2012: A Golden Year? FEATURE ARTICLES

The Minmar Muddle: Administrations and Precedentin the Companies Court p2

Meeting of French Administrateurs Judiciaires and Mandataires Judiciaires: Belgium 17 November 2011 p18

CASE DIGESTS

Banking and Financial Services p8

Civil Procedure p10

Commercial Cout p11

Company Law p13

Corporate Insolvency p13

Personal Insolvency p16

NEWS IN BRIEF p22

FIRST IMPRESSIONS p25

SOUTH SQUARE CHALLENGE p26

SOUTH SQUARE DIGEST IS PUBLISHED BY SOUTH SQUARE BARRISTERS,AT 3-4 SOUTH SQUARE GRAY’S INN, LONDON WC1R 5HP. TEL 020 7696 9900. PUBLICATION PRINT AND PRODUCTION BY WENDOVER PUBLISHING. TEL 01428 658697.

IN THIS ISSUE

FEBRUARY 2012A REGULAR REVIEW OF RELEVANT NEWS, CASES AND ARTICLES FROM SOUTH SQUARE BARRISTERS

Welcome to the first South Square Digest of

2012. A fine year - perhaps? In the Chinese

horoscope, it is the year of the golden

dragon, supposedly the luckiest of all years in

the complete 60 year cycle. So for any

dragons, like me (to be a dragon you have to

have been born in 1928, 1940, 1952, 1964,

1976, 1988 or 2000), this is supposed to be a

really good year. By coincidence we have a

Diamond Jubilee and the much vaunted

London Olympics to celebrate – or escape

from. For London may just be a little crowded

this summer!

So how did 2011 go? Mixed, I guess. The

Arab Spring was not expected, nor were the

riots in London. Problems in the financial

world – and particularly with the Euro - were

expected, but by the end of the year it was

probably a much deeper crisis than anyone

thought it would be. In fact the Euro got into

a real mess in 2011 with a number of

Eurozone prime ministers falling – the Irish

one, the Portuguese one, the Greek one, the

Spanish one and even the great survivor,

Silvio Berlusconi, the Italian one. And “Call

me Dave” exercised the UK veto, won by

Margaret Thatcher, for the very first time -

apparently to the visible irritation of

President Sarkozy. Interestingly, whilst many

decried Mr Cameron for doing so, the

Evening Standard was swift to report that

more than 80% of Londoners agreed with

what the British Prime Minister had done.

So how has the world of insolvency been

faring? Well the retailers continued to suffer

in 2011 with trouble for all sorts of well-

known names: I think, for example, of TJ

Hughes, Jane Norman, Habitat, Homeform

(kitchens and bathrooms), Focus DIY, Barratts

(the shoe chain), D2 Jeans, Alexon and

Hawkin’s Bazaar as well as the sale of Comet

for £2. 2012 looks like it is going to be tough

too, given what has happened to, for

example, La Senza, Peacocks and Blacks

Leisure.

But it is not just the retailers who faltered

in 2011. Paramount Restaurants (Bertorelli,

Livebait, Brasserie Gerrard) suffered, as did

Cooks Bakery and Oddbins. And, of course,

MF Global.

So what do we have for you in this edition

of the South Square Digest? Well we start

with an article by William Trower QC,

Stephen Robins and Charlotte Cooke entitled

“The Minmar Muddle: Administrations and

Precedent in the Companies Court”. Our

second article is by David Marks QC on the

meeting of French Administrateurs Judiciaires

and Mandataires held in Belgium in

November 2011. And we welcome Ron

Barclay-Smith, our new Chambers Director,

who writes on his first impressions of

Chambers. We also have the usual Case

Digests, News in Brief, Diary Dates and a new

South Square Challenge.

I hope you enjoy this edition of the Digest.

As always, if you want to be added to the

Digest circulation list – or your details have

changed – email kirstendent@southsquare.com

and we will do what we can to get you the

next edition when it is published. In the

meantime, everyone at South Square joins me

in wishing you a happy and healthy 2012.

David Alexander QC, Editor

2

IntroductionThe doctrine of precedent has been

described as one of the cornerstones of

our legal system: see Lambeth London BC v

Kay [2006] 2 AC 465 per Lord Bingham at

para 42. Decisions of higher courts are

binding on lower courts, and decisions of

courts of co-ordinate jurisdiction should be

followed, unless they are clearly wrong.

Further, where one Judge at first instance

has held that a previous Judge at first

instance was mistaken, the third Judge at

first instance should follow the second,

even if privately he prefers the reasoning

of the first: see Minister of Pensions v

Higham [1948] 2 KB 153 per Denning J at

p.155. This approach is intended to foster

certainty and predictability, as Nourse J

explained in Colchester Estates v Carlton

The Minmar Muddle:Administrations and Precedentin the Companies Court

plc [1986] 1 Ch 80 at p.84:

“It is desirable that the law, at whatever

level it is declared, should generally be

certain. If a decision of this court, reached

after full consideration of an earlier one

which went the other way, is normally to

be open to review on a third occasion

when the same point arises for decision at

the same level, there will be no end of it.

Why not in a fourth, fifth or sixth case as

well? … There must come a time when a

point is normally to be treated as having

been settled at first instance. I think that

that should be when the earlier decision

has been fully considered, but not

followed, in a later one … I would make

an exception only in the case, which must

be rare, where the third judge is convinced

that the second was wrong in not

following the first. An obvious example is

where some binding or persuasive

authority has not been cited in either of

the first two cases. If that is the rule then,

unless the party interested seriously

intends to submit that it falls within the

exception, the third case will, so far as the

point in question is concerned, be a

formality, with any argument upon it

reserved to the Court of Appeal”.

Normally these principles are easy to

apply. However, some situations present

greater difficulties. Consider the

following example. Judge A decides in

favour of proposition X. Subsequently,

Judge B, in ignorance of Judge A’s

decision, decides against proposition X.

Judge C considers both previous

judgments, and sides with Judge A. On

the same day, Judge D, in ignorance of

the decision which Judge C has just

handed down, considers the judgments of

Judge A and Judge B, and sides with

Judge B. How, in those circumstances,

should Minister of Pensions v Higham and

Colchester Estates be applied? And what

should Judge E hold when asked to

choose between the two competing lines

of authority?

Outlandish as that example may seem, it

is precisely the position which has come

William Trower QC, Stephen Robins and Charlotte Cookeexamine the recent series of decisions regarding the

validity of appointments of administrators: Hill v Stokes;

Minmar; Virtualpurple; and Msaada Group.

FEBRUARY 2012

3

into being in respect of Rule 2.20(2) of the

Insolvency Rules 1986. In Hill v Stokes plc

[2011] BCC 473, HHJ McCahill QC (sitting as

a Deputy High Court Judge) held that

service of the notice of intention to

appoint an administrator on the persons

identified in Rule 2.20(2) is not an essential

pre-condition to the valid appointment of

an administrator. Unaware of that

decision, Sir Andrew Morritt C held in

Minmar (929) Ltd v Khalatschi [2011] BCC

485 that the failure to serve such a notice

on the company – even where there is no

qualifying floating charge holder to whom

the notice could be addressed – will render

the administrator’s appointment invalid. In

Re Virtualpurple Professional Services Ltd

[2011] EWHC 3487 (Ch), Norris J considered

both previous decisions, and held that Hill

v Stokes plc was correct, and that Minmar

had been wrongly decided. On the same

day, in ignorance of Norris J’s decision,

Warren J held in National Westminster

Bank plc v Msaada Group & Ors [2011]

EWHC 3423 (Ch) that Hill v Stokes plc had

been wrongly decided, and that Minmar

was correct. By the time this article goes to

print, it is entirely possible that further

Judges will have added to the debate by

siding either with HHJ McCahill QC and

Norris J, or with Sir Andrew Morritt C and

Warren J. (Indeed, it is understood that

HHJ Purle QC has already given an ex

tempore judgment disagreeing with

Minmar but has yet to approve the

transcript.)

The relevant provisionsIn light of this confusion, it is useful to

start at the beginning, with paragraph 28

of Schedule B1 to the Insolvency Act 1986.

This provides:

“An appointment may not be made

under paragraph 22 unless the person who

makes the appointment has complied with

any requirement of paragraph 26 and 27

and: (a) the period of notice specified in

paragraph 26(1) has expired; or (b) each

person to whom notice has been given

under paragraph 26(1) has consented in

writing to the making of the

appointment”.

The requirements of paragraph 26 are as

follows:

“(1) A person to proposes to make an

appointment under paragraph 22 shall

give at least five business days’ written

notice to: (a) any person who is or may be

entitled to appoint an administrative

receiver of the company; and (b) any

person who is or may be entitled to

appoint an administrator of the company

under paragraph 14.

(2) A person who proposes to make an

appointment under paragraph 22 shall

also give such notice as may be prescribed

to such other persons as may be

prescribed”.

The “persons” who have been

“prescribed” for the purposes of

paragraph 26(2) are identified in Rule

2.20(2):

“A copy of the notice of intention to

Where one Judge at first instance hasheld that a previous Judge at first instancewas mistaken, the third Judge at first instance should follow the second.

WILLIAM TROWER QC

4

appoint must, in addition to the persons

specified in paragraph 26, be given to: (a)

any enforcement officer who, to the

knowledge of the person giving the

notice, is charged with execution or other

legal process against the company; (b) any

person who, to the knowledge of the

person giving the notice, has distrained

against the company or its property; (c)

any supervisor of a voluntary arrangement

under Part I of the Act; and (d) the

company, if the company is not intending

to make the appointment”.

