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Has the removal of the need for liquidators to obtain sanction before causing a company to commence or defend legal proceedings signalled a change in the way the courts approach a liquidator’s power to bring proceedings? Faith Julian, barrister at 9 Stone Buildings, reviews the decision in Re Longmeade Ltd (in liquidation), in which liquidators sought directions in respect of commencing proceedings contrary to the wishes of creditors.
Re Longmeade Ltd (In liquidation)  EWHC 356 (Ch),  All ER (D) 259 (Feb)
The Chancery Division considered an application by the joint liquidators of Longmeade Ltd (Longmeade) for directions, pursuant to section 168(3) of the Insolvency Act 1986 (IA 1986) in relation to a potential claim in negligence, which they had identified could be made by the company against the Secretary of State for Business Innovation and Skills. Consideration was given to the principles to be applied to the modified regime concerning the commencement of proceedings by a company in compulsory liquidation post-26 May 2015.
Longmeade went into compulsory liquidation in November 2010, whereupon the official receiver (OR) was appointed liquidator. Longmeade’s principal debtor, Lehman Commercial Paper Inc (Commercial Paper), had entered US bankruptcy proceedings in October 2008. In order to obtain a distribution under Commercial Paper’s bankruptcy, the OR was required to file certain US tax forms within a specified period. The OR failed to do so, and Longmeade missed the 2012 rounds of distributions under the US proceedings. Longmeade would have received a total of about $26m in those distributions. The applicants were appointed joint liquidators in March 2013 (the liquidators) and submitted the appropriate forms for the 2013 rounds of distributions, thus securing payments of around $35m for Longmeade.
The liquidators, after taking advice from counsel, considered that a negligence claim (claim) against the Secretary of State of Business Innovation and
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Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.
Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.
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