Lexis®PSL Restructuring and Insolvency monthly highlights—February 2017

February 2017 highlights from the Lexis®PSL R&I team. This month’s highlights include details of the new LN forms committee appointed to look at our new forms under the new Insolvency (England and Wales) Rules 2016 (IR 2016), plus details of our new practice notes on the IR 2016, together with a round up of other restructuring and insolvency news and cases.

In this issue:

  • Feature article: Insolvency (England and Wales) Rules 2016—forms committee named by LexisNexis
  • Feature article: Schemes of arrangement—the end of the numerosity test? (Re Dee Valley Group plc)
  • Feature article: Where is COMI and when can the administration be terminated due to improper motive? (Thomas and another v Frogmore Real Estate Partners)
  • Headlines (News updates & analysis)
  • Cases
  • Trackers
  • Dates for your diary
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    Insolvency (England and Wales) Rules 2016—forms committee named by LexisNexis

The Insolvency (England and Wales) Rules 2016, SI 2016/1024 (IR 2016) remove the Insolvency Service’s obligation to prepare prescribed forms when they come into force on 6 April 2017. Despite Companies House and the Insolvency Service announcing that they will be producing certain forms, significant uncertainty remains as to what the format of many of the forms and applications under the IR 2016 should look like. This uncertainty has caused alarm to many practitioners. LexisNexis has therefore established a committee of the following leading insolvency professionals to establish standard form documents which are expected to be widely adopted across the market:

  • Chief Registrar, Stephen Baister
  • Alison Curry, Head of Regulatory Standards & Support at the Insolvency Practitioners Association
  • David Leibowitz, Restructuring and Insolvency partner at Berwin Leighton Paisner
  • Frances Coulson, Head of Insolvency and Litigation at Moon Beever
  • Jeremy Goldring QC, Barrister at South Square
  • Mark Sands, immediate Past President of the Insolvency Practitioners Association and partner at Baker Tilly Creditor Services LLP

For further details, see News Analysis: Insolvency (England and Wales) Rules 2016—forms committee named by LexisNexis.
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Schemes of arrangement—the end of the numerosity test?(Re Dee Valley Group plc)

Re Dee Valley Group plc [2017] EWHC 184 (Ch)

The High Court held in Re Dee Valley Group PLC that a Chairperson of a shareholder scheme meeting may reject votes cast against a scheme of arrangement in circumstances where the shares were acquired through an artificial share-splitting exercise designed to frustrate the scheme. Catherine Balmond, Craig Montgomery, Priyanka Usmani and Katharina Crinson of Freshfields Bruckhaus Deringer consider the impact of the first English case to consider this issue. While it arose in the context of a shareholder scheme, the impact is also significant for debt restructurings implemented by way of a creditor scheme of arrangement (see News Analysis: Schemes of arrangement—the end of the numerosity test?).
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Where is COMI and when can the administration be terminated due to improper motive? (Thomas and another v Frogmore Real Estate Partners)

Thomas and another v Frogmore Real Estate Partners GP1 Ltd and others, Frogmore Real Estate Partners GP1 Ltd and others v Thomas [2017] EWHC 25 (Ch), [2017] All ER (D) 73 (Jan)

The Chancery Division made a declaration to the effect that the centre of main interest of three companies was in the United Kingdom and that, as a result, it had jurisdiction to make orders concerning the administration of the companies. On the evidence, there had been no improper motive on the part of the building society that had made loans to the companies, and an application for a declaration that there had been would therefore be dismissed. Richard Perkoff, barrister at Littleton Chambers, who acted for the applicant administrators, considers the decision.
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Headlines (News updates & analysis)

Court considers correct approach to conflicting evidence (Fielding and another v Hunt (acting as liquidator of the Burnden Group Ltd))

Fielding and another v Hunt (acting as liquidator of the Burnden Group Ltd) [2017] EWHC 247 (Ch), [2017] All ER (D) 169 (Feb)

How should a court deal with conflicts between contemporaneous documents and the evidence of witnesses who have not been cross-examined? Nick Oliver, director and head of the insolvency and business turnaround team at Verisona Law, considers the Chancery Division’s approach in this case, when hearing an appeal against a liquidator’s rejection of a proof of debt.
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Granting permission to proceed in administration action (Safe Business Solutions Ltd (in liquidation) v Cohen)