It seems that the service of the notice on

any person who is entitled to appoint an

administrative receiver or administrator is

an essential pre-condition to the valid

appointment of an administrator. But

what of the persons prescribed by Rule

2.20(2)? Is it also essential for the notice to

be served on them in order for the

appointment to be valid? And what is

required to occur if there is no person who

is entitled to appoint an administrative

receiver or administrator? Is it still

necessary in those circumstances to serve

the notice on the persons prescribed by

Rule 2.20(2)? To some, these questions may

appear to be arid technical ones. But they

are important. If the service of the notice

on the company is essential under Rule

2.20(2)(d) in order for the appointment to

be valid, administrators appointed by the

company’s directors under paragraph 22

may discover, perhaps many months after

taking office, that their appointment was

invalid for want of notice to the company.

Hill v StokesIn Hill v Stokes, the administrators were

appointed by the company’s directors. The

notice of intention to appoint

administrators was served on the

qualifying floating charge holder. It was

also served on the company, in accordance

with Rule 2.20(2)(d). But it was not served

on landlords who had distrained, as

required by Rule 2.20(2)(b). The

administrators applied for directions as to

whether their appointment was valid. HHJ

McCahill QC held that it was. In his view,

paragraph 28(1) “[should] be interpreted

as referring, not to paragraphs 26 and 27,

but to paragraphs 26(1) and 27”. In other

words, notice to any qualifying floating

charge holder was an essential pre-

condition, but notice to the persons

identified in Rule 2.20(2) was not, and the

failure to notify the distraining landlords

would not be fatal to the validity of the

administrators’ appointment.

HHJ McCahill QC held that the purpose

of Rule 2.20(2) is connected with the

interim moratorium which arises

immediately upon the giving of the

notice to the qualifying floating charge

holder under paragraph 26(1): see

paragraph 44(4). This interim moratorium

prohibits execution and distress: see

paragraph 43(6). It also prevents a

supervisor of a voluntary arrangement

from presenting a winding-up petition.

Further, it prevents the company itself

from passing a resolution for its own

winding up: see paragraph 42(1). Unless

the persons identified in Rule 2.20(2) are

provided with a copy of the notice which

has given rise to the interim moratorium,

they will have no means of knowing

about its existence, and might infringe it

inadvertently. HHJ McCahill QC said in

paragraph 51 of his decision, “One could

be forgiven for thinking that the reason

for notifying [the persons prescribed by

Rule 2.20(2)] is for information purposes,

rather than as a prerequisite for the

making of the order, in order to save them

from stumbling innocently into an

enforceable interim moratorium, once the

notice of intention to appoint has been

lodged”. In HHJ McCahill QC’s view, this

impression was fortified by the absence

of a minimum period of notice in the case

of paragraph 26(2), in contrast with the

minimum period of five days under

paragraph 26(1).

MinmarIn Minmar, there was no qualifying

floating charge holder. No notice of

intention to appoint administrators was

served on the company. HHJ McCahill QC’s

decision in Hill v Stokes was not drawn to

Sir Andrew Morritt C’s attention. The

Chancellor held, principally on the basis of

“the clear words of paragraphs 26 and 28”

(although without any particularly

detailed reasoning) that the service of the

notice of intention on the company was a

mandatory pre-condition to a valid

appointment and that the administrators

had not been validly appointed. The

Chancellor considered the point about the

lack of a minimum notice period under

paragraph 26(2) but concluded: “As the

latter provisions do not specify any notice

period, presumably it must be a

reasonable period”. It does not appear to

have been suggested to the Chancellor

that it would be highly unsatisfactory for

the validity of an administrators’

appointment to turn on an assessment of

the ‘reasonableness’ of the period of

notice to the persons specified in Rule

2.20(2) – an uncertain and fact-dependent

test.

The possibility that notice to the

persons identified in Rule 2.20(2) was

necessary solely to prevent them from

contravening inadvertently the interim

moratorium does not appear to have

been suggested to the Chancellor. In the

absence of any explanation, the

Chancellor said in paragraph 61 of his

judgment:

“I can see no reason why all those

enumerated in Insolvency Rule 2.20(2),

namely bailiffs, process servers, distrainers,

supervisors or the company itself, should

receive notice of an intention to appoint

administrators if there is a floating charge

over the assets of the company in respect

of which there is someone entitled to

appoint an administrative receiver or an

Is it essential for the notice to be servedon the company? And what is to occurif there is no qualifying floating chargeholder?

FEBRUARY 2012

5

administrator but not otherwise. Prima

facie, each of them is concerned, whether

or not there is a floating charge over the

property of the company”.

It should be noted that the Chancellor’s

decision that the service of the notice of

intention on the company was a

mandatory pre-condition to a valid

appointment was strictly obiter. This is

clear from paragraph 53 of his judgment,

in which he said: “In the light of my

conclusion on paragraph 105, the point of

law arising in respect of paragraph 26 does

not arise, but in case this case goes further,

I should indicate my conclusions”. Since his

views did not form part of the ratio

decidendi, the third Judge to have

considered the point was required to

follow Hill v Stokes, unless convinced that

it was wrong.

VirtualpurpleThe third Judge to consider the point was

Norris J, who sided with HHJ McCahill QC,

not through slavish adherence to the

doctrine of precedent, but because he

was convinced that HHJ McCahill QC’s

reasoning was right. The facts in

Virtualpurple were similar to the facts in

Minmar, in that there was no qualifying

floating charge holder, and no notice of

intention to appoint administrators had

been served on the company. Norris J

considered Hill v Stokes and Minmar. He

held that the former was to be preferred,

and that the latter was wrong, and that

HHJ McCahill QC’s explanation of the

raison d’etre of Rule 2.20(2) was correct:

“Reading the rules in this way makes

functional sense. In paragraph 61 of his

judgment in Minmar, the Chancellor said

that he could see no reason why the

persons enumerated in Rule 2.20(2) should

receive notice of intention to appoint an

administrator if there was a floating

charge holder but not otherwise. But the

significance of the interim moratorium

does not appear to have been drawn to his

attention. Where there is an interim

moratorium … those whose rights are

immediately affected by a temporary

suspension are to be notified … This

applies both to those who are enforcing

recovery rights against the company, and

to the company itself which, during the

interim moratorium, cannot pass a

resolution for its winding up”.

Since there was no requirement to

serve the notice of intention to appoint

an administrator on the persons

identified in Rule 2.20(2) in the absence

of a qualifying floating charge holder, it

could not, in Norris J’s view, be an

absolute requirement for a valid

The third Judge to have considered thepoint was required to follow Hill v Stokes,unless convinced that it was wrong.

STEPHEN ROBINS

6

appointment. Even in circumstances

where a qualifying floating charge holder

did exist and did itself receive notice

under paragraph 26(1), there was, in

Norris J’s opinion, no requirement for a

copy of the notice to be served on the

persons identified in Rule 2.20(2) for the

appointment to be valid. Norris J

concluded:

“It is hard to read Rule 2.20(2) as

containing requirements to give notice

which are fundamental to the question of

the validity of the appointment process

where there is no minimum period of

notice prescribed. As HHJ McCahill QC

observed in Hill v Stokes, the absence of a

minimum period of notice to the persons

administrators had been served on the

supervisor of that voluntary arrangement.

Warren J was required to decide whether

or not the appointment of the

administrators was valid. He considered

Hill v Stokes and Minmar. Warren J said in

paragraph 29:

“In light of what the Chancellor said in

Minmar, I must revisit the decision in Hill v

Stokes and address each of the reasons

which Judge McCahill gave for his

decision. As will be seen, I disagree with

his decision and agree with that of the

Chancellor. Judge McCahill said what he

did as a matter of decision. It is not

entirely clear whether what the

Chancellor said was strictly obiter or

whether it was an alternative ground of

decision. If it was only obiter I ought, as a

matter of judicial comity, to follow Judge

McCahill, sitting as a judge of this

Division, unless I am convinced that he

was wrong. Perhaps, given the subsequent

judgment of the Chancellor, it is a little

easier for me to depart from Judge

McCahill’s decision than would ordinarily

be the case but I still have to be clear in

my own mind that he was wrong. In

contrast, if the conclusion of the

Chancellor was an alternative ground for

his decision, I should follow his as the later

judge. It is not necessary for me to resolve

that point since in my view the reasons

given by Judge McCahill do not support it.

In my judgment, he was clearly wrong to

decide the way he did on the basis of

those arguments”.

As regards the purpose of Rule 2.20(2),

Warren J expressly disagreed with HHJ

McCahill QC’s view in Hill v Stokes that

the purpose of notice on the persons

identified in that Rule was “for

information purposes, rather than as a

prerequisite for the making of the order,

in order to save them from stumbling

innocently into an enforceable interim

moratorium”. Warren J described this

conclusion as “speculation if I may

respectfully say so” which, in Warren J’s

opinion, was not supported by the

legislation or other admissible material.

Warren J concluded in paragraph 62:

“In concurrence with the reasoning of the

Chancellor, it is right to follow the clear

words of paragraph 26 and 28 so that the

prescribed in the Rule suggests that the

reason for notifying them is for

information purposes; and there seems no

good reason why failure to provide

information to [such persons] … should

render the appointment process invalid”.

Msaada GroupWarren J’s decision in Msaada Group was

handed down only hours later. It related

to an insolvent partnership to which

administrators had been appointed under

the Insolvent Partnerships Order 1994.

