Latest Cases May 2014
(Court of Appeal, Patten, Lewison and Sharp LJJ, 24 February 2014)
Where an office holder retains possession of property for the benefit of the winding-up or administration, rent will be treated as accruing from day to day and payable as an expense of the winding-up or administration. Leisure (Norwich) II Ltd v Luminar Lava Ignite Ltd and Goldacre (Offices) Ltd v Nortel Networks UK Ltd were overruled.
(Court of Appeal, Sullivan, McFarlane and Lewison LJJ, 3 April 2014)
Where a company was only able to continue to pay its debts as they fell due by taking new deposits, and using them to pay off old debts, in any commercial sense the company was insolvent, whether on a cash flow basis or a balance sheet basis. The Court of Appeal rejected the argument that if a company is cash-flow solvent, there is no need to consider whether it is also balance sheet solvent, unless it has contingent or prospective liabilities.
(Chancery Division, His Honour Judge Simon Barker QC (sitting as a judge of the High Court), 10 April 2014)
The court declined to make an administration order notwithstanding that the conditions in para 11 Sch B1 to the Insolvency Act were clearly satisfied. The administration application had been made because there was a pending winding-up petition against the company. There was evidence of substantial post-petition dispositions by the company to connected parties and/or for non-business purposes and other unexplained (and potentially unjustifiable) transactions. In the circumstances, the court transferred in the pending petition, called it on for hearing and appointed a provisional liquidator.
(Chancery Division, His Honour Judge
The liability to pay non-domestic rates is a single liability for the whole of the relevant chargeable financial year, notwithstanding that such liability may be discharged in instalments. Such liability falls within the definition of ‘debt’ in r 13.12 IR. In consequence, a local authority was bound by a Company Voluntary Arrangement (CVA) containing r3’s standard terms (condition 20 of which incorporates r 13.12 IR) in respect of the entire year’s liability and could not take steps to recover instalments falling due for payment after the CVA was approved.
(Chancery Division, His Honour Judge
The petitioner presented a winding-up petition against the debtor company on the basis of unpaid invoices. In advance of the hearing, the debtor filed a witness statement in which it admitted that it was unable to pay its debts as they fell due but disputed that it was indebted to the petitioner. The exhibit to that statement included draft CVA proposals in which the petitioner was listed as a contingent creditor in the sum of £1. At the hearing, the debtor sought an adjournment of the petition to a longer hearing to determine whether there was a genuine dispute on substantial
grounds. However, the deputy district judge made a winding-up order on the basis that the petitioner was a contingent creditor and the company was admittedly insolvent.
On appeal, His Honour Judge Hodge QC (sitting as a judge of the High Court) held that the deputy district judge had fallen into error and, in any event, should have exercised his discretion not to make a winding-up order on the basis of a £1 debt. Accordingly, he set aside the winding-up order. However, he declined to dismiss the petition since the debtor had only sought an adjournment at the original hearing.
Where a winding-up petition was struck out the grounds that the petition debt was genuinely disputed on substantial grounds, but the debtor company had unreasonably refused the petitioner’s request to mediate the underlying dispute before the costs of the disputed petition exceeded the petition debt, the company was entitled to its costs of resisting the petition on the indemnity basis up to the point at which its own conduct of the litigation became unreasonable.
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