks where the value of the property was less than the amounts due under the charges. Given the negative equity, the trustee in bankruptcy disclaimed title to these properties as they constituted “onerous property”.

If a company goes into liquidation, the liquidator is able to disclaim the whole of an insolvent tenant’s liability under a lease. The disclaimer ends all of the tenant’s rights, interests and liabilities, effectively meaning that the tenant can get out of the lease early. This can have a significant impact on a landlord, whose expected income from the property suddenly comes to an end.