There was no qualifying floating charge

holder, but the partnership was subject to

a partnership voluntary arrangement. No

notice of intention to appoint

CHARLOTTE COOKE

FEBRUARY 2012

7

latter is not to be read as referring only to

paragraph 26(1). For reasons which I have

given, I do not consider that the reasons

which Judge McCahill had for reaching

the contrary conclusion are enough to

support it. I decline to follow his

decision”.

The position in future cases at firstinstanceAs mentioned above, Warren J was

unaware that Norris J had just sided with

HHJ McCahill QC. Had he known that, his

analysis of the position in terms of stare

decisismight have looked rather different.

As explained above, where the second

Judge to consider a point has disagreed

with the first, the third Judge to consider

the point is required by the rule in

Minister of Pensions v Higham and

Colchester Estates to follow the second,

whatever he might think privately.

Therefore, returning to the example at

the beginning of this article, Judge D, had

he known about Judge C’s decision, would

have been bound to follow it. By dint of

the same reasoning, had Warren J known

about Virtualpurple, he would have been

required to follow it by agreeing with Hill

v Stokes, whatever he might have thought

about HHJ McCahill QC’s reasoning.

However, Warren J was unaware of

Virtualpurple, and held that Hill v Stokes

was wrong.

If a fifth first instance Judge is required

to consider this point, what conclusion

would he be required to reach? As a

matter of law, where a previous Judge

can be shown to have come to a

particular conclusion in ignorance of a

precedent which he ought properly to

have followed, his decision is said to be

per incuriam. See, for example, Morelle

Ltd v Wakeling [1955] 2 QB 379 per

Evershed MR at p.406: “the only cases in

which decisions should be held to have

been given per incuriam are those …

given in ignorance … of some authority

binding on the court concerned”. In light

of the fact that Warren J was unaware of

Virtualpurple, it might be possible to

argue that his decision in Msaada Group

was per incuriam, and that the fifth

Judge to consider the point should

follow Norris J in Virtualpurple.

Practical suggestionsUntil the confusion is cleared up by the

Insolvency Rules Committee or the Court

of Appeal, there are three ‘escape routes’

for litigants who do not want to engage in

the debate.

First, it is possible for a person with

standing under paragraph 12(1) (such as a

secured creditor) to apply for an order

appointing administrators with

retrospective effect (to a maximum of 364

days). The court’s power to make a

retrospective appointment was

established in Re G-Tech Construction Ltd

[2007] BPIR 1275, which was followed on

this point in Re Kaupthing Capital Partners

II Master LP Inc [2011] BCC 338, Re

Derfshaw Limited [2011] EWHC 1565 (Ch),

Re Frontsouth (Witham) Limited [2011]

EWHC 1668 (Ch) and Adjei v Law For All

[2011] EWHC 2672 (Ch). It should be

noted however that this practice rests on

a very slim foundation – the presence of

the words “at a time appointed by the

order” in paragraph 13(2) – and may not

survive a serious challenge.

Secondly, it may be possible to rely on

paragraph 104 of Schedule B1 to validate

the administrators’ historic acts, whilst

securing a fresh appointment with purely

prospective effect. Paragraph 104

provides: “An act of the administrator of a

company is valid in spite of a defect in his

appointment or qualification”. This

alternative to a retrospective appointment

was suggested by Norris J in Re Blights

Builders Ltd [2007] 3 All ER 776; he gave

further encouragement to practitioners to

adopt this course of action in Re Care

Matters Partnership Ltd [2011] EWHC 2543

(Ch) at paragraph 8. The difficulty with this

suggestion is that paragraph 104 was held

in G-Tech and Kaupthing to be

inapplicable where the appointment is

invalid, although it is respectfully

suggested that this conclusion is difficult

to square with the express words of

paragraph 104, since the fact of the invalid

appointment is precisely what brings

paragraph 104 into play. Indeed, if the

appointment were valid, paragraph 104

would never be required. It is only where

the appointment is invalid that paragraph

104 is needed. To say that it does not apply

in such circumstances is to deprive it of any

practical effect. Further, the suggestion

that paragraph 104 does not apply in the

case of a bona fide but defective attempt

to appoint an administrator would appear

to be contrary to the decision of the House

of Lords in Morris v Kanssen [1946] AC 459.

Clearly there is scope for argument, but at

present any attempt to rely on paragraph

104 at first instance will encounter

difficulties.

Thirdly, there will be cases in which it is

possible to establish that proper notice

was in fact given to the company where

the appointing directors’ solicitors are

also instructed by the company - the rules

as to service are inherently more flexible

than might at first appear to be the case:

see Re Bezier Acquisitions Limited [2011]

EWHC 3299 (Ch).

ConclusionThe out-of-court procedure introduced by

the Enterprise Act 2002 was intended to

produce a simplified, streamlined route for

the appointment of administrators. It is

therefore a little ironic that the

requirements of this process are currently

causing such confusion. In Care Matters,

Norris J gave permission to appeal to the

Court of Appeal, saying: “My respectful

view is that both the issues surrounding

the validity of appointments arising from

Minmar and the apparent solution

afforded by G-Tech Construction are in

need of definitive determination in a case

fully argued on both sides”. Truer words

have never been spoken, and we hope

that the Minmar muddle is resolved as

soon as possible, either by the Court of

Appeal, or by way of amendment to the

Insolvency Rules 1986.

Until the confusion is cleared up by theInsolvency Rules Committee or theCourt of Appeal, there are three ‘escaperoutes’.

8

CASE DIGESTS

CASE DIGESTS Edited by HILARY STONEFROST

BANKING AND FINANCIAL SERVICES

HILARY STONEFROST

The validity of out-of-court appointments of administrators has yet again come beforethe court. This time the question was whether a failure to deliver the notice ofintention to appoint to the registered office of the company invalidated theappointment; it doesn’t, at least not where full and complete information has beengiven to everyone to whom information ought to be given (see Re BezierAcquisitions Ltd; page 14). Also on administration, in the context of the pre-packsale of EMI, the court decided that it did not require disclosure of information beyondthat required by SIP 16 (see Re Maltby Holding Limited; page 15).

On cross-border issues, the court has decided that there is power in the High Court inthis jurisdiction to use the common law to recognise and assist an administratorappointed overseas even in cases where none of the EC regulation, section 426 of theInsolvency Act 1986 and/or the Model Law apply (see Frank Schmitt v Deichmann& Ors; page 15).

On an important issue of procedure, the court has made clear the importance ofgiving notice of applications for urgent injunctions, no matter how late in the day theapplication is made. Mobile phones and e-mails means that it is almost alwayspossible to give notice and for the Judge to talk to the parties over the phone. Thecircumstances in which no notice is required are very rare (see AB v BarristersBenevolent Association Ltd at page 10).

Hilary Stonefrost

The claimants claimed payment under

guarantees in respect of instalments paid

under shipbuilding contracts. The

guarantees provided for payment "on

demand" against a signed statement

certifying that the buyer's demand had

been made in accordance with the

contract and that the builder had failed

to make the refund. The judge held that

the guarantees did not only impose a

secondary liability conditional on the

builder’s liability under the shipbuilding

contracts. Therefore it was not necessary

for the claimants to show that the buyer

was contractually entitled to a refund of

the advance payments. Meritz Fire &

Marine Insurance Co Ltd v Jan de Nul NV

(2010) EWHC 3362 (Comm), (2011) 1 All

ER (Comm) 1049 applied. Further, the

rules as to discharge of a surety on the

basis of material variation, forbearance or

non-disclosure had no application to

demand guarantees. Holme v Brunskill

(1878) LR 3 QBD 495 distinguished.

Digested by STEPHEN ROBINS

WS Tankship II BV v Kwangju Bank LTD & Ors [2011] EWHC 3103

(Comm) QBD (Commercial Court) (Blair J), 25 November 2011 STEPHEN ROBINS

The appellant appealed against a

decision refusing him permission to

make certain amendments to his

pleadings in his claim against the

respondent bank. The appellant had

instructed the bank to execute four

substantial transactions. The bank did

not immediately execute them because

it suspected that they were connected

with money laundering. It made a

suspicious activity report to the Serious

Organised Crime Agency and sought its

consent to proceed with the

transactions. The bank's suspicions were

Shah v HSBC Private Bank (UK) Ltd [2011] EWCA Civ 1669 Court

of Appeal (Longmore LJ, Moses LJ, Black LJ), 30 November 2011

later found to be groundless. The

appellant brought a claim for damages

said to have been caused by the bank's

delay in executing the transactions.

Shortly before the substantive trial, the

appellant sought to amend his case to

allege bad faith against one of the

FEBRUARY 2012

9

bank's employees. In order to refute

that allegation the bank adduced

transcripts of telephone conversations

between its employees relating to the

appellant’s transfers. The appellant then

abandoned that allegation and instead

sought to amend his reply to allege that

an employee in the bank's compliance

department and another in its customer

relationship department had conspired

to make a suspicious activity report

without any basis for so doing. The

judge refused to allow the appellant to

amend his reply, holding that the

evidence did not support the proposed

allegation and that it was too close to

the trial date to make such an

allegation. The appellant appealed. The

Court of Appeal upheld the judge’s

decision. There was nothing in the new

material to support an allegation of bad

faith or dishonesty. The desired

amendments were speculative and had

no real prospect of success. There was

no evidence that it had been the size of

the transactions alone that had

triggered the bank's suspicions, but

even if it had been, there was no reason

to say that was indicative of dishonesty.

It was very much a matter for the

judge's discretion, and a significant

departure from principle would be

required for the Court of Appeal to

interfere with such a decision.

Moreover, it was pre-eminently a case

management decision.

The claimant brought an action against

an investment company alleging that the

investment company had repudiated a

loan agreement. The loan agreement

contained certain conditions precedent.

