Liquidation- Wrongful Trading
Re: Bangla Television Limited (In Liquidation)
[2009] EWHC 1632
Chancery Division 15 July 2009

Facts:
This case involved a claim for wrongful trading brought by a liquidator against the directors of the Company.  Before the Company was wound up its assets were transferred to another company under a business sale agreement for an apparent consideration of £250,000 although no monies had in fact been paid.  The liquidator also applied for a declaration that the sale was a transaction at an undervalue pursuant to s238 Insolvency Act 1986 and at the trial the Judge failed to make any specific order in respect of wrongful trading.  It was therefore argued by one of the directors that to seek a further order with regard to wrongful trading would be an abuse of process as the matter had been considered in the previous trial.  Also it could not be shown that the company had suffered a loss from the wrongful trading.
 
Decision:
It wasn’t the Judge’s intention to prevent the liquidator from pursuing a wrongful trading claim when deciding on the transaction at undervalue issues.  The Judge had not said that there should not be any order made in respect of wrongful trading and therefore this could be considered.  The Court also held that the directors should pay £250,000 to the Company in respect of which they were jointly and severally liable as this represented the sum by which the assets of the Company had been reduced by their conduct and represented the loss to the creditors.

Liquidation-Leave to bring a claim
Re: Bourne and others –v- Charit-Email Technology Partnership LLP
[2009] EWHC 1901
Chancery Division 23rd July 2009

Facts:
This case involved various investment schemes that used limited liability partnerships.  The investment scheme in question involved a company purchasing intellectual property (IP) rights in respect of an email product so as to exploit that product.  The members of the scheme funded the purchase by way of a bank loan.  The product was not successful and the Company was unable to pay the seller of the IP rights.  The seller then issued winding-up proceedings against the company which the members of the scheme sought to oppose but the Court held that it did not have standing to do so.  The Seller then applied for permission to issue proceedings against the Company in liquidation on the basis that it had been involved in a fraudulent scam and should be joined with other similar claims in the commercial courts.  The application was opposed by the liquidator who argued that the issues raised were most appropriately resolved within the liquidation proceedings and that there was no real risk of conflicting judgments within those proceedings and the commercial court proceedings.

Decision:
The court accepted the view of the members of the scheme that within the commercial court litigation there were wider issues common to all of the schemes in respect of which the court would want to take an overview. If issues in relation to this particular scheme were determined separately this could result in duplication.  The Judge accepted that there was a danger that the liquidator, who had little in the way of available assets, could be drawn into lengthy court proceedings but also was conscious that there were other creditors who were not involved in the litigation whose views should be taken into account.  The Judge also took into account the fact that the members were not contributories or creditors of the company but, on balance and taking into account what was just in all the circumstances of the case, permission was granted for proceedings to be issued.

US Bankruptcy proceedings – Validity of Trust Provisions
Re: Perpetual Trustee Company Ltd –v- BNY Corporate Trustee Services Ltd and others 
[2009] EWHC 1912
Chancery Division 28th July 2009
Facts:-
This case is part of the continuing litigation in relation to the collapse of Lehman Brothers and involved an application to stay claims issued against various companies pending the resolution of proceedings in the United States.  The facts of the case were complex and in summary concerned a claim with regard to the validity of the provisions of a trust deed when there was a default in payment under a credit insurance scheme.  Proceedings had been issued in relation to the provisions of the trust deed in the US courts and were due to be heard there in August 2009.  In the meantime similar claims had been brought in the English Courts. The court had to determine whether to stay those claims even though the transactions were governed by English law and the English Court had jurisdiction to deal with them.

Decision:
The Court accepted that there was a general rule that it was contrary to public policy and therefore void to exclude the mandatory provisions of insolvency legislation but accepted that there was an exception in cases of a grant of an interest in property determinable on the insolvency of the grantee but not the grantor.  In this case the trust deed was not contrary to public policy as it didn’t attempt to oust the provisions of the Insolvency Act 1986, however it would not be appropriate for the court to make the declarations requested and the case should not be determined until at least October 2009 to enable the US court to consider the position in respect of the proceedings issued in that court.

Insolvency – Cross Border issues
In the matter of Swissair Schweizerische Luftverkehr-aktiengesellschaft
[2009] EWHC 2063
Chancery Division 6th August 2009

Facts:
Swissair was a Swiss company with a branch office in England where it had assets and liabilities.  The Company was wound up and English liquidators appointed in this Country with Swiss liquidators being appointed in Switzerland.  The English liquidators entered into a protocol with the Swiss liquidators to co-ordinate the insolvency proceedings in the two countries and both liquidators realised assets and advertised for claims in each jurisdiction.  Some claims were made in England although creditors were encouraged to submit claims in the Swiss liquidation which most creditors did.  The Swiss liquidation was recognised by the High Court as a foreign named proceeding.  The issue in this case was whether the court could order assets realised by the English liquidators to be remitted to the Swiss liquidators and whether it would be appropriate to do so.

