Insolvency Bulletin: February 2016
The first XXIV Old Buildings Insolvency Bulletin of 2016 provides a concise round up of the recent decisions affecting insolvency lawyers and practitioners.
Cross-jurisdictional issues continue to figure prominently in the courts’ caseload. In Re Public Joint-Stock Company Commercial Bank “Privitbank” the High Court considered whether it had jurisdiction to approve a scheme of arrangement by a Ukrainian bank. The High Court indicated that the critical factor in these cases would often be whether English law governed the relationship between the company and its creditors.
In Nordic Trustee ASA v Ogx Petroleo Gas SA the issue was whether a party’s application had brought an application to recognise foreign insolvency proceedings illegitimately in order to obtaining a stay of arbitral proceedings. In refusing recognition, the court reaffirmed that it had a wide power to control its own process to prevent an abuse.
Contrasting recent decisions by bankruptcy courts, it is possible to identify a common attitude to late applications by debtors to adjourn petitions.
In Edginton v Sekhon the Court of Appeal upheld the lower court’s refusal of an adjournment in order to pay the petition debt, which the debtor sought whilst the judge was giving judgment. Conversely, in Aabar Block SARL v Maud, the long running English insolvency proceedings against the well-known property investor, Glenn Maud, the court granted an eleventh hour adjournment to see whether Mr Maud might be able to discharge his debt after the conclusion of Spanish insolvency proceedings.
In both cases, the determining factor appeared to be the strength of the debtor’s evidence that, if an adjournment is granted, there is a reasonable prospect that creditors will be paid.
In a number of cases, the High Court has grappled with the rules relating to the service of insolvency proceedings. In Morby v Gate Gourmet the High Court confirmed that the rules governing the personal service of ordinary proceedings also apply to insolvency proceedings. In Re Premier Motor Auctions Leeds Limited the High Court held that fixed and floating charge holders ought to be served with applications to approve litigation expenses, even where those charge holders are defendants in the foreshadowed proceedings. The clear trend is towards applying the rules of service under the CPR in insolvency proceedings generally.
The appellate courts have wrestled with issues arising where those involved in insolvency proceedings seek to bring claims that properly ought to be considered, and brought, by office holders. In Purewal v Countrywide Residential Lettings Ltd the Court of Appeal rejected an argument that a bankrupt had standing to bring negligence claims against LPA receivers appointed by his mortgagee over property that fell into the bankruptcy estate, notwithstanding that the bankrupt continued to be a mortgagor.
In County Leasing Asset Management Ltd v Hawkes the Court of Appeal allowed an appeal from the High Court’s decision to make a direction suspending the running of time for limitation purposes between the dissolution and restoration of the company. The critical factor was the liquidator’s decision not to bring the claim before dissolving the company. The Court of Appeal had no appetite to allow a third party assignee to bring those claims who had, for that purpose, sought to restore the company to the register. In this case, as in Purewal, the court reaffirmed that office holders are primarily responsible for bringing actions on behalf of the bankruptcy estate or the company.
Finally, in Re Angel Group Limited the court approved the appointment of four liquidators, two each from rival camps, who had reluctantly reached a novel compromise. Two liquidators nominated by the shareholder and controller of the group of companies would investigate claims against a major creditor and the former administrators. Two liquidators nominated by the creditor and the former administrators would investigate claims against the shareholder and controller. In this strange case the English courts showed their commitment to commercially pragmatic solutions, even in the context of an occasionally inflexible statutory regime.