XXIV Insolvency Judgments – May 2012

Insolvency Judgments

Produced in conjunction with Cork Gully.

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As the realities of the economic downturn begin to be fully realised and the UK economy fights to recover from recession, insolvency related issues are increasingly relevant. With this in mind, XXIV on Insolvency Judgments is the first of our new quarterly publications prepared in conjunction with Cork Gully. In each edition we will summarise important insolvency related decisions of the last three months and identify any trends or changes in judicial thinking.

We have selected the cases for review on the basis of their interest to us. They cover cases from different jurisdictions where they appear to us either to concern principles which would be equally relevant to readers in the United Kingdom or to give an interesting insight into developments in insolvency elsewhere in the world. The report aims to ensure that those with an interest in insolvency are as fully informed as possible on relevant developments.

The last quarter has seen some interesting developments in the case law. In the run up to the hearing in the Supreme Court of Rubin v Eurofinance, the cross-border insolvency cases in the Courts below roll on. In re Phoenix Kapitaldienst, a German administrator applied to the High Court for relief under Section 423 of the Insolvency Act 1986 (transactions defrauding creditors). Neither the EU Insolvency Regulation nor the Cross-Border Insolvency Regulations 2006 applied in this case so the Court had to consider whether it had a common law jurisdiction to recognise and assist the administrator and if so, whether it should do so. The Court decided there was, and that it should. The Court said there ought to be broad commercial support for international comity.

This quarter also saw the Court of Appeal explain the rules of proxies in creditors meeting (Horler v Rubin), as well as a decision in High Court on foreign liquidators obtaining orders for the disclosure of documents from the English Court under the CBIR and the UNCITRAL model law (re Chesterfield United Inc).

In Wright Hassall v Duncan Morris the Court held that the administrator of two companies was not personally liable to solicitors who had acted on conditional fee arrangements (CFAs) for the companies. In general an administrator acts as agent for the company, and in this case the solicitors can have been in no doubt about that when they signed the CFAs or when they brought proceedings expressly against the administrator “in his capacity as administrator” of the companies. Solicitors acting for administrators on CFAs should be particularly careful when drafting their terms.

In re Globespan Airways the High Court decided that, when a company moves from administration to CVL, the registration of a notice of the move under Paragraph 83 of Schedule B1 should be deemed to take place immediately upon its receipt by the Registrar of Companies even though Companies House actually takes an average of 3 days to process such notices. However, the Companies House website says that the Registrar has sought permission to appeal this decision and apparently decided not to change its practice in the meantime. So administrators filing notices of moving to CVL near the end of the period of administration ought to continue to take care to leave enough time for the processing of the paperwork in Cardiff. The Court also expressed critical surprise at the practice of the Registrar of Companies at Companies House of rejecting incomplete but perfectly comprehensible forms; in Globespan Airways the administrators had not copied out their address into every relevant box on a form. A victory for common sense, but one on appeal!

In Leisure (Norwich) II v Luminar Lava Ignite a landlord argued that an unpaid quarter of rent payable in advance, which had fallen due just before the appointment of administrators, should be treated as an expense of the administration because the administrators had occupied the premises during the period for which the rent was payable. The Court rejected his argument. The debt arose on a date before the commencement of the administration. Whilst the Apportionment Act 1870 permits the Court to apportion rent by reference to periods of occupancy, it only applies when the rent is payable in arrears, which this was not.