Decision:
The court held that it did have power to order the assets to be remitted and that it would be appropriate to do so as those assets would be administered by the Swiss liquidator as part of the assets of the main liquidation and in accordance with Swiss law.  Whilst some liabilities were deemed to be preferential in the Swiss liquidation there was more than enough in the way of assets to pay those liabilities in full.  All other claims ranked pari passu in any distribution and assets remitted from England would be applied in that way.  It was pointed out that the court did have to be satisfied that the interest of creditors in this country were adequately protected and that any order to remit the assets was consistent with the English liquidation which was the case here.

Bankruptcy – Charging Orders
Re: Nationwide Building Society –v- Wright and another
[2009] EWCA Civ  811
Court of Appeal – July 2009

Facts:
Nationwide Building Society obtained a charging order over Mr Wright’s property following judgment being entered in respect of a credit card debt.  An interim charging order was made before the bankruptcy petition was presented but the final charging order was made after presentation of the petition but before the bankruptcy order was made.  The Nationwide and the court were not aware of the pending petition when the charging order was made.  The trustee in bankruptcy applied to discharge the charging order and that application was granted.  The Nationwide appealed arguing that it was entitled to retain the benefit of the charging order where it pre-dated the commencement of the bankruptcy.

Decision:
The Court pointed out that the Insolvency Act 1986 provides that a bankruptcy commences when a bankruptcy order is made. One could not go back under the Act to a date prior to making of the bankruptcy order other than as permitted by Section 284 of the Act. That section did not affect the rights of people receiving property from the bankrupt in good faith for value and without notice that a petition had been presented.  That principle was a change from the position before the 1986 Act came into effect and it appeared from this that it was intended that the position in respect of charging orders in bankruptcy should be different from that in corporate insolvency.  Creditors who had issued execution over land of a bankrupt were only entitled to retain the benefit of execution if it was completed before the commencement of the bankruptcy, i.e. when the bankruptcy order was made. It was clearly the intention of the legislator that a creditor who had completed execution prior to the making of the bankruptcy order should not be deprived of his security as a result of the bankruptcy order alone.  Accordingly the charging order should not have been discharged.
 
Bankruptcy – Equity of Exoneration
Re: Williams –v- Bateman
[2009] ALL ER D317
Chancery Division 22nd July 2009

Facts:
In this case an application was made by the former wife of a bankrupt. The matrimonial home had been held as joint tenants and on their divorce the wife gave notice severing the joint tenancy and a bankruptcy order was then made.  The wife then remarried twice.  A trustee in bankruptcy was appointed who applied for a declaration as to the value of the wife’s interest in the property and an order for sale so as to realise the bankrupt’s share.  The Judge decided that the trustee had a one half share in the property and made an order for sale but agreed to deduct sums in respect of the equity of exoneration and the value of improvement works from that share.  The wife argued that the trustee should have treated the equity of exoneration as a set off against the bankrupt’s interest in the property as at the commencement of the bankruptcy so that it cancelled that interest and left her as the sole beneficiary. 

Decision:
The wife’s application was dismissed on the basis that whilst there was a contingent liability between the bankrupt and his wife there was no actual liability due to her from the bankrupt so that the idea of setting off a contingent liability against the bankrupt’s beneficial interest was not in accordance with the provisions of the relevant section of the Insolvency Act.  In the circumstances therefore the Judge’s decision had been correct.

Bankruptcy – Transaction at undervalue/trustees conduct
Re: Miller (as Trustee in Bankruptcy of Bayliss –v- Bayliss)
[2009] EWHC 2063
Chancery Division 5th August 2009

Facts:
Mrs Bayliss together with her husband and another family owned shares in a family company.  Just before he was made bankrupt her husband transferred 187 shares in the Company to her for no consideration.  On the appointment of a Trustee in Bankruptcy the 300 shares owned by the bankrupt invested in the Trustee who also treated the 187 shares as part of the estate on the basis that the transfer was a transaction at undervalue.  The Trustee then started negotiating regarding the sale of the total 487 shares by offering them to Mrs Bayliss and the other family.  Offers were received from Mrs Bayliss for £30,500 however the Trustee made it clear that that offer could only be progressed when cleared funds were received.  The other family then made an offer of £20,000 and provided the funds.  The Trustee accepted that offer.  Mrs Bayliss applied to the court arguing that the Trustee had entered into a contract to transfer all of the shares to her for £30,500 and had acted improperly so that the court could intervene under s303 of the Insolvency Act 1986.

Decision:
The court held that no binding agreement had been reached with Mrs Bayliss and that the Trustee had simply invited offers which he was not obliged to accept.  The Trustee was not bound to accept the first offer received by him or necessarily to accept the highest offer.  The Trustee was simply seeking to maximise the value of the shares for the benefit of the estate and his view that a definite sum of £20,000 was worth more to the creditor than an uncertain promise of £30,500 was in the court’s opinion right in the circumstances. The Trustee had behaved professionally and there was no evidence of any impropriety.