Lexis®PSL Restructuring and insolvency monthly highlights—May 2016

This month’s highlights include a discussion on the decline of BHS, Brexit, government proposals to boost the insolvency regime and more, plus a round up of other interesting cases and developments

The decline and fall of British Home Stores

Why has BHS recently fallen into administration? Mark Smith and Nick Moser, partners with Taylor Wessing LLP, examine the causes and effects of BHS’s recent decline. For further details, see News Analysis: The decline and fall of British Home Stores.

Third Parties (Rights against Insurers) Act 2010 (Commencement) Order 2016

SI 2016/550: The remaining provisions of the Third Parties (Rights against Insurers) Act 2010 (TP(RAI)A 2010), which are not already in force, will be commenced on 1 August 2016.

R3 proposes moratorium for businesses facing insolvency

R3 is recommending a 21-day moratorium, during which creditors will be prevented from taking any action to recover their debts to allow directors of struggling companies time to make considered decisions about their company’s future when facing insolvency.

For further details, see News Analysis: R3 proposals moratorium.

Bankruptcy (Scotland) Act 2016

The Bankruptcy (Scotland) Bill (Session 2015-16) received royal assent on 28 April 2016 as the Bankruptcy (Scotland) Act 2016 (asp 21). The Bill was introduced for an Act of the Scottish Parliament to consolidate the Bankruptcy (Scotland) Act 1985, the Bankruptcy (Scotland) Act 1993, Part 1 of the Bankruptcy and Diligence etc. (Scotland) Act 2007, Part 2 of the Home Owner and Debtor Protection (Scotland) Act 2010, the Bankruptcy and Debt Advice (Scotland) Act 2014, the Protected Trust Deeds (Scotland) Regulations 2013 and related enactments.

Paying the forfeit—the importance of mitigating losses

LSREF III Wight Ltd v Gateley LLP [2016] EWCA Civ 359, [2016] All ER (D) 145 (Apr)

The Court of Appeal has handed down judgment in LSREF III Wight Ltd v Gateley LLP, a case which concerned a forfeiture clause in a lease and whether the claimant had unreasonably failed to mitigate its loss. John de Waal QC, barrister at Hardwicke chambers, says the case shows that judges want to achieve a fair result.

For further details, see News Analysis: Paying the forfeit—the importance of mitigating losses.

MVLs—a ticking time bomb?

Are members’ voluntary liquidations (MVLs) a ticking time bomb? Helen Kavanagh and Charles Draper, members of the restructuring & insolvency practice of Squire Patton Boggs, consider whether the rush to take advantage of the lower level of tax available under the previous tax regime has left directors and insolvency practitioners (IPs) with a ticking time bomb.

For further details, see News Analysis: MVLs—a ticking time bomb?

Debtor payments leading up to the making of a bankruptcy order

Thomas and another v D’Eye and others [2016] Lexis Citation 50, [2016] All ER (D) 66 (May)

What are the consequences of a money transaction being void under section 284 of the Insolvency Act 1986 (IA 1986), and what relief can the court grant? Joseph Curl, barrister at 9 Stone Buildings, considers the significance of the recent decision in Thomas and another v D’Eye and others.

For further details, see News Analysis: Debtor payments leading up to the making of a bankruptcy order.

ICAEW to offer particular licenses to insolvency practitioners

The ICAEW has announced it is to offer partial licences for insolvency practitioners. The decision follows changes to insolvency licensing regime. The ICAEW said it will begin accepting applications for partial licences on 1 July 2016. The decision follows that of the Insolvency Practitioners Association in April 2016.

For further details, see News Analysis: ICAEW to offer particular licenses to insolvency practitioners.

Plans to reform CPR rules on appeals

Proposals to raise the threshold for permission to appeal to the Court of Appeal have been set out for consultation by the Civil Procedure Rule Committee (CPRC). The proposals amendments to the Civil Procedure Rules (CPR) also include removing the automatic right of oral renewal for permission to appeal to the Court of Appeal in civil cases where it has been refused on the basis of the documents in the case. The consultation is open until 24 June 2016.

