Trustees should be careful when disclaiming assets after bankruptcy, after a High Court ruling blocked an application on a property that turned a significant profit when sold.

The case in question is Sleight v The Crown Estate Commissioners [2018] EWHC 3489 (ch).

The facts 

The Applicant in Sleight was the trustee in bankruptcy (the Applicant). The Respondents were The Crown Estate Commissioners (the Respondents).

Insolvency Set-Off and Construction Contract Adjudications in light of Bresco Electrical Services Ltd (in liquidation) v Michael J Lonsdale (electrical) Ltd; Cannon Corporate Ltd v Primus Build Ltd [2019] EWCA Civ 27

[2019] EWCA Civ 27

The Cannon case was heard at the same time as the Bresco appeal, although if searching for it, the case will be found under the Bresco name and reference. Here, there was a lengthy procedural history culminating in Cannon resisting summary judgment of an adjudication decision on the basis that Primus might not be able to repay the sums, because Primus was in a CVA. The Judge at first instance said:

A party on the receiving end of an adjudication is usually in a difficult position. Its situation is only made worse if the referring party is insolvent.

In such a situation, if the adjudicator makes an award in favour of the insolvent company the chances of subsequently recovering any sums awarded in litigation are very limited. While a stay to enforcement may be available, there are costs associated with obtaining a stay which will probably also be irrecoverable.

Using a traffic light approach, we consider the sorts of amendments which might impact on "day one" security.

WHEN MIGHT AMENDMENTS PRESENT A PROBLEM?

If you are a landlord where the tenant company goes into liquidation you should consider your options carefully before taking any action.

In such a case, the liquidator is able to disclaim “onerous property,” which is likely to include a lease at an open market (or similar) rent. The effect of the disclaimer is to bring the liability of the tenant company to an end as well as ending its interest in the property.

On August 26, 2018, the UK government issued its response to its consultation on insolvency and corporate governance. The consultation sought views on how the risk of company failure could be reduced by improving the corporate governance and insolvency framework.

In its recent decision in LBI EHF v Raiffeisen Bank International AG [2018] EWCA Civ 719, the Court of Appeal confirmed the wide discretion enjoyed by a non-defaulting party under the default valuation provisions in the Global Master Repurchase Agreement (2000 edition) (“GMRA”) when it comes to determining the “fair market value” of securities.

In particular, when assessing “fair market value”, the non-defaulting party is entitled to have regard to any distressed or illiquid market conditions that were being experienced at the relevant time.

Events of Default are most often found in the context of loan agreements and are similar to termination rights that may be found in commercial agreements, albeit with potentially different consequences. An Event of Default is an event or circumstance relating to a borrower or its activities which will give rise to a right for a lender to refuse to make any further advances, demand immediate repayment of a loan, make a term loan repayable on demand and/or enforce its security.

Introduction

For more than a century, a creditor holding English law governed debt relied on the principle (known as the “rule in Gibbs ”) that a debt governed by English law cannot be discharged by a foreign insolvency proceeding, provided that the creditor does not submit to that proceeding.