Insolvency Bulletin: March 2015
The March 2015 edition of the XXIV Old Buildings Insolvency Bulletin reviews a number of valuable judgments for those practitioners dealing with corporate insolvencies that have a significant international element, as well as a number of interesting developments in English bankruptcy law.
The Saad litigation continues to provide insolvency lawyers with food for thought. In Akers v Samba, the English Court of Appeal turned its mind to the vexed question of whether assets can be settled on trust, where those assets are located in jurisdictions which do not recognise trusts or enforce foreign law.
In Akers, the answer to this question affected the extent to which a disposition made after the presentation of a winding-up petition placed assets out of the reach of creditors of companies in the Saad group. This decision on the meaning of article 4 of the Hague Convention, that the question of the validity of any declaration of trust is governed by the law of the trust rather than the situs of the assets, demonstrates a willingness by the Court of Appeal to give effect to trusts wherever possible.
Re Northsea Base Investment Limited is an interesting example of the circumstances required to rebut the presumption that a company’s centre of main interests is different from its place of incorporation. In this case, the court made declarations that 8 Cypriot companies’ centres of main interest were England and Wales in order to assist in “exporting” their administration to other jurisdictions. The English court examined how the group actually conducted its business to determine with which jurisdiction they were most closely connected .
The Court of Appeal’s decision in Salford Estates (No. 2) v Altomart clarified the extent to which creditors could present winding-up petitions in England on the basis of debts arising under contracts containing an arbitration agreement. It confirmed that the Arbitration Act 1996 does not provide for an automatic stay, but that the English courts should, as a matter of their discretion, dismiss such petitions, provided the debt is not admitted.
Addressing the practical problems arising where liquidators and other office holders seek the assistance of third parties who have documents or information relevant to the liquidation, the High Court in Re Harvest Finance considered whether to allow those third parties their costs of complying with orders for the production of documents or information. The court emphasised that providing such assistance was a public duty, but nevertheless confirmed the existence of the jurisdiction. However, it made clear that its discretion would only be exercised in very exceptional circumstances.
Turning to developments in bankruptcy, in two cases decided mere months apart, Sands v Layne and Re Cahillane, the English High Court came to opposite conclusions on the jurisdiction of insolvency courts to vary or revoke orders made by appellate courts under section 375 of the Insolvency Act 1986.
In the former, a trustee in bankruptcy sought to set aside a consent order between the debtor and the petitioning creditor that compromised an appeal of the original bankruptcy order. In the latter, a debtor attempted to invoke the jurisdiction to give himself a ‘second bite of the cherry’ following an unsuccessful appeal. Given that there are now conflicting decisions at first instance on the scope of the jurisdiction under section 375, it is ripe for clarification by the appellate courts.
In Mowbray v Sanders and JSC Bank of Moscow v Kekhman, the English courts considered the circumstances in which it may subsequently annul a bankruptcy, but in very different factual situations. In Mowbray, the issue arose after the debtor had failed, until the last moment, to challenge timeously the debt underlying the petition. By contrast, in JSC Bank of Moscow, the bankrupt had petitioned for his own bankruptcy, which some of his creditors then challenged. This case is particularly significant for those dealing with international bankruptcies, as the High Court dealt at length with the circumstances in which foreign resident individuals can invoke an English bankruptcy process to administer their debts and assets, even where their home jurisdiction would not recognise it.
Finally, the decision in Horton v Henry will prove useful for those dealing with bankrupts with uncrystallised pensions, as the High Court’s judgment contains a helpful discussion on the circumstances where income payment orders may be sought. Nevertheless, the court’s plea for a more general review of this area by an appellate court highlights the extent to which uncertainty continues to prevail.