Additionally, it stated that the

investment company’s obligation to

make any advance was at its sole

discretion. The claimant alleged that the

investment company had repudiated the

agreement by refusing to make an

advance when validly requested to do so

and by subsequently evincing a clear

intention not to perform the agreement

according to its terms. The claimant

alleged that he had suffered substantial

loss and damage as a result. The Judge

held that under the terms of a loan

agreement the lender retained a residual

discretion not to lend, even if the

conditions precedent had been satisfied,

and the court would only interfere with

that discretion if it had been exercised

irrationally, capriciously or arbitrarily. The

agreement repeatedly emphasised the

control to be retained by the investment

company as the lender. The satisfaction

of the conditions precedent gave rise to a

prima facie obligation to lend but the

investment company nonetheless

McKay v Centurion Credit Resources LLC [2011] EWHC 3198 (QB)

QBD (Leeds), (Judge Keyser QC), 6 December 2011

retained a residual discretion not to lend.

Where a contract conferred a discretion

on a contracting party, the court could

only interfere with that discretion if it

had been exercised irrationally,

capriciously or arbitrarily. On the facts,

the investment company’s decision not to

lend was made on commercial grounds

and it was not appropriate for the court

to interfere in its decision as a

commercial lender. It was not for the

court to substitute its own view of what

was reasonable; it sufficed that a rational

lender could have exercised its judgment

in the same manner.

The appellant company (“LBF”) appealed

and the respondent joint administrators

of LBIE cross-appealed against a decision

of Briggs J ([2010] EWHC 2914)

concerning the beneficial ownership of

certain securities. LBIE acquired securities

from third parties for the account of LBF.

LBIE introduced a process known as

“RASCALS” under which, through inter-

company repurchase agreements and

stock loans, LBF purported to confer title

back to LBIE after the initial acquisition.

LBIE cross-appealed, contending that

beneficial title vested in LBIE on

acquisition since that was the common

objective intention and any trust failed

for certainty of subject matter and terms.

LBF contended that it did not transfer

title on any subsequent “on” leg since

under the terms of an Inter Company

Pearson & Ors v Lehman Brothers Finance SA [2011] EWCA Civ 1544

Court of Appeal (Lloyd LJ, Patten LJ, Tomlinson LJ), 21 December 2011

Funding Agreement LBIE was not to be

treated as a lender to LBF in respect of

transactions after June 2000 and there

was no payment for the “on” legs of the

relevant repo/stock loan. Further, there

was a 5½ hour gap between each

successive “on” leg and “off” leg, and

the evidence showed that the final “off”

leg had settled before the administration

order on 15 September 2008. Held,

DANIEL BAYFIELD

10

CASE DIGESTS

dismissing the cross appeal, that the trust

on acquisition did not fail for uncertainty

of subject matter (Hunter v Moss [1994] 1

WLR 452, White v Shortall [2006] NSWSC

1379 applied). Held, dismissing the

appeal, that LBF was estopped from

denying that title passed on the “on”

leg, since the mutual book-keeping of

the parties showed a convention that

was shared between the parties. After

the first “on” leg title remained vested in

LBIE. However, where certain Manual

RASCALS securities were subjected to a

stock loan after 31 July 2008, LBF had

beneficial title unless LBIE could show

that collateral had been provided.

[Gabriel Moss QC; Daniel Bayfield;

William Willson]

CIVIL PROCEDURE Digested by CHARLOTTE COOKE

CHARLOTTE COOKE

On 24 July 2009, the Grand Court made a

world wide freezing order ("the WFO")

in respect of the Defendants on the

application of the Plaintiff, a Saudi

Arabia partnership. The amount frozen

was US$9.2bn. On 9 June 2011, the trial

of certain claims against the Plaintiff and

others by a number of banks in the

Commercial Court in London began ("the

London Proceedings"). The trial of the

London Proceedings was listed to last for

six weeks. However, on 15 June 2011 (the

fourth day of the trial) the Plaintiff

abandoned its defence and consented to

judgment against it. Prior to the trial of

the London Proceedings, on or around 10

and 11 May 2011, a significant number of

documents relevant to both the London

Proceedings and the Cayman proceedings

were discovered in a cupboard belonging

to one of the partners of the Plaintiff.

Following the discovery of those

documents, the Plaintiff applied for the

discharge of the WFO. In addition,

certain of the Defendants sought orders

striking out the Plaintiff's claim as an

abuse of the process of the Grand Court

and/or orders for cross-examination of

certain partners of the Plaintiff on the

basis of alleged misconduct and/or

material non-disclosure on the part of

the Plaintiff. The Grand Court held: (1)

The power to strike out a claim would

not be exercised except with great

circumspection. The objective of the

strike out sanction was not to punish the

disobedient party but to secure the fair

trial of the action in accordance with the

due process of the court. Accordingly, a

party is not to be deprived of his right to

a proper trial merely as a penalty for

disobedience of the rules, even if such

disobedience amounts to contempt or

defiance of the court. Striking out would

Ahmad Hamad Algosaibi & Brothers Company v Saad

Investments Company Limited Grand Court of the Cayman

Islands, Financial Services Division (Smellie CJ), 2 December 2011

not be appropriate if the object of a fair

trial is or can ultimately be secured by

(for example) the late production of

documents withheld. (2) Conversely, a

litigant who has demonstrated that he is

determined to pursue proceedings with

the object of preventing a fair trial

should be treated as having forfeited his

right to take part in a trial. His object is

inimical to the process which he purports

to invoke. (3) On the basis of the

affidavit evidence as it stood, the court

was unable to conclude that a fair trial of

the action was no longer possible.

Implausible as the accounts provided by

the Plaintiff as to the discovery of the

relevant documents had been, they had

not been disproved conclusively. In the

circumstances, the applications to strike

out and/or for cross examination were

dismissed.

[Michael Crystal QC; Marcus Haywood]

On 5 December 2011 the Applicant

discovered that confidential

correspondence between her and the

BBA could be found on the Internet

through a Google search. She notified

the BBA, who urgently contacted Google,

who agreed to remove the information

from its servers. The information was not

removed in its entirety until 9 December

2011. In the meantime, during the

evening of 6 December, the Applicant

obtained a without notice, out-of-hours

injunction against the BBA. The

injunction required the BBA to remove a

number of private letters from the

Internet. Two days after the injunction

was granted the BBA successfully applied

for the discharge of part of the order and

undertook to use its best endeavours to

have such information as was within its

control removed from the Internet. On

the return date of the injunction, the

Applicant did not ask that the injunction

be continued, but merely sought that her

anonymity be preserved. Anonymity was

granted. Tugendhat sought to remind

AB v Barristers Benevolent Association Ltd [2011] EWHC 3413

(QB) (Tugendhat J), 19 December 2011

practitioners of the importance of giving

notice, however late, of any application

by telephone to the Judge on duty out of

hours. In these days of mobile phones

and emails it is almost always possible to

do this. And it is equally almost always

possible for the Judge to communicate

with the intended defendant or

respondent, either in a three way

telephone call, or by a series of calls, or

exchanges of e-mail. Cases where no

notice is required for reasons given in PD

25A para 4.3(3) are very rare indeed.

MICHAEL CRYSTALQC

FEBRUARY 2012

11

Whilst CPR r .37(b)(i) authorised the

court to make an order for alternative

service pursuant to CPR r 6.15(1) and to

make such an order with retrospective

effect pursuant to CPR r 6.15(2), that

power was to be exercised with caution.

A claimant who wished retrospective

validation of a method of service in a

foreign country had to show that the

method of service used was good service

Albert John Martin Abela and others v Ahmad Baadarani [2011]

EWCA Civ 1571 (Arden, Longmore, McFarlane LJJ), 21 December 2011

by the local law; where service on a

party's Lebanese lawyer did not

constitute good service in Lebanese law,

a judge had been wrong to have

retrospectively validated it.

It appeared that the Appellants had

transferred all their assets to trusts of

which they and their families were

beneficiaries. The Respondent company

sought an order under CPR r.71.2 for the

Appellants to produce documents in

their control including documents

relating to the administration of the

trusts. The Appellants contended that

they did not have the relevant

documents in their control. On appeal

the Appellants submitted that the judge

had misdirected himself as to the

meaning of control, wrongly equating

the ability to obtain documents with

having the documents in their control.

The Court of Appeal held that where the

court could infer that there was some

North Shore Ventures Ltd v Anstead Holdings Inc [2012] EWCA

Civ 11 (Pill, Arden and Toulson LJJ), 18 January 2011

understanding or arrangement between

beneficiaries and trustees by which the

latter were to shelter the assets of the

former, it was entitled to regard

documents in the physical possession of

the trustees relating to the

administration of the trust as documents

in the control of the judgment debtors

for the purposes of CPR r.71.2.

COMMERCIAL COURT Digested by MARCUS HAYWOOD

This appeal raised a question of

construction of shipbuilder’s refund

guarantees given pursuant to six

shipbuilding contracts. The Supreme

Court held that on the proper

construction of an advance payment

bond issued by a bank enabling the

buyers of ships to recover instalments

paid in the case of default by the

shipbuilder, the bank's obligations

extended to the shipbuilder's insolvency.