EU Referendum 2016—What Brexit could mean for you and your clients

Following months of negotiations, David Cameron presented his new settlement for Britain in Europe. With the deal signed and the battle lines drawn, the campaign to decide the UK’s future in the EU has begun in earnest. As the debate rages across the nation, Lexis®Nexis has been working with industry experts to cut through the politics and assess the implications for a wide range of legal practice areas.

For further details, see News Analysis: What might Brexit mean for restructuring and insolvency lawyers?

Proposals to bolster the insolvency regime

The government is consulting on four proposals designed to improve the existing corporate insolvency regime. The intention is to enable more corporate rescues of viable businesses and ensure the insolvency regime delivers the best outcomes. One of the proposals is to create a new moratorium which will provide companies with an opportunity to consider the best approach for rescuing the business while free from enforcement and legal action by creditors. The consultation closes on 6 July 2016.


Advocate General v Dickie

2010 Scot (D) 16/9

Abstract: In sequestration proceedings in bankruptcy in which the respondent argued that sequestration should not be granted because the equity in two properties he owned was sufficient security for payment of the debt, the court held that as the respondent had only offered, not given, security, it had not been shown that there was sufficient security for payment of the debt to prevent the award of sequestration.

Shlosberg v Avonwick Holdings Ltd and others

[2016] EWHC 1001 (Ch)

Abstract: Legal professional privilege in bankruptcy—the Chancery Division ruled that the claimant's trustees in the bankruptcy had acquired the benefit of his legal professional privilege with respect to one of three categories of documents held by the second defendant solicitors, who were also acting for the claimant's creditor (A). Both A and the claimant had been engaged in hostile litigation. In all the circumstances, no order was granted requiring the solicitors to cease acting for the trustees. However, an injunction was granted requiring the solicitors to cease acting for A.

Re The Copenhagen Reinsurance Company (UK) Ltd and another

[2016] All ER (D) 25 (May); [2016] EWHC 944 (Ch)

Abstract: Insurance—transfer of long-term insurance business. The Companies Court granted an order, among other things, sanctioning an insurance business transfer scheme to transfer the applicant company, The Copenhagen Reinsurance Company (UK) Ltd's entire insurance business to another company in the Enstar group.


[2016] All ER (D) 118 (May); [2016] EWHC 79 (Ch)

Abstract: Scheme of arrangement—the Chancery Division allowed the applicant company's application for an order convening a single meeting of its scheme creditors to consider and approve a scheme of arrangement. The court held that a single meeting was appropriate for the three groups of shares being considered by the court, and that the English jurisdiction was the appropriate location to hear the application.

Stevensdrake Ltd trading as Stevensdrake solicitors v Hunt and another

[2016] All ER (D) 102 (May); [2016] EWHC 1111 (Ch)

Abstract: The Chancery Division considered the effect of a Tomlin order on the recovery of a debt following the settlement of a claim. It held that, among other things, an agreement between the parties would not fail for lack of consideration, and that the doctrine of promissory estoppel was engaged and made it inequitable for the claimant solicitors' firm to pursue the defendants for the remaining balance due. In the circumstances, a further hearing would be necessary.

Re A Company

[2016] All ER (D) 103 (May); [2016] EWHC 1046 (Ch)

Abstract: The Companies Court dismissed the petitioners' petition for the winding up of a company where, among other things, the company had produced evidence that was, on its face, sufficient to raise a bona fide dispute regarding the receipt of three payments.

Hosking and another (as joint liquidators of Hellas Telecommunications (Luxembourg) II SCA) v Slaughter and May

[2016] EWCA Civ 474; [2016] All ER (D) 173 (May)

Abstract: The Court of Appeal, Civil Division, held that in respect of administrations that had commenced on or before 5 April 2010, the administrators could agree to pay the fees of the solicitors' firm both before and after the end of the administration. If the liquidators did not agree with the fees that had been paid, they could bring misfeasance proceedings against the administrators. The IA 1986 and the Insolvency Rules 1986 provided ways in which liquidators could challenge the decision of an administrator to pay legal fees, but they did not provide a means by which liquidators could require the assessment of costs paid in an earlier administration.