Safe Business Solutions Ltd (in liquidation) v Cohen [2017] EWHC 145 (Ch)

In what circumstances can the courts lift a statutory protection of moratorium in order to allow an insolvent company to commence litigation against its administrators? Amy Keogh, associate at Irwin Mitchell LLP, considers the issues before the Registrar in this case.
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Vehicle hire purchase agreements and tools of the trade in bankruptcy (Mikki v Duncan)

Mikki v Duncan [2016] EWCA Civ 1312, [2017] All ER (D) 157 (Feb)

How should trustees treat vehicles held under hire purchase agreements in bankruptcy? Jonathan Titmuss of Hardwicke chambers, who acted for the successful trustee in bankruptcy (trustee), explores the background to the appeal, the main legal arguments, and the legal and practical implications of the decision.
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Setting aside statutory demands and abuse of process (Harvey v Dunbar Assets plc (No 2))

Harvey v Dunbar Assets plc (No 2) [2017] EWCA Civ 60, [2017] All ER (D) 127 (Feb)

The Court of Appeal was asked to decide whether a debtor could apply to set aside a statutory demand on a ground that he had unsuccessfully argued in respect of a previous statutory demand that had been served on him. Joseph Curl, barrister at 9 Stone Buildings who acted for Dunbar Assets plc, discusses the Court of Appeal’s judgment (see News Analysis: Setting aside statutory demands and abuse of process (Harvey v Dunbar Assets plc (No 2))).
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Foreign trust assets and liquidations—when beneficiaries’ rights might vanish (Akers v Samba Financial Group)

Akers and others v Samba Financial Group [2017] UKSC 6, [2017] All ER (D) 06 (Feb)

The Supreme Court allowed an appeal by the appellant Saudi Arabian bank and held that a trustee’s transfer to it of shares he was alleged to have been holding on trust for the fourth respondent, a Cayman Islands company in liquidation, had not been a disposition within the meaning of section 127 of the Insolvency Act 1986 (IA 1986). Therefore, the claim by the fourth respondent and its liquidators that the transfer was void had no prospect of success. Daniel Smith, counsel, and Kavan Bakhda, associate, at Latham & Watkins examine the Supreme Court’s judgment in Akers v Samba Financial Group in relation to the effect of section 127 of the IA 1986 and the lex situs on transfers of trust property (see News Analysis: Foreign trust assets and liquidations—when beneficiaries’ rights might vanish (Akers v Samba Financial Group)).
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Notice of intention should not be used as delaying tactic (South Coast Construction Ltd v Iverson Road Ltd)

South Coast Construction Ltd v Iverson Road Ltd [2017] EWHC 61 (TCC), [2017] All ER (D) 114 (Jan)

The Technology and Construction Court (TCC) held that, if a moratorium had continued in respect of the defendant company, the claimant company’s application, under IA 1986, Schedule B1, paragraph 43(6)(b) for permission to proceed with proceedings to enforce an adjudicator’s award in the claimant’s favour would have been granted. Lucie Briggs of Atkin Chambers, who was counsel for South Coast Construction, considers the decision (see News Analysis: Notice of intention should not be used as delaying tactic (South Coast Construction Ltd v Iverson Road Ltd)).
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Litigation in the course of insolvency (Re Primeo Fund (in liquidation))

Re Primeo Fund (in liquidation); MacRae v Fisher [2016] EWHC 2432 (Ch), [2016] All ER (D) 96 (Sep)

How will the court approach applications by insolvency practitioners (IPs) under IA 1986, ss 236 and 366 for the purpose of litigation? Robert Amey of South Square, who successfully represented the applicant in a recent case, says the court was required to balance the reasonable requirement of the liquidators against the need to avoid making an unreasonable, unnecessary or oppressive order.
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The scope of the insolvency court to review an order (Sands v Layne)

Sands (as trustee in bankruptcy of the estate of Layne (a bankrupt)) v Layne [2016] EWCA Civ 1159, [2016] All ER (D) 160 (Nov)

Can the court dismiss a bankruptcy petition where the creditor refuses a reasonable offer of security—even if the debtor is insolvent? Richard Ascroft of Guildhall Chambers welcomes the Court of Appeal’s recent clarification of the circumstances in which the jurisdiction under IA 1986, s 375(1) may be exercised.
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Restoring to the register of companies under CA 2006 (Davy v Pickering)