The principle issue between the parties

was the role to be played by

considerations of business common sense

in determining what the parties meant

by their agreement. Lord Clarke (who

gave the judgment of the Supreme

Court) held that the exercise of

construction is essentially one unitary

exercise in which the court must consider

the language used and ascertain what a

reasonable person, that is a person who

has all the background knowledge which

would reasonably have been available to

Rainy Sky SA v Kookmin Bank [2011] UKSC 50 Supreme Court

(Lords Phillips, Mance, Kerr, Clarke and Wilson), 2 November

2011

the parties in the situation in which they

were at the time of the contract, would

have understood the parties to have

meant. In doing so, the court must have

regard to all the relevant surrounding

circumstances. Where the parties have

used unambiguous language, the court

must apply it. However, if there are two

possible constructions, the court is

entitled to prefer the construction which

is consistent with business common sense

and to reject the other.

MARCUS HAYWOOD

12

CASE DIGESTS

This appeal gave the Supreme Court the

opportunity to revisit the decision of the

House of Lords in Stack v Dowden [2007]

2 AC 432. The Supreme Court held that

the time had come to make it clear that

in the case of the purchase of a property

in joint names for joint occupation by a

married or unmarried couple, where both

were responsible for any mortgage, there

was no presumption of a resulting trust

from their having contributed to the

deposit or rest of the purchase price in

unequal shares. Rather where a property

had been bought in the joint names of a

cohabiting couple who were both

responsible for any mortgage, but

without any express declaration of their

beneficial interest, the starting point was

that equity followed the law and they

were joint tenants both in law and in

equity. That presumption could be

displaced by showing that the parties had

a different common intention at the time

they acquired the property or that they

later formed the common intention that

their respective shares would change.

Jones v Kernott [2011] UKSC 53 Supreme Court (Lord Walker,

Lady Hale, Lord Collins, Lord Kerr and Lord Wilson), 9 November

2011

Their common intention was to be

deduced objectively from their conduct. If

it was clear either that the parties had

not intended joint tenancy at the outset

or had changed their original intention,

but it was not possible to ascertain, either

by direct evidence or by inference, what

their actual intention had been as to the

shares in which they would own the

property, each was entitled to that share

which the court considered fair, having

regard to the whole course of dealing

between them in relation to the property.

The court was required to determine

issues relating to the proper

interpretation of an investment and

funding management agreement

entered into between the Manager and

the Issuer, a structured investment

vehicle. Clause 21.1 of the agreement

provided an indemnity to the Manager

in the following terms: "The Issuer

undertakes with the Manager that if the

Manager incurs any losses, liabilities...,

costs, claims, demands or proceedings

(each a Loss) in any way arising from its

appointment and the performance of

the Manager's duties and obligations...,

the Issuer will, by way of indemnity and

on demand, pay to the Manager an

amount equal to such Loss, subject, in

each case, to the Indemnity Cap Excess

Payment Rules... ". The Indemnity Cap

Excess Payment Rules were defined in a

Common Terms Agreement, which

limited the "Indemnity Cap" to $1

million "within any twelve month period

(such twelve-month period to be

measured on a rolling basis)".

In August 2008, the Manager became

aware of an action commenced in the

United States in which allegations had

been made about management services

provided by the Manager. The Manager

went on to incur costs totalling $3.5

million in connection with the action.

Demands for payment were made by the

Manager on the Issuer on 29 June, 4

November and 2 December 2010; the

amounts claimed were, respectively,

$135,955, $3,427,519 and $19,517.

The issues were (i) whether the

indemnity was capped in the sum of $1

million for the relevant periods; (ii) if the

indemnity was so capped, the point at

Stornoway 2011 Ltd v SIV Portfolio Plc (In Receivership) [2011]

EWHC 2952 (Comm) (Burton J) 14 November 2011

which the initial 12-month period

commenced for the purposes of the

indemnity; (iii) if the indemnity was so

capped, whether it covered one or more

than one 12-month period. The Court

held as follows: (1) The indemnity was

subject to the Indemnity Cap of $1

million. The Manager was made subject

to the Rules, and thereby, by reference

to the definitions contained therein, to

the cap. (2) The 12-month period began

on June 29, 2010, when the first demand

for payment was made. That followed

from the Issuer's obligation in clause

21.1 that it would "on demand, pay to

the Manager an amount equal to such

Loss". (3) The 12-month period was

"rolling", so that no more than $1

million would be payable in respect of

any 12-month period.

[Barry Isaacs QC]

BARRY ISAACS

FEBRUARY 2012

13

The claimant carried on practice as a

solicitor in Leeds. The defendant was an

investment company. The claimant and

the defendant entered into a loan

agreement the purpose of which was to

provide to the claimant funds with

which he would be able to pay

disbursements, including the premiums

due under policies of after-the event

(“ATE”) insurance, in respect of up to

6,000 claims in which he proposed to act,

pursuant to conditional fee agreements

(“CFAs”), for debtors under regulated

consumer credit agreements against

banks and other financial institutions.

Clause 1.1(a) of the agreement stated

that the lender's obligation to make any

advance was at its sole discretion. The

claimant encountered problems

obtaining ATE insurance having tried

several insurance companies. He

subsequently requested an advance from

the defendant who refused on the basis

that no ATE insurance was in place. In

these circumstances, the claimant

alleged that the defendant had

McKay (t/a McKay Law Solictors & Advocates v Centurion Credit

Resources LLC) [2011] EWHC 3198 (QB) QBD (Mercantile Court,

Leeds) (Judge Keyser QC), 6 December 20011 /12/2011

repudiated the agreement by refusing to

make an advance when validly requested

to do so and by subsequently evincing a

clear intention not to perform the

agreement according to its terms. The

Court dismissed the claim holding that

under the terms of a loan agreement the

lender retained a residual discretion not

to lend, even if the conditions precedent

had been satisfied, and the court would

only interfere with that discretion unless

it had been exercised irrationally,

capriciously or arbitrarily.

COMPANY LAW Digested by WILLIAM WILLSON

A applied for permission to continue a

derivative claim against R under section

261 of CA06. A and R were directors/50%

shareholders of X and its two

subsidiaries (“Y” and “Z”). R, through a

further company (“W”) performed

consultancy work for Y. The bank

claimed against A under a guarantee in

respect of Y’s liabilities. A paid, alleging

that he was entitled to a 50%

contribution from X as a co-guarantor.

With the agreement of A and R, X sold

its only asset and ceased trading. The

proceeds were paid into Z’s account and

subsequently to R and/or W. A was

unaware of the sale. A sought on X’s

behalf an account from R arising for his

breach of fiduciary duty. Held, there was

a strong prima facie case of breach by R

in relation to the money in Z's account.

The quantum of W's invoices was also

open to challenge. The hypothetical

director under section 172 of CA06

would attach considerable importance to

continuing the claim. The situation was

not a ratifiable one. R, a 50%

Charles Parry v (1) Guy Bartlett (2) Charles Parry Group Ltd [2011]

EWHC 3146 (Ch) Ch D (Leeds) (Judge Behrens), 29 November 2011

shareholder, was capable of blocking a

resolution to bring proceedings against

him: this fell squarely within the

exception to the rule in Foss v Harbottle

67 ER 189. An alternative remedy did not

operate as an absolute or independent

bar to a derivative claim, Konamaneni v

Rolls Royce Industrial Power [2002] 1

WLR 1269 considered. An unfair

prejudice petition was not a realistic

alternative remedy on the facts.

Accordingly, permission would be

granted to enable A to continue.

WILLIAM WILLSON

CORPORATE INSOLVENCY Digested by ADAM AL-ATTAR

In allowing the appeal and holding that

HSBC had to be paid in full before there

could be any proof against Singer &

Friedlander Funding plc as the principal

debtor by Kaupthing Singer &

Friedlander plc (in administration) as

guarantor, the Supreme Court

disapproved the decision of Chadwick LJ

in Re SSSL Realisations [2006] Ch 610.

The Supreme Court explained that the

rule in Cherry v Boultbee was excluded

by the rule against double proof. The

former rule might be said to fill the gap

left by disapplication of set-off, but it

did not work in opposition to set-off. It

produced a similar netting-off effect

Mills v HSBC [2011] UKSC 48 19 October 2011 Lords Hope DP,

Walker, Lady Hale, Lords Clarke, Collins

except where some cogent principle of

law required one claim to be given strict

priority to another. The principle that a

company’s contributories had to stand in

the queue behind its creditors was one

such principle. The rule against double

proof was another. It would be technical,

artificial and wrong to treat the rule

ADAM AL-ATTARROBIN DICKER QCTOM SMITH

14

CASE DIGESTS

against double proof as trumping set-

off, as it undoubtedly did, but as not

trumping the equitable rule, Cherry v

Boultbee.

[Gabriel Moss QC, Robin Dicker QC, Tom

Smith, Richard Fisher]

An individual had been a de facto or

shadow director of two companies, and

payments made by one company to the

other amounted to preferences in his

favour. The Judge held that the recipient

company was jointly and severally liable

with him to repay the sums as it had not

given value for the payments or acted in

good faith. In 2006 C&E had made a

partial VAT repayment to the company

(now in liquidation) in response to its

repayment claims. Those monies were

then paid out to the individual and/or the

other company. The company was

deregistered for VAT and was dissolved in

2007, leaving unpaid tax liabilities. The

commissioners suspected that the company

had been involved in missing trader fraud

and applied for a winding up order. The

liquidator appointed sought orders for the

recovery of the two payments made in

2006 as being preferences. The liquidator

claimed that the individual had been a

director or de facto director of the

company throughout, was a creditor of

the company in respect of a loan, and was

Defty v Prestwood Properties Ltd [2011] EWHC 3324 (Ch) (Charles Hollander QC,

sitting as a Deputy Judge of the High Court), 24 November 2011

a de facto or shadow director of the other

company. The Judge held that whereas a

third party who had given value and acted

in good faith would be protected under IA

241(2) the other company had been

controlled by the director and there was

no evidence of value given for the

payments. The other company and the

director were, therefore, jointly and

severally liable to repay the sums with

interest at 4 per cent, to reflect the

prevailing interest rate at the time.

