Legal News

Original news UBS AG ( London Branch) and another v Kommunale Wasserwerke Leipzig; UBS Ltd v Depfa Bank plc; UBS AG ( London Branch) v Landesbank Baden- Württemberg [2017] EWCA Civ 1567, [2017] All ER ( D) 119 ( Oct). The Court of Appeal ( Civil Division) concluded that the judge had been wrong to decide that the financial advisers were acting as the claimants’ agents when arranging for their client, the principal defendant, to enter into a single tranche collateralised debt obligation ( STCDO), and to treat any bribe as within that agency, thereby fixing the claimants with legal responsibility despite their lack of knowledge. The court further held that, because the claimants dishonestly assisted the advisers’ abuse of their fiduciary duty to the principal defendant, the bribe tainted the claimants’ conscience, making it inequitable for them to enforce the STCDO secured through that...

Original news Raithatha (as liquidator of Halal Monitoring Committee Ltd) v Baig and others [2017] EWHC 2059, [2017] All ER ( D) 244 ( Jul). The case involved a company established as a community initiative to oversee the production of Halal meat. When founded in 2004 by its first director, BH, it was intended to operate on a not-for-profit basis. By 2008, however, the company had built up liabilities it could not meet. It did not register for VAT until 2011 and, in April 2012, it went into insolvent liquidation. On winding up, there were 14 directors. The applicant, R, was appointed as liquidator. R brought proceedings concerning non-payment of the VAT assessment. He alleged that, by failing to secure VAT registration until 2011 and by not levying or recovering VAT on services supplied, the directors breached their fiduciary obligations to the company or failed to...

Original news Re Lehman Brothers Europe Ltd (in administration) [2017] All ER ( D) 44 ( Aug), [2017] EWHC 2031 ( Ch). In a significant ruling, the court endorsed a plan by the joint administrators to appoint a director to LBEL, already in administration, so that surplus monies could be paid to its sole member, Lehman Brothers Holdings plc ( LBH), rather than to a creditor. The proposal was found to be lawful, practical and advantageous. The application outlined a pragmatic route to unlock value for the member once unsecured debts had been met. How, then, did the administrators approach distributions to members? The principal entities were LBEL, its parent LBH, and an associated company, Lehman Brothers Limited ( LBL), each in administration. After paying LBEL’s unsecured creditors 100 pence in the pound, LBEL’s administrators retained a substantial surplus. They were, however, unable to...

Original news Redman (suing as widow and administratrix of the estate of Redman, deceased) v Zurich Insurance plc and another [2017] EWHC 1919 ( QB), [2017] All ER ( D) 07 ( Aug) The Queen’s Bench Division struck out a widow’s claim brought under TP( RAI) A 2010 against the first defendant, the insurer of the second defendant employer of her husband, who died in 2013. The court held that the second defendant became a “relevant person” for the purposes of s 1 when it was voluntarily wound up in 2014, predating the commencement of TP( RAI) A 2010 on 1 August 2016. It also concluded that the second defendant incurred the liability, within the same section, when the cause of action was complete, which likewise occurred before 2016. As the claim failed to satisfy either condition in s 1, the...

Original news Saw ( SW) 2010 Ltd and another v Wilson and others (as joint administrators of Property Edge Lettings Ltd) and another [2017] EWCA Civ 1001 What was the background to the appeal? In December 2007, SAW ( SW) 2010 Limited ( AW), one of the appellants and both a shareholder in and creditor of Property Edge Lettings Limited (the company), granted the company a long lease of a residential apartment block in Exeter known as Bartholomew House. On 18 December 2007, Capital Homes Loans Limited ( CHL) advanced a £1.25m buy-to-let loan to the company, secured by six fixed charges, in materially the same form, over each flat within Bartholomew House (the CHL charge). The CHL charge also imposed a fixed charge over rental income from the flats and a floating charge over the remainder of the company’s...

Original news In NRAM v Evans [2015] EWHC 1543 ( Ch), the court directed the rectification of an inadvertent discharge of a mortgage. The proceedings centred on whether a 2005 loan, advanced by NRAM’s predecessor to Mr and Mrs Evans, was secured over their property. The key issue was whether a 2004 charge, which had secured an earlier loan to the borrowers, who were subsequently made bankrupt, was effective to cover the 2005 advance. The High Court held that, on its terms, the 2004 charge did secure the 2005 loan against the property. The mortgage conditions attaching to the 2004 charge were sufficiently broad and unambiguous to include the 2005 borrowing. Upon the borrowers’ bankruptcy, their estate vested in the Official Receiver as trustee, but remained subject to the bank’s charge. It was also found that the bank had made a distinct mistake by...

