Winding-up property dispositions—Wilson v SMC Properties

Winding-up property dispositions—Wilson v SMC Properties

In what circumstances can a party obtain a validation order if a transaction is caught by the Insolvency Act 1986 (IA 1986), s 127? Marc Brown, a barrister at St Philips Chambers, advises that parties to transactions will want to be satisfied that there is no winding-up petition pending against a company before becoming bound.

Original news

Wilson and another v SMC Properties Ltd and others [2015] EWHC 870 (Ch), [2015] All ER (D) 115 (Apr)

The second claimant company, 375 Live, experienced financial difficulties and sold property that it owned to the first defendant company, SMC, at a time when a winding-up petition had been presented against 375 Live. Following a winding-up order having been made against 375 Live, a dispute arose between SMC and 375 Live's liquidator as to whether the sale had been entered into in good faith and for value, and whether the court should exercise its discretion to validate it. The Chancery Division held that, on the evidence, the sale had been entered into in good faith and for value, and that court would exercise its discretion to validate it.

What was the background to the application?

375 Live Limited (the company) was in business as a scrap gold and silver merchant. On 4 August 2011, it purchased property at 58G Hatton Garden, London for £1.2m. The company defaulted on its VAT which resulted in VAT assessments being raised. The company put the property on the market in November 2013 and a board minute recorded a decision on 5 November 2013 to sell the property for £1.1m.

At some point in November 2013, however, the company signed a contract for sale of the property for £1.3m. This sale did not proceed.

On 26 February 2014 HMRC presented a petition for the winding up of the company.

In the meantime, a creditor holding a fixed charge over the property was pressing for

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About the author:

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.