[John Briggs]

JOHN BRIGGS

The administrators of Hellas applied for

directions as to how to proceed with the

administration in particular whether to

exit by dissolution or by compulsory

liquidation. The Judge held that the

administrators had the right under the

terms of the SPA to fund their

investigations from the funded costs

amount before having recourse to

Hellas’s cash assets. They were exempt

from any obligation to preserve the

funded costs amount for the

respondent’s benefit. Consequently, the

costs of the administration were first to

be met from the funded costs amount

before any distributable assets of the

Re Hellas Telecommunications (Luxembourg) II SCA (in

administration) [2011] EWHC 3176 (Ch) (Sales J), 30 November 2011

company were used for that purpose. As

a result, Hellas had cash assets available

to permit a distribution to creditors. The

proper course was, therefore, for the

company to be placed into compulsory

liquidation.

[Richard Sheldon QC, Hilary Stonefrost,

Tom Smith]

RICHARD SHELDON QC

HILARY STONEFROST

The question was whether the failure to

deliver the notice of intention to appoint

to the company at its registered office

invalidated the appointment of the

administrators. The Judge held that IR

2.8(2) and (3) did not contain a complete

and exhaustive code as to the mode of

service upon a company. IR 12A.5

provided that where a document was

required “to be given, delivered or sent

to a person” it might be so

communicated “to a solicitor authorised

to accept delivery on that persons

behalf”. Rule 13.4 also stated that where

under the Act or the Rules a notice or

other document was to be given to a

person it might “if he has indicated that

his solicitor is authorised to accept service

on his behalf” be given instead to the

solicitor. The failure to deliver the notice

of intention to appoint to the company’s

registered office did not invalidate the

appointment of the administrators. The

requirement to effect service on the

Re Bezier Acquisitions Ltd [2011] EWHC 3299 (Ch) (Norris J),

12 December 2011

company by delivering the documents to

its registered office was fulfilled by the

delivery of the notice by the company’s

secretary to the company’s solicitors.

The Court should have regard to the

principle in Re Regent United Service

Stores (1878) 8 Ch D 75 by which service

was good where there had been “such a

service as gives full and complete

information to everybody to whom

information ought to be given”.

[William Trower QC, Stephen Robins]

WILLIAM TROWERQC

FEBRUARY 2012

15

The Court of Appeal held that

administration proceedings did not

constitute “analogous insolvency

proceedings which have been instituted

with a view to the liquidation of the assets

of the transferor” within the meaning of

the Transfer of Undertakings (Protection

of Employment) Regulations 2006. In so

holding, the Court of Appeal favoured the

“absolute” approached approved by the

Employment Appeal Tribunal. It is not

possible rationally to conclude that an

Key2Law (Surrey) LLP v De'Antiquis [2011] EWCA Civ 1567

(Longmore, Rimer LJJ, Warren J), 20 December 2011

administrator’s appointment is made “with

a view” to the liquidation of the

transferor's assets. Rimer LJ said that in all

cases the formal consideration of the

available options is a matter with which

the administrator must formally engage.

The Judge refused an application by Terra

Firma, the investment fund managed by

Guy Hands, for pre-action disclosure of

valuations made in connection with the

‘pre-pack’ sale of EMI, the music

publishing and recording business, by its

Joint Administrators. The case is important

to insolvency practitioners because it

examined what, if anything, has to be

disclosed in relation to a ‘pre-pack’ sale in

addition to the SIP16 statement.

Terra Firma alleged that the sale was at an

undervalue in excess of £1.3bn and sought

disclosure of the valuations to satisfy itself

Re Maltby Holding Limited [2012] EWHC 4 (Ch) (Warren J),

5 January 2012

as to the propriety of the sale. The Judge

found that Terra Firma had the

wherewithal to produce its own valuations

and did not require disclosure from the

Joint Administrators beyond the SIP 16

statement.

[Mark Phillips QC, Adam Al-Attar]

MARK PHILLIPS QC

Applying the principles considered in

Cambridge Gas Transportation Corpn v

Navigator Holdings plc [2007] 1 AC 508,

the High Court has held that in cases

where none of the other aid and

assistance provisions apply, e.g. the EC

Insolvency Regulation, section 426 of the

Insolvency Act 1986 and/or the Model

Law, there is power in the English High

Court to use the common law to

recognise and assist an administrator

appointed overseas. Furthermore, the

assistance includes doing whatever the

English court could have done in the

case of a domestic insolvency. On the

basis that insolvency proceedings are a

collective proceeding for the

enforcement, not establishment, of

Frank Schmitt v Deichmann & Ors [2012] EWHC 62 (Ch)

(Proudman J), 23 January 2012

rights for the benefit of all creditors,

when those proceedings include

proceedings to set aside antecedent

transaction, it necessarily follows that an

overseas appointee can use the relevant

provisions of the Insolvency Act, e.g.

section 423 of the 1986 Act to set aside

antecedent transactions.

[David Marks QC]

DAVID MARKS QC

16

CASE DIGESTS

Faced with impending bankruptcy, the

Appellant put forward proposals for an

IVA. The Respondent bank claimed to be

a significant creditor of the Appellant by

virtue of a deed of guarantee and

indemnity. Under the deed, the

Appellant had agreed to guarantee the

payment of secured loans made by the

Respondent to a number of companies.

For voting purposes, the chairman of the

creditors’ meeting admitted the whole

of the Respondent’s claimed debt,

marking it as “objected to”. The

proposals were rejected and a

bankruptcy order ensued. The Appellant

unsuccessfully appealed the chairman’s

decision to the Chief Registrar before

obtaining permission for a further

appeal. The Appellant sought to

challenge the chairman’s decision on two

grounds. First, on the basis that the sums

claimed under the deed of guarantee

were not liquidated/were unascertained

such that the chairman should have

given them a value of £1 and, second, on

the basis that the Respondent was a

secured creditor. Lewison J found for the

Respondent on both grounds.

Following the judgment of Briggs J in

McGuinness v Norwich and

Peterborough Building Society [2011]

BPIR 213, Lewison J held that although a

pure guarantee may give rise to an

unliquidated/unascertained liability in

damages, liability under a contract of

indemnity where the so-called guarantor

undertakes obligations as a principal

debtor will normally give rise to a

liquidated debt. As a matter of

construction, the deed of guarantee

contained a contract of indemnity.

Further, even if the Respondent’s claim

had been unliquidated, it did not follow

that the chairman was required to value

it at £1. As the deed of guarantee

required the Appellant to pay, in the

absence of manifest error, any amount

certified as due the chairman could not

have attributed a lesser value to the

Respondent’s claim than the certified

amount. The Appellant’s second ground

of appeal – that the Respondent was a

secured creditor – relied on the fact that,

some months after the creditors’

Charles Sofaer v Anglo Irish Asset Finance Plc [2011] EWHC 1480

(Ch) (Lewison J), 26 May 2011

meeting, the Appellant took an

assignment of the equity of redemption

in each of the companies’ properties

comprised within the bank’s security. On

this basis it was argued that the

Respondent was a secured creditor of

the Appellant. Lewison J identified three

flaws in the argument. First, events

subsequent to the creditors’ meeting

could not affect the Respondent’s right

to vote at the meeting. Second, the

Respondent retained no interest in the

equity of redemptions assigned to the

Appellant as, by definition, the equity of

redemption represents the residual

rights of the mortgagor after

satisfaction of the mortgage. Third, in

any event, assignment of the equity of

redemption could not alter the nature of

the liabilities secured; the liabilities

secured were those owed by companies

to the bank and not those owed by the

Appellant as guarantor. In so deciding,

Lewison J declined to follow the decision

of Evans-Lombe J Fagg v Rushton [2007]

BPIR 1059.

[Richard Fisher]

PERSONAL INSOLVENCY Digested by HENRY PHILLIPS

RICHARD FISHERHENRY PHILLIPS

The Applicants were two former

solicitors. Prior to the commencement of

their bankruptcies, they had been

disqualified as directors by the Secretary

of State, on the basis of evidence

supplied by the administrators and

liquidators of a number of companies.

Again prior to the commencement of

the bankruptcies, some of those

companies, by their

administrators/liquidators, and the

administrators/liquidators themselves,

had made claims against the bankrupts,

alleging fraud and misappropriation,

some of which claims might survive the

bankruptcies. On the Applicants being

made bankrupt, the Secretary of State

appointed two partners in the same firm

of accountants as the administrators and

liquidators as trustees of the bankrupts’

estates. The bankrupts applied to

remove the trustees under section 298

Insolvency Act 1986 on the basis, inter

alia, that notwithstanding the erection

of ‘Chinese walls’ there was a risk that

privileged documentation coming into

Doffman & Anor. v Wood & Anor. (Unreported) (Proudman J), 13

September 2011

the hands of the trustees might pass to

those members of the same firm

bringing or responsible for the pursuit

of the claims against the bankrupts. The

Trustees argued that the interests of the

creditors were paramount and, in the

present case, the creditors were content

with the trustees’ appointments.

Further, the risk of privileged

information being passed to the

administrators/liquidators was answered

by an undertaking given by the trustees

preventing disclosure of any privileged

LLOYD TAMLYN

FEBRUARY 2012

17

The Applicant bank successfully applied

to set aside a bankruptcy order made

against the Respondent in Northern

Ireland on the grounds that the

Respondent’s centre of main interests lay

in the Republic of Ireland.