Gardner v Lemma Europe Insurance Company Ltd (in liquidation)

[2016] EWCA Civ 484; [2016] All ER (D) 175 (May)

Abstract: The Court of Appeal, Civil Division, dismissed an appeal against a judge's refusal to lift an automatic stay on proceedings being brought against the respondent, a company in liquidation. On the facts, the applicant had not established that he had a seriously arguable claim for an indemnity under his insurance policy with the respondent and, in the circumstances, the judge had not been wrong to refuse to exercise his discretion in favour of lifting the stay.

The Sherlock Holmes International Society Limited v Aidiniantz

[2016] All ER (D) 162 (May); [2016] EWHC 1076 (Ch)

Abstract: The Chancery Division held that whilst an individual, R, had been properly appointed as a director of the Sherlock Holmes International Society Ltd, he had ceased to be a director of the company at a specific date in circumstances where the articles of association provided for a director only to hold office until the next annual general meeting. A declaration was granted.

Dates for your diary

Date Time Subjects covered
14 June 2016 Consultation on harmonised approach to EU insolvency ends
21 June 2016 12.30pm Joint R3/LexisNexis webinar: Sector issues - part 1 - nhs trusts and care home issues (subscription required)


There have been developments on the following cases this month:

Case name Court and citation Subject Current status
Horton v Henry Chancery Division,[2014] EWHC 4209 (Ch),[2014] All ER (D) 193 (Dec) Appeal hearing concluded but judgment reserved by Court of Appeal on 21 April 2016. In the previous judgment, H was made bankrupt. His assets on the date of the bankruptcy included four pension policies. H did not wish to crystallise the policies and, without crystallisation, the precise value of the policies could not be determined. The applicant trustee in bankruptcy applied to the court, effectively seeking that H be ordered to crystallise his policies and to exercise his elections in a manner desired by the trustee. The Chancery Division held that there was no power to require H to elect in any particular way. The application would be dismissed.
Harvey v Dunbar Assets plc (No 2) Chancery Division,[2015] EWHC 3355 (Ch),[2015] All ER (D) 02 (Dec) In the previous judgment, the Chancery Division dismissed an appeal against a district judge's dismissal of the claimant's application to set aside a second statutory demand issued by a bank against him under a guarantee where it had been based on the same argument, promissory estoppel, used in respect of his application to set aside the first statutory demand issued by the bank. Where there was a second statutory demand, an argument that had been run unsuccessfully and abandoned on appeal could not be raised in respect of a second statutory demand unless there was a change of, or special circumstances. There were no special or exceptional circumstances in the present case to justify re-opening or re-arguing the promissory estoppel point, which had previously been rejected and the district judge had been entitled to come to the conclusion that he had. Hearing of appeal in the Court of Appeal commences on 14 or 15 December 2016.
Cole v Howlett Chancery Division,[2015] EWHC 1697 (Ch),[2015] All ER (D) 178 (Jun) In the previous judgment, the claimant issued proceedings against the defendants, alleging copyright infringement of his music sample of the drum part of ‘Warriors Dance’, released on the album ‘Invaders Must Die’ by the Prodigy. He sought permission to amend his claim form and particulars of claim to plead an assignment of the causes in action to him from the Official Receiver of his bankruptcy estate and, thereby, properly constitute the claim. The Chancery Division, in allowing the application, held that it was disproportionate, since the defect had been cured, to deprive the claimant of his right to have the issue ventilated in court. Application for permission to appeal to the Court of Appeal commences on 7 July 2016.
Akers and others v Samba Financial Group Court of Appeal Civil Division,[2014] EWCA Civ 1516,[2014] All ER (D) 59 (Dec) In the previous judgment, the liquidators of a company appealed a decision in which the court had stayed English Trust proceedings on the basis that the courts of Saudi Arabia were a more appropriate forum. The Court of Appeal (Civil Division) reversed the decision on the basis that it was not able to determine the various issues on a stay or summary judgment application. Appeal hearing concluded but judgment reserved by Supreme Court on 28 April 2016.
