Insolvency Bulletin: February 2014
Welcome to the revitalised Insolvency Bulletin by XXIV Old Buildings. Each quarter, practising barristers at one of London’s leading insolvency Chambers will publish short, readable and accurate summaries of a selection of interesting and important insolvency decisions, with full references and commentary upon their wider impact. Having previously written the content for Cork Gully’s insolvency newsletters, we are now dedicated to publishing our own quarterly Insolvency Bulletin designed for the busy practitioner. If you like to discuss any of the cases or issues raised in the Bulletin, please do not hesitate to contact us. Please forward this email on to anyone who you think might be interested. If you would like to receive this Bulletin regularly, or wish to opt out, please email us on firstname.lastname@example.org.
In this edition we cover no less than 5 important Court of Appeal decisions. The first, Kavanagh v Crystal Palace Football Club involved consideration of the tension between the TUPE and insolvency regimes. Dismissal of employees in order to avoid a liquidation might well amount to an “economic, technical or organisational reason entailing changes in the workforce”, and thus an exception to the TUPE definition of unfair dismissal. The Court stressed that it would in each case strive to ascertain the true reason for the dismissal.
In Re Ovenden Colbert Printers, the Court of Appeal upheld a decision of Mr Justice Peter Smith who had ruled that a claim alleging that a transaction was at an undervalue failed because the money in question had either been taken by a trustee who was not authorised to take the money (in which case the company had not entered into the transaction at all) or, if he was so authorised, no relevant transaction had been identified. The case illustrates the importance of identifying the precise elements of a recovery claim.
Bristol Alliance v Bennett was a dispute between landlords who had agreed a surrender of leases upon payment by the tenant company of an agreed price. The payment was made but the company then went into administration before the surrender was completed. The payment was held by the landlords’ solicitors in escrow pending resolution of the issue, raised by the liquidators of the company, whether the price was an asset of the company. The Court of Appeal, overturning the decision of Mr David Donaldson QC, sitting as a deputy, ruled that the right which the landlords had to specific performance of the agreement to surrender survived the administration and so the money was not an asset of the company.
In Oraki v Dean & Dean, the Court of Appeal considered who ought to pay the trustee’s costs and expenses when an annulment is sought and ordered. When a trustee has acted properly, he should not be deprived of his right to remuneration by reason of the annulment. The position might be different if the trustee is considered to have acted improperly. The Court considers the matter from the position of the bankrupt and the trustee.
The fifth decision of the Court of Appeal summarised in this Bulletin is another instalment of the Tchenguiz saga – Isis Investments v Oscatello Investments. Kaupthing Bank went into a winding up procedure in Iceland nearly 2 years after the claim had been commenced, but before certain Part 20 claims were made by a defendant. The Court upheld the decision of Mrs Justice Asplin that the term “pending lawsuit” in Art.32 of the EC Directive on the Reorganisation and Winding up of Credit Institutions must refer to proceedings in their entirety, rather than requiring slicing up of existing legal proceedings. So English procedural law governed the applications to add new claims; the status of the foreign insolvency was simply a matter to be taken into account in the Court’s exercise of discretion.
Some interesting insolvency decisions were handed down in the Commercial Court, not least the pair of decisions in Bannai v Erez which concerned a large Israeli bankruptcy. Mr Justice Burton granted Dr Bannai’s application for an anti-suit injunction against the trustee of the Israeli bankruptcy to give effect to a London arbitration agreement, notwithstanding that the Israeli court had refused a stay sought on the same ground. A few weeks later, Mr Justice Burton ordered the trustee to pay the costs of the application which he had unsuccessfully opposed, as would be the ordinary course in contested litigation; the application in question could not be described as insolvency proceedings and the trustee was a named party. He should have obtained (and it appeared he had obtained) an indemnity from the creditors to protect his position.
Also in the Commercial Court, in BAT v Windward Prospects, Mr Justice Hamblen appointed a receiver in unusual circumstances, in order to compel the defendant to issue proceedings against its former directors and a sole shareholder, who had apparently received unlawful dividends. There was a real risk that the claims were governed by French law and that a French law limitation period was about to expire; the Judge found the claims had a real prospect of success and so appointed a receiver whose powers were limited to issuing protective proceedings.
Finally, in Re ARM Asset Backed Securities, Mr Justice David Richards ruled on the COMI of the company in question but side-stepped the question of whether the EC Regulation on Insolvency Proceedings applies to a just and equitable winding up petition.