The difficulty in defending post-petition payments (Re Changtel Solutions UK Ltd)

Article summary

Restructuring & Insolvency analysis: The court found in favour of liquidators seeking to recover payments deemed void pursuant to section 127 of the Insolvency Act 1986 (IA 1986). Considering limitation, arguments of special and exceptional circumstances, and the defence of change of position, Insolvency and Companies Court (ICC) Judge Barber found no reason to justify an exception to the principle of pari passu distribution to unsecured creditors. While unaware of the petition, the respondent’s services had not improved the position for unsecured creditors and therefore they were not entitled to be paid in full to the detriment of other creditors who would only receive a small dividend. A change of position defence was held to be constrained to circumstances in which validation would be ordered. As no special or exceptional circumstances were established to justify the validation of the payments, a change of position defence was not available. The respondent was ordered to repay the sum claimed in full...