Court of Appeal clarifies Eurosail

Court of Appeal clarifies Eurosail

At what point will the court find a company is deemed unable to pay its debts? Frances Coulson of Moon Beever comments on a ruling in which the court considered the established law on the issue in the context of cashflow.

Original news

Carman (liquidator of Casa Estates (UK) Ltd) v Bucci [2014] EWCA Civ 383, [2014] All ER (D) 33 (Apr)

The liquidator had applied to recover money paid to the respondent company secretary as constituting transactions at an undervalue. The circuit judge found that the respondent had rebutted the statutory presumption that the company had not been insolvent at the time that the payments had been made. The High Court found that the presumption had not been rebutted and made its own findings on the solvency of the company at the relevant time. The Court of Appeal, Civil Division, considered the established law on when a company was deemed to be unable to pay its debts, within the meaning of and the Insolvency Act 1986, s 123 (IA 1986), and dismissed the respondent’s appeal.

How did the issue arise?

The issue arose because the liquidators of Casa Estates (UK) Ltd (of whom Mr Bucci was the sole director) were pursuing Mrs Bucci—the Company Secretary—for various transactions at undervalue. As she was a connected party there was a presumption of insolvency which she sought to rebut. She successfully did so at first instance but Warren J overturned Judge Purle’s decision to that effect on appeal, and the Court of Appeal agreed with Warren J.

The issue revolved around the definition of insolvency and the test therefor. The company was unusual in its arrangements. Both Warren J and the Court of Appeal were careful to say it was not a Ponzi scheme, but the Court of Appeal used a Ponzi scheme company as an analogy to show that a company which

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