The Respondent was a successful

businessman and, until recently, reputed

to be the wealthiest man in Ireland. By

2011, the Respondent’s exposure to

Anglo Irish Bank left him unable to pay

his debts. He subsequently petitioned for

his bankruptcy in Northern Ireland. At

the time the petition was presented, the

Respondent’s home and habitual

residence was in the Republic of Ireland

but the Respondent contended that his

centre of main interests was nevertheless

located in Northern Ireland, at the

registered office and place of business of

the parent of a group of companies of

which he had been a director. The

Northern Irish court granted the

bankruptcy order. The Applicant bank

made an application to annul the

bankruptcy order on the grounds that

the Respondent’s centre of main

interests was not in Northern Ireland and

/or on the basis of non-

disclosure/misrepresentations made in

the Respondent’s statement of affairs.

In considering the bank’s application,

Deeny J referred to the decisions of the

ECJ in Eurofood IFSC Limited C-341/04

and Interedil Srl v Fallimento Interedil Srl

C-396/09 and placed considerable

emphasis on the need for a debtor’s

centre of main interest to be

ascertainable by third parties. Deeny J

held that the court must determine two

questions. First, the court must decide

where a debtor’s centre of main interests

is by reference to where he conducts the

administration of his business

immediately prior to the presentation of

the petition. Second, the court must

Irish Bank Resolution Corporation Limited v John Ignatius Quinn

[2012] NICh1 (Deeny J), 10 January 2012

consider whether that centre of main

interests is reasonably ascertainable by

third parties. Accordingly, Deeny J’s

judgment suggests that even if a

person’s centre of main interests is

within the jurisdiction of the bankruptcy

court, an order ought not be made, and

will be annulled, if that centre of main

interests is not ascertainable by third

parties. Deeny J held that the

Respondent’s centre of main interests

was located in the Republic of Ireland. In

so deciding, reliance was placed on the

fact that the Respondent was heavily

involved in litigation in Dublin, the

Respondent and his family had solicitors

and counsel in the Republic but none in

Northern Ireland, none of the substantial

sums lent to the Respondent by the Bank

were denominated in sterling and the

guarantees of the loans were governed

by the law of the Republic of Ireland.

[Gabriel Moss QC, John Briggs]

information. Proudman J held that

notwithstanding the guidance of the

House of Lords in Bolkiah v KPMG [1999]

2 AC 222, the trustees should not be

removed. The interests of the creditors

were paramount and any risk of

privileged information being

disseminated was adequately dealt with

by the undertaking of the trustees not

to seek disclosure of privileged

documentation relating to the

bankrupts’ defence of the claims or

disqualification proceedings without

further court order.

[Lloyd Tamlyn]

GABRIEL MOSS QC

18

On 17 January 2011, the National Council

of French Administrators and Liquidators,

otherwise known as the Conseil National

des Administrateurs Judiciaires et des

Mandataires Judiciaires met for their

annual Colloquium, this time in Brussels.

There were over 130 delegates. It is by far

the most important reunion of

professionals in the French insolvency

industry. The overriding theme of the

Colloquium was the consideration of the

development of the EC Insolvency

Regulation 1346/2000.

The Colloquium, which lasted for a

whole day, was structured on the basis of a

series of round tables, with each round

table comprising four or five separate

speakers, analysing particular aspects of

and relating to the European Regulation. It

was held at the Sheraton Hotel in Brussels

on the basis that this displayed the

requisite degree of European-ness in order

in turn to reflect the general theme of the

gathering. The President of the National

Council was kind enough to invite a

number of foreign speakers, including the

author of this Article to comment, in

particular, on specific national views on

various aspects of the Regulation.

It was clear that the theme was

sufficiently important by those who

organised the conference because of a per-

ception, perhaps largely unjustified, that

many people in the French insolvency

industry were not particularly wholly

familiar with and were even sometimes not

particularly receptive to the thrust and

intentions, not to mention the underlying

philosophy of the Regulation.

The conference was opened by Madame

Viviane Reding, the European Justice

Commissioner in charge of matters relating

to justice, human rights and related

matters such as citizenship.

The first round table dealt with the

important interrelationship between the

EC Regulation and what were called

procedures which involved no divestment.

This was prompted by the relatively recent

introduction into French law of what is

called the Law of Safeguard, initially on 26

July 2005, thereafter reformed by further

Regulations introduced on or about 18

December 2008. The relevant text can be

found in Chapter VI of the French Code de

Commerce. A word should perhaps be said

about the distinction that exists in French

insolvency procedure and practice between

Administrateurs Judiciaires and

Mandataires Judiciaires. They both

emanate from a former and single

profession known as the profession of

Syndic-Administrateur Judiciare, but now

encompass two separate functions. In

general terms, judicial administrators assist,

or on rare occasion, replace directors with a

view to restructuring the relevant business.

On the other hand and by way of contrast,

Judicial ‘Mandataires’ represent the

Meeting of French AdministrateursJudiciaires and Mandataires Judiciaires:Belgium 17 November 2011

DAVID MARKS QC reports from the meeting at theSheraton Hotel in Brussels.

collective voice of the creditors as a whole

and whenever there is deemed to be an

inability on the part of the enterprise or

the company to restructure itself, they, in

effect, are responsible for the realisation of

assets with a view to effecting distributions

in accordance with laws which reflect the

English system of paying dividends. They

are also responsible for dealing with the

fallout from any cessation of employment

by employees. In round terms, there are in

France 421 professionals who encompass

both profession with the Administrateurs

Judiciaires numbering some 113 persons,

while there are 308 Mandataires

Judiciaires, both professions in question

employing a total of some 3,000

employees. More and more of these

professionals have formed themselves into

a corporate structure, there being some 28

companies or groups dealing with judicial

administration, and 68 or so groups

dealing with the business of carrying on

activities as Mandataires Judiciaires.

A word should perhaps be said about the

role of the National Council. The Council

consists of two ‘colleges’ representing the

two distinct branches of the overall

profession. These colleges, in effect, act, in

a very loose way, as trade unions for the

professional organisations and, of course,

the National Council is responsible for

continuing education as well as disciplinary

and related matters.

The first round-table dealt with the important inter-relationship between theEC Regulation and what were called procedures which involved no divestment.

FEBRUARY 2012

19

Reverting to the first round table, being

the first of four which were held

throughout the day, the theme was

prompted by the fact that taking, for

example, English law, the main

proceedings which are addressed by Annex

A to the European Regulation omit

schemes of arrangement and the proposed

restructuring moratorium for the United

Kingdom. This is true of both Annexes A

and B. With regard to Annex B alone,

administration other than winding up

through administration, is also excluded.

The question was therefore posed on a

general European basis as to whether such

proceedings should be in or out, and

whether indeed the issue was important.

The French clearly took the view that the

new form of safeguard which is called

Accelerated Safeguard, should be included

and a passionate plea was made for that by

Reinhard Dammann of Clifford Chance in

Paris and Madame He� le�ne Bourbouloux, a

very well-known and highly respected

judicial administrator. Patricia Godfrey, a

former President of INSOL Europe, and a

partner of Messrs Nabarro dealt with the

English approach, while apart from the

two French speakers mentioned above,

Jean-Pierre Farges, a partner of the French

Paris office of Messrs Ashurst made a

similar plea for inclusion of the new French

systems within the EC Regulation. It was

perhaps significant that much support was

made for the consideration of, if not the

inclusion of, ‘non-divesting’ type

mechanisms, both in force and

contemplated as coming into force by the

person who presided over the first round

table, namely, Monsieur Jean-Bertrand

Drummen, the current President of the

Association of Consular Judges in France.

The round table ended with a discussion

between those who formed part of the

round table on the one hand, and the floor

of the house on the other, with the mood

being, as indicated above, that there

should be a greater inclusiveness in any

amendments proposed or otherwise of the

EC Regulation.

The next round table dealt with what,

on any basis, is a hot issue, namely, the

question of the extent to which, if any, the

current Regulation deals with groups of

companies, a matter which has grown in

importance ever since the well-known

Eurofood decision. Here, a well-known and

highly respected academic lawyer,

Professor Menjucq, presided over a largely

Franco-Italian panel, but the panel also

comprised a well-known Netherlands

lawyer, Nicolas Tollenaar and a leading

Italian judge from Turin, also very well

known in this area, namely, Luciano

Panzani. It is perhaps fair to say that INSOL

Europe, an organisation already mentioned

above, is heavily involved in the compiling

of a report which makes extensive

suggestions for amending the EC

Regulation, including but not limited to,

the question of groups. Case studies were

given by this particular round table, in

particular, the story of how Nortel was

dealt with within the French system.

However reference was also made to the

well-known matters of Daisytek and Rover,

both of which had substantial French

elements. Other cases which are well

known to English lawyers include Enron,

Brac rent-a-car and Crisscross as well as the

Eurofood affair itself.