Original news JCAM Commercial Real Estate Property XV Ltd v Davis Haulage Ltd [2017] EWCA Civ 267, [2017] All ER ( D) 62 ( Apr) The Court of Appeal ( Civil Division) upheld the property owner’s challenge to a High Court ruling that had declined to take off the court record a copy of a notice of intention ( No I) to appoint an administrator. The court examined the effect of paragraphs 44(4) and 28(2) of Schedule B1 to the Insolvency Act 1986. What, then, should practitioners draw from this? The ruling makes clear that lodging an No I where there is nobody to serve, or where there is no firm decision to proceed to an appointment, purely to obtain the moratorium, can no longer be relied upon. Merely contemplating an administration if other avenues fall away does not suffice....

Original news Sands (as trustee in bankruptcy of the estate of Layne (a bankrupt)) v Layne and another [2016] EWCA Civ 1159, [2016] All ER ( D) 160 ( Nov) The Court of Appeal, Civil Division, upheld the trustee in bankruptcy’s challenge and determined that Insolvency Act 1986, s 375(1) empowers a court to revisit, set aside or amend an order it has previously made while exercising its appellate jurisdiction over a decision from a lower court. What lessons of practical value should practitioners draw from this ruling? The ruling in Sands v Layne refines the boundaries of the jurisdiction under s 375(1) to review, rescind or vary orders within the relevant Parts of the Insolvency Act 1986 dealing with personal insolvency. It also examines when a bankrupt’s trustee and other creditors should be added as parties to any application seeking to rescind a...

Original news C‑156/15: Private Equity Insurance Group SIA v Swedbank AS What was the background to the case? The dispute stemmed from the insolvency of the Latvian company Izdevniecība Stilus SIA, whose rights are now held by Private Equity Insurance Group SIA (the company). Before going under, the company maintained a current account with Swedbank AS (the bank). The account agreement contained a clause under which every sum standing to the account’s credit was pledged to the bank as financial collateral securing all liabilities owed by the company to it. Once insolvency commenced, the bank relied on that term and debited the account, using the funds to satisfy the company’s debts to the bank. Acting through its administrator, the company sought repayment of those amounts by reference to Latvian insolvency provisions requiring pari passu treatment of creditors. The bank maintained that its steps were...

Original news Hosking and another v Apax Partners LLP [2016] EWHC 1986 ( Ch), [2016] All ER ( D) 193 ( Jul) The Companies Court refused an application by the joint liquidators to pause the English proceedings they had commenced, pending the outcome of earlier litigation in the United States. The court decided that a stay was not justified and set out several reasons for that conclusion: It was not appropriate to censure the defendants for blameworthily bringing about parallel proceedings. Any judgment in the US case would not bind the defendants. The fraud allegations ought to be addressed at the earliest sensible opportunity. Nonetheless, a short stay until 3 October 2016 was ordered for case management purposes, given the imminent US ruling on forum non conveniens, which could encourage additional defendants to consent to being joined to the English...

Original news Re Ralls Builders Ltd (in liquidation); Grant and another v Ralls and others [2016] EWHC 1812 ( Ch), [2016] All ER ( D) 113 ( Jul). The Chancery Division determined that, as the joint liquidators’ application under section 214 of the Insolvency Act 1986 for a contribution from the company’s directors on a wrongful trading basis had failed, it was not appropriate to order the directors to add to the company’s assets in respect of the liquidators’ fees and expenses incurred in examining and advancing that unsuccessful claim. What was the background to this judgment? This was a wrongful trading claim brought under IA 1986, s 214. The liquidators, Steven Grant of Wilkins Kennedy and James Tickell of Portland, sought a £1.5m contribution to the company’s assets from three former directors of a South East building company that entered...

Original news Grant and another v Baker and another [2016] EWHC 1782 ( Ch), [2016] All ER ( D) 108 ( Jul) The Chancery Division upheld an appeal by the trustees in bankruptcy, setting aside an order that would have delayed the sale of the bankrupt’s property for as long as his adult daughter, who suffered from global developmental delay, dyspraxia and obsessive compulsive disorder ( OCD), continued to live there. The court agreed that the district judge had been right to find exceptional circumstances within section 335A of the Insolvency Act 1986 ( IA 1986), recognising that such circumstances can include a situation where a bankrupt’s child has medical or mental health conditions and would be adversely affected by moving due to a sale. Nevertheless, it concluded that the judge had materially erred in discretion by imposing an open-ended...

Original news Hall and another v Elia and another [2016] EWHC 1697 ( Ch), [2016] All ER ( D) 63 ( Jul) The Chancery Division refused a mother’s application for permission to appeal a registrar’s ruling that a deed, by which her son purported to assign his property interest to her, was a sham, or else should be set aside under sections 339, 340 or 423 of the Insolvency Act 1986 ( IA 1986). A Chancery judge held that, as the registrar had already debarred the mother from defending the claim, permission to challenge his decision on the assignment should be refused. What was the background to the appeal? The mother and son said a deed of assignment transferred his share to her before the bankruptcy order against him. His trustee in bankruptcy asserted a beneficial interest, as did his company’s...