Davy v Pickering [2017] EWCA Civ 30, [2017] All ER (D) 104 (Jan)

Guy Adams, barrister at St John’s Chambers, reviews the decision in Davy v Pickering, which concerns the directions and provisions the court can make when restoring a company to the register of companies, as specified under the Companies Act 2006, s 1032(3) (CA 2006) of (see News Analysis: Restoring to the register of companies under CA 2006 (Davy v Pickering and others)).
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Chancery Court Guide revised

HM Courts and Tribunals Service (HMCTS) has updated the Chancery Court Guide. The changes include contact details and web addresses, as well as new information about the company insolvency pro bono scheme, and reference to the fact the e-filing scheme in the Rolls Building is to become mandatory on 25 April 2017 (para 6.1).
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Revised SIP 15 published

A revised version of Statement of Insolvency Practice 15 (SIP 15) on creditor committees has been issued by the Joint Insolvency Committee (JIC), the Institute of Chartered Accountants in England and Wales has announced. The revised SIP 15 will come into effect on 1 March 2017.
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Cases

Re Gertner; CFL Finance Ltd v Rubin
[2017] EWHC 111 (Ch)

Abstract:
The Chancery Division allowed the applicant company's application for an order revoking the making of an individual voluntary arrangement (IVA) in relation to the financial affairs of the third respondent, R. The court held that the creditors' meeting at which the IVA had been approved had been subject to a material irregularity, in that the vote of one of the creditors should not have been allowed, as it had previously made a settlement agreement with R. An order was made revoking the approval for the IVA.
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Dickinson v NAL Realisations (Staffordshire) Ltd
[2017] EWHC 28 (Ch)

Abstract:
The Chancery Division held that, among other things, the claimant's claim to recover sums which, he alleged, were due to him and secured by a debenture over a company that was in liquidation, would not succeed, where certain transactions had allegedly been made at an undervalue. The court held that a share buyback had been void.

Trackers

There have been developments on the following cases this month:

Case name Court and citation Subject Current status
Heis and others v MF Global UK Services Ltd (in administration) [2016] EWCA Civ 569, [2016] All ER (D) 125 (Jun) Court of Appeal Civil Division In the previous judgment, the Court of Appeal, Civil Division, dismissed an appeal by the administrators of a company regarding an implied contract between it and the respondent company. The judge had been correct, on the evidence, to have implied a contract between them pursuant to which the appellant company paid the expenses of staff seconded to it by the respondent company. That implied contract had included an obligation on the appellant to indemnify the respondent in respect of its debt pursuant to section 75 of the Pensions Act 1995 Permission to appeal refused by the Supreme Court on 21 December 2016.

Dates for your diary

Date Time Subjects covered
1 March 2017 Revised SIP 15 (creditors’ committees) comes into effect
7 or 8 March 2017 Appeal hearing (Court of Appeal): Sebry v Companies House and another

Decision being appealed: [2015] EWHC 115 (QB), [2015] All ER (D) 221 (Jan).

9 March 2017 12:30  Webinar: Insolvency concerns in company law (available with subscription)
3 April 2017 Appeal hearing (Court of Appeal): Lomas and others v Burlington Loan Management Ltd and others; subnom Re Lehman Brothers International (Europe) (in administration) (Waterfall IIA)

Decision being appealed: [2015] EWHC 2269 (Ch), [2015] All ER (D) 11 (Aug).

6 April 2017 The Insolvency (England and Wales) Rules 2016, SI 2016/1024 come into force
6 April 2017 Small Business, Enterprise and Employment Act 2015 (Commencement No 6 and Transitional and Savings Provisions) Regulations 2016, SI 2016/1020 comes into force
6 April 2017 Deregulation Act 2015 (Commencement No 6 and Savings Provision) Order 2016, SI 2016/1016 comes into force
6 April 2017 New type of limited partnerships (private fund limited partnerships) permissible
6 April 2017 12:30  Webinar: Limitation Act issues in insolvency recoveries (available with subscription)
25 April 2017 New E filing system mandatory in all Rolls Building jurisdictions
27 April 2017 Appeal hearing (Court of Appeal): Cole v Howlett

Decision being appealed: [2015] EWHC 1697 (Ch), [2015] All ER (D) 178 (Jun).

About this blog post

This is a shortened version of the LexisPSL Restructuring and Insolvency Monthly Highlights which was first published on LexisPSL Restructuring and Insolvency.

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