Sebry v Companies House and another QBD,[2015] EWHC 115 (QB),[2015] All ER (D) 221 (Jan) In the previous judgment, the claimant managing director of a company in administration brought an action against the defendants companies house and the registrar of companies in respect of incorrect information published on the company register. It was the claimant's case that the publication of the information was a breach of duty of care which had caused the company to go into administration. The Queen's Bench Division upheld the claimant's case applying the assumption of responsibility and the three stage Caparo test. Hearing of appeal in the Court of Appeal commences on 7 or 8 March 2017
Tchenguiz and others v Grant Thornton UK LLP and others Commercial Court,[2015] EWHC 1864 (Comm),[2015] All ER (D) 36 (Jul) In the previous judgment, the fourth and fifth defendants (Kaupthing and JJ respectively) sought the dismissal or stay of the proceedings. The Commercial Court held that the proceedings against Kaupthing had been brought in breach of a prohibition on legal action against it contained in art 116 of the Icelandic Bankruptcy Act 1991, which had effect in the United Kingdom by reason of reg 5 of the Credit Institutions (Reorganisation and Winding Up) Regulations 2004, SI 2004/1045. However, the claims against both Kaupthing and JJ were not excluded by art 1(2)(b) the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters. Hearing of appeal in the Court of Appeal commences on 1 or 2 February 2017
Lomas and others v Burlington Loan Management Ltd and others; Subnom Re Lehman Brothers International (Europe) (in administration) Companies Court,[2015] EWHC 2269 (Ch),[2015] All ER (D) 11 (Aug) In the previous judgment, in the administration of Lehman Brothers International (Europe), the Chancery Division addressed the administrators' application for directions regarding the entitlement of creditors to interest on their debts for periods after the commencement of that administration. The court construed r 2.88 of the Insolvency Rules 1986, SI 1986/1925, and its provisions for the payment of statutory interest. Hearing of appeal in the Court of Appeal commences on 3 or 4 April 2017
Okon v London Borough of Lewisham Chancery Division,[2016] EWHC 864 (Ch),[2016] All ER (D) 123 (Apr) In the previous judgment, the Chancery Division held that, providing the claimant gave certain undertakings, it would grant permission to appeal and allow an appeal and set aside a bankruptcy order made in respect of the claimant on the petition of a local authority. The petition had been based on council tax liability orders, which the claimant disputed. The court held that the judge ought to have adjourned the bankruptcy petition in order to await the outcome of the claimant's appeal to the Valuation Tribunal in respect of the liability orders. Applying for permission to appeal to the Court of Appeal
Investment Trust Companies (in Liquidation) v Revenue and Customs Court of Appeal Civil Division,[2015] EWCA Civ 82, [2015] All ER (D) 181 (Feb) In the previous judgment, two sets of proceedings had concerned the repayment of VAT on management services provided to closed-end investment trusts companies, and a number of rulings had been made by the Chancery Division in respect of changes in the legislation that had affected the trusts' entitlement to reclaim VAT from the Revenue and Customs Commissioners. Both the trusts and the Revenue appealed. The Court of Appeal, Civil Division, allowed the appeals and, in so doing, clarified the scope of s 80(7) of the Value Added Tax Act 1994. Appeal hearing concluded but judgment reserved by Supreme Court on 19 May 2016
Sands and another v Singh and others Chancery Division:[2015] EWHC 2219 (Ch),[2015] All ER (D) 304 (Jun) In the previous judgment, the Chancery Division ruled that the claimant trustees in the bankruptcy of the first defendant had 'applied' for orders of possession and sale, within the meaning of s 283A(3) of the Insolvency Act 1986, within the three-year time period after which, failing such application being made, the property would have re-vested in the bankrupt. The trustees' attempt to issue the proceedings by delivering the application notice and tendering the relevant fee to the county court had been sufficient to engage s 283A(3) of the Act, notwithstanding that the court had not issued the proceedings until a later date. Section 283A(3) was not dependent upon the court doing anything, but merely required that ‘the trustee applies’. Applying for permission to appeal to the Court of Appeal.

Lexis®PSL Restructuring and Insolvency

This is a shortened version of the Lexis®PSL Restructuring and Insolvency monthly highlights for May 2016 that was first published on Lexis®PSL Restructuring and Insolvency.

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