Background e IDAS Regulation: Regulation ( EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/ EC What are the principal changes ushered in by the e IDAS Regulation? In what respects will the current regime be altered? Although signatures are commonly used on commercial paperwork, under English law a document generally need not be signed to have legal force, save for particular classes including: guarantees consumer credit agreements sales of real property, or wills When electronic formats such as fax and email emerged in the 1980s and 1990s, the courts in England adopted a notably liberal stance, treating even a telex answerback, generated without human action, as a valid signature. As a result, Directive 1999/93/ EC (the 1999 e Signature Directive), which came before the e IDAS...

Original news Banwaitt v Dewji and another [2015] EWHC 3441 ( Ch) What issues did this case raise? This decision will interest practitioners advising judgment creditors with a charging order against a debtor’s share in jointly owned property, and anyone dealing with security over beneficial interests in land more generally. The central issue was whether a married couple, as co-owners, could have a charging order removed from the title by the wife buying the husband’s stake. The claimant had secured a substantial judgment which the debtor failed to satisfy. A charging order was then obtained over the debtor’s beneficial interest in the family home. Thereafter, the debtor and his wife transferred the property into her sole name for a modest sum. She argued the order no longer bound the title—maintaining it had been ‘overreached’ under sections 2 and 27 of the Law of...

Original news Re Codere Finance ( UK) Ltd [2015] EWHC 3778, [2016] All ER ( D) 27 ( Jan) Codere Finance ( UK) Ltd sought an order approving a scheme of arrangement under Part 26 of the Companies Act 2006. The company, incorporated in England, was a subsidiary of Codere SA, a Spanish entity that sat at the top of the corporate group. Efforts to negotiate a restructuring had been underway for over two years before these proceedings. It was concluded that the most effective route was to rely on the scheme jurisdiction available in England and Wales, and Codere Finance ( UK) Ltd was acquired for that very purpose. The court was asked to decide whether to sanction the scheme, with particular focus on the fact that the group had only recently bought Codere Finance ( UK) Ltd...

Original news Chief Constable of Greater Manchester Police v Wright [2015] EWHC 3824 ( Ch), [2015] All ER ( D) 270 ( Nov) The Manchester County Court refused the claimant chief constable’s application, said to be made under POCA 2002, s 311, for permission to continue forfeiture proceedings against a bankrupt, concluding that, on a proper interpretation, no permission was needed under that section. Accordingly, any purported condition of leave—requiring the seized cash to be paid to the defendant trustee in bankruptcy—could not be attached and, in any event, would contravene POCA 2002, s 298(4). What was the background to the application? Three separate sums were taken by the police from Mohammed Tahir pursuant to POCA 2002, s 294 in August 2010 and May 2013. On 7 July 2014 Mr Tahir was declared bankrupt, and a trustee in bankruptcy ( Miss Wright, the...

Practical implications This judgment demonstrates how the principles governing equitable set-off via a cross-claim function in an assignment, in this instance where a factor has taken over debts owed by customers to a supplier. The Court of Appeal concluded that, since the factor neither agreed with the supplier that no rebate would be available nor asked the debtor to notify it of any rebate, the debtor had no obligation to reveal any prior contractual rebate arrangements affecting the debt. Here, the scale of the rebate cross-claim almost eliminated the whole of Bibby’s demand. The clear potential for serious prejudice to a factor in such circumstances is therefore apparent and calls for the inclusion of suitably drafted contractual protections (see paras [49]–[53]). How did the set off issues arise in this debt factoring case? Under a Factoring Agreement from 2000, Bibby, acting as factor, acquired all of the...

Practical implications This judgment delivers a concise overview of the relevant legal principles for a CA 2006, s 994 unfair prejudice petition and/or an alternative claim for a just and equitable winding up under IA 1986, s 122(1)(g), together with the specific criteria needed to establish such claims. For additional guidance on pursuing these claims, see Practice Notes: Unfair prejudice claim—what it is and when to use it Unfair prejudice claim—the procedure Just and equitable winding-up—what it is and when to use it Just and equitable winding-up—the procedure The key requirements for establishing a successful s 994 unfair prejudice petition Hildyard J addressed this at paras [35]–[48]. Despite a tendency to treat s 994 as covering any conduct connected with or affecting the company, and the court’s flexible, expansive approach, three cumulative requirements must be satisfied. These include: that the matters...

Practical implications Although no witnesses were cross-examined in this matter, the court was able to dispose of it summarily, given the procedural steps already taken and the case management directions both in place, under which the appellants had repeated opportunities to advance their position. Disclosure had also occurred, and the court could rely upon witness material filed in earlier, related proceedings that had failed. While the appellants invoked comparisons with decisions discussed in the Tomlinson Report concerning banks’ lending behaviour, it was not the court’s role to permit a trial merely to ventilate issues of public interest where the underlying claims lacked viability. Accordingly, a summary determination was appropriate notwithstanding the absence of oral testing of the evidence. The court’s task is to assess viability, not to convene a forum for broader debate where the pleaded causes cannot...