Insolvency Bulletin: November 2015

10 November 2015

Insolvency Bulletin: November 2015

The November 2015 edition of the XXIV Old Buildings Insolvency Bulletin provides an update of the key insolvency decisions handed down by the courts over the summer.

One area that has received considerable focus is the jurisdictional questions arising when an English insolvency process has an international dimension. In the latest decision in this long running administration, the High Court in Re MF Global grappled with whether section 236 of the Insolvency Act 1986 had extraterritorial effect. Despite good arguments in favour of such an effect, the court concluded it did not. This result remains ripe for reconsideration at an appellate level.

In Official Receiver v Sahaviriya Steel, the court provided a useful overview for practitioners of the approach to applications to serve insolvency proceedings outside the jurisdiction. It is particularly important for its commentary on the difficulties in resolving the ‘proper forum’ element of those applications. Nevertheless, in the light of Re MF Global, which was not cited, it is notable that the court devoted little attention to the question of whether the relevant provisions had extraterritorial effect. Where there is doubt, it seems the court’s practice may well be to grant permission to serve out and leave the real argument for an application to dispute the court’s jurisdiction.

The ability of English office-holders to reach outside the jurisdiction was also canvassed by the Royal Court of Guernsey. In Re X (A Bankrupt), the judge considered the effect of the doctrine of ‘modified universalism’ on Guernsey customary law. In this case, the Guernsey court declined to lend assistance to the office holder on the grounds that customary law was a last resort, and here there were statutory remedies. There remains uncertainty as to how the courts in the Channel Islands will approach a request for assistance where there is no statutory remedy.

In a series of cases, the English courts considered the extent to which bankrupts and defaulting directors might be able to rely on statutory defences.

In Viscount St Davids v Lewis the court confirmed that an office holder required a high degree of knowledge before time begins to run for the purposes of claiming after acquired property. In Re Robin Hood Centre Plc the court, rejecting the notes in the 2015 edition of Sealy and Milman, held that it was for directors accused of wrongful trading to prove the ‘all steps’ defence in section 214(3). In Re Finch UK Plc, which is an interesting example of the flexibility of the preference provisions, the court endorsed the now clear rule that the Duomatic principle cannot be relied upon to defeat an application to set aside antecedent transactions.

The trend from these cases is to make the office-holder’s burden easier to discharge in applications to make bankrupts, directors and others contribute to the ‘pot’ for creditors.

In Barclays Bank v Registrar of Companies the court tackled the difficulties of restoring a company to the register where it was dissolved following an administration. The case is a useful exposition of the guidance available to practitioners attempting to find a mechanism for the company’s eventual dissolution which is acceptable to the court.

The decision in Re the Estate of Platon Elenin (otherwise known as Boris Berezovsky) highlights the considerable difficulties practitioners can face when attempting to determine how the bankruptcy regime is “modified accordingly” by the Administration of Insolvent Estates of Deceased Persons Order 1986. The clear approach appears to be to construe legislation in such a way as to ensure consistency for creditors across the insolvency regime. There remains a clear need for a more straightforward scheme for the administration of insolvent estates which expressly stipulates modifications to the bankruptcy legislation as, for example, occurs under the Insolvent Partnerships Order 1994.

Finally, the decision from last year in Re Scot Young (A Bankrupt), which was made public recently, in the administration of the bankruptcy of another well-known and recently deceased entrepreneur, confirms the extent to which the court will give priority to the democratic right of creditors to call meetings and make their case as to how the administration should proceed.