Introduction
In the recent case of Global Corporate Ltd v Hale , the Court of Appeal was asked to assess whether sums, described as “interim dividends”, paid to Mr. Hale (the “Respondent”) in his capacity as both a director and shareholder of Powerstation UK Limited (the “Company”), had been made in accordance with section 830 of the Companies Act 2006 (the “Act”) prior to the Company’s insolvency.
What Is the "Rule in Gibbs"?
The rule in Gibbs is a long-established common law principle in which the Court of Appeal determined that a debt governed by English law cannot be discharged or compromised by a foreign insolvency proceeding(Anthony Gibbs and Sons v La Société Industrielle et Commerciale des Métaux (1890) 25 QBD 399). The rule in Gibbs remains a fundamental tenet of English insolvency law.
Why Does the Rule in Gibbs Matter?
A Court of Appeal decision last week has broadly upheld previous TCC guidance as to the ability of companies in liquidation or those subject to CVAs to commence and enforce adjudication proceedings against their creditors. Although theoretically possible, adjudication proceedings commenced by companies in liquidation are now liable to be restrained by a court injunction. Adjudications by companies subject to a CVA are more likely to be appropriate and, depending on the circumstances, may be enforced without a stay of execution.
Insolvency set-off: a recap
In our update this month we take a look at some recent decisions that will be of interest to those involved in insolvency litigation. These include:
Back in August, we wrote a blog about adjudication and liquidation, following the judgment in the TCC case of Michael J. Lonsdale (Electrical) Limited v Bresco Electrical Services Limited (in Liquidation) [2018] EWHC 2043 (TCC) (Lonsdale).
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?
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