The round table stressed the way in

which French domestic law tended to deal

with group insolvencies as in a case called

Emtec, dealt with by one of the leading

courts dealing with insolvency matters in

France, namely the Tribunal de Commerce

in Nanterre in 2006. It was also pointed out

that although Eurofood did not itself

present a formal barrier to a proper

consideration of group insolvencies, it

could nonetheless be said that the

European Court of Justice in that case had

stressed that there was really no

mechanism whereby group insolvencies as

such could be addressed, save through the

concepts which the Eurofood case itself

had considered. Reference was also made

to the Eurotunnel affair in 2006 where 17

procedures of safeguard were opened on a

concurrent basis followed by, in effect, a

DAVID MARKS QC

20

protocol, and an agreement, whereby

there was coordination about the structure

of these parallel regimes. It was also

pointed out that in the Daisytek matter

which has been referred to above, in 2006

the highest French court, namely the Cour

de Cassation, had endorsed the application

of the EC Regulation with regard to groups

of companies in the sense that it had

centralised the affairs of that particular

matter in France to ensure that on a

commercial basis at least, due recognition

was made of the fact that most of that

company’s activities were conducted in

France so as to justify the opening of main

proceedings in France with secondary

proceedings being, as it were, held in check

while the French main proceedings were

pursued and finalised. Overall, the round

table, along with the floor of the house,

was completely in favour of there being

some major reform respecting the general

desired view that if there were subsidiary

companies, then any insolvency regimes

attaching to those subsidiary companies

should be subject to some form of primary

proceeding, i.e. a main proceeding, and

thereby in principle the law of the Member

State where the principal trading company

was situated. Obviously, that is a conclusion

that is easier to state than implement

either in terms of a proposed reform to the

EC Regulation or otherwise. This theme

was revisited several times during the

conference, the watch-word no doubt

being that flexibility would be key in

considering what form of amendment

should be made to the EC Regulation with

regard to groups as a whole. One thing

was agreed upon, namely, that there can

be no such separate concept as a group

insolvency and at the very least it was

required that there be some form of

coordination of procedures within a group

with regard to those companies within the

group which suffered financial difficulties

and which went into some form of formal

insolvency subject to the EC Regulation.

In many ways this was the most

important practical aspect that emerged

from the whole day, although clearly, as

will be seen and has been seen already, the

other subjects that were covered were of

immense importance. The reason why

perhaps group insolvency is something of a

hot issue as indicated above is that the

European Commission is required to report

on the application of the Regulation

before 1 June 2012 and if needs be, submit

proposals for its adaptation at about that

time. The main difficulty which has been

manifested in the wake of the Eurofood

case is the fact that the opening of

secondary proceedings can very often

frustrate the objective of achieving a

coordinated sale under the control of a

single officeholder. Local courts opening

secondary proceedings with respect to

foreign subsidiaries will generally appoint

different local officeholders leading to

multiple appointments within the same

group. Since most assets of the local

subsidiaries are located in the local

jurisdiction where the secondary

proceedings are opened, then the

secondary proceedings will effectively

cause the officeholder in the main

proceedings to lose any real control on the

foreign assets and any foreign operations.

Despite what is indicated above, it could be

said that the duty of each officeholder is to

cooperate, and the power of the main

officeholder to stay any local liquidation

proceedings are a weak substitute and, in

practice, rarely provide an adequate

remedy for these sometimes intractable

problems.

This was one of the themes which

emerged at various points throughout the

entire meeting. To adopt a group COMI

approach usually involves, at a practical

level, an attempt in effect to fend off

secondary proceedings by preventing there

being multiple officeholders. Another

important reason to prevent secondary

proceedings being opened is that

secondary proceedings have to be

liquidation proceedings, again posing a

real threat to the successful going concern

of the sale.

This has led to the options which have

been touched on already. One option is to

seek to transfer all local assets of the

foreign subsidiary to a new company

established under the laws of the

jurisdiction where the group COMI is

deemed to be located: what can be called a

hive-off. This would mean that local assets

that would otherwise fall into the scope of

secondary proceedings would be converted

into a different form of assets, namely,

shares falling under the scope of the main

proceedings. One possible problem is that

although Article 18 of the Insolvency

Regulation appears expressly to permit

such a transfer, that kind of transfer could

possibly distort local priorities and lead to

allegations of abuse or other wrongful

conduct. Furthermore, a transfer of assets

might not be allowed under the finance

documents or it might require consent

from the junior lenders. In addition, a hive-

off of local assets into a new company

might well prevent there being an effective

solution if the assets are encumbered with

security rights or other rights in rem.

One alternative is that the officeholder

in the main proceedings tries to convince

local creditors and/or local courts not to

open secondary proceedings. In the well-

known collapse of Collins & Aikman, the

UK administrators in the main proceedings

managed to prevent secondary

proceedings by representing that they

would respect local priorities and treat

local creditors as if secondary proceedings

were opened. In the event, the English

court determined that the administrators

were allowed to make such

representations. However, this is not to say

that the approach in Collins & Aikman will

always be allowed in other jurisdictions.

For example, in Germany, many lawyers are

convinced that the representations made

by the administrators in Collins & Aikman

would not be permitted under their law. In

Nortel, one of the case studies dealt with at

length at the meeting, the UK

administrators in the main proceeding sent

letters to the local courts in the jurisdictions

of the subsidiaries requesting to be heard

before any petition to open secondary

proceedings be decided. That fairly

unorthodox request had to be seen in the

light of the MG Rover case, another matter

mentioned above, where the French Court

of Appeal, after having heard the UK

administrators in the main proceedings

denied the request to open secondary

proceedings following the argument of the

Insolvency regimes attached to subsidiary companies should be subjectto some form of primary proceeding.

FEBRUARY 2012

21

UK administrators that secondary

proceedings could negatively impact

realisations and therefore provide no real

advantage. Another approach was that

adopted in the Emtec matter also

mentioned above. In that case, the petition

to open main proceedings with respect to

all group companies in France and abroad

contained the explicit representation that

secondary proceedings would be opened

with respect to the foreign subsidiaries

after the sale had been concluded, and

that the proceeds of local assets would be

kept in the local jurisdiction and then

distributed according to the order of

priority stipulated by the local secondary

proceeding.

All the above techniques contrast in

many ways with the decision of the Belgian

court in the matter of Megapool. In that

case, the court held that secondary

proceedings could no longer be opened in

Belgium because at the time of the request

to open the secondary proceedings, the

main liquidators in the Netherlands had

already liquidated the assets and activities

of the Belgian establishment.

The above shows how difficult and

complex this area is. One often debated

technique is that the court can determine

on the basis of the head office functions of

the group the place where the main

business is carried on by the controlling

parent company and therefore the COMI of

each individual group can be based in the

same place as the COMI of the controlling

parent. That may not fit all sizes.

Apart from the proposal which could well

emanate from the current INSOL Europe

Working Group, Working Group V of

UNICTRAL has specifically considered

whether the COMI principle adopted by the

Model Law should be modified to apply to

the entire group. So far, the Working Group

has rejected the concept of a group COMI

whereby all insolvency proceedings of the

group would be administered from one

jurisdiction, as being unworkable. It may

well be that the European legislature will

also regard any argument in favour of a

group COMI as being equally problematic.

This is no doubt for the very simple reason

that from the viewpoint of the European

legislature, no insolvency system will be

regarded, or indeed should be regarded, as

better or worse than any other. It follows,

therefore, that one key element of

successfully dealing with group insolvencies

is to have the same officeholder appointed

in the proceedings of all the relevant

entities. Ideally, the most critical phase of an

insolvency should be the first phase in which

the value of the business and assets have to

be realised, preferably through a global sale

and the need to ensure that any potential

investor needs to have only one party,

rather than multiple parties, to negotiate

with. Protocols clearly are an excellent

means of further improving coordination.

However, there is a strong feeling that

having the same officeholder appointed is

still preferable to having multiple

officeholders appointed in the group, even

if they are encouraged to cooperate.

The third round table was one which

included the author of this article and

Mickael Jaffe, a well-known lawyer from

Munich, Germany. In addition, the panel

was graced by the presence of Yves

Lelievre, President of the Tribunal de

Commerce de Nanterre, the eminent court

which has been mentioned already. There

were two outstanding French speakers

who joined the panel, namely, Marc Andre,

a well-known Mandataire Judiciaire and Dr

Emmanuelle Inacio of the University of

Boulogne. The panel was presided over by

Professor Carolyn Henry. Here, the theme

was judicial cooperation, as well as

officeholder cooperation. From an English

point of view, much was said about the

Model Law which of course is not, in any

way as yet integrated into French law.

President Lelievre spoke about the practical

need for officeholders to be realistic and to

take into account the real requirements of

employees and creditors when considering

coordination, either on an intra-national

basis or as between States. There was also

an interesting discussion involving the floor

of the house, as it were, as to the extent to

which, if any, judges across frontiers can

speak to each other about coordination of

relevant proceedings. On the whole, it was

felt that this was a matter which had to be

dealt with on a very subtle and detailed

basis given the risk of trespassing upon

respective jurisdictions which had their

own rules and procedure and practice.

The fourth and final panel dealt with the

extraterritorial effects of various aspects of

insolvency procedures, in particular,

employment rights and reservation of title

claims. This also involved extremely

eminent academics and practitioners. For

reasons of space, it is not thought

appropriate to say anything more about

this, save that the contents of the

presentations can be found online at the

website of the National Council and the

relevant address is the following, namely,

www.cnajmi.fr.

The entire day was not only extremely

well organised and richly provided for in

the extremely comfortable setting of the

Hotel Sheraton in Brussels, but also

represented a reminder of the abiding

need for all insolvency practitioners across

the European Union to continue dialogues

of this sort with a view to deeply needed

improvements in insolvency procedure and

practice within Europe and beyond.

This article was first published in International

Corporate Rescue journal and is reprinted with

permission by Chase Cambria Publishing Ltd –

www.chasecambria.com

YVES LELIEVRE

22

NEWS in brief

ADAM GOODISON

Battersea Power Station & PetroplusOn 12 December 2011, following theissuance of a letter or request out of theRoyal Court of Jersey, Vos J appointedadministrators over Battersea PowerStation under s 426 of and Schedule B1 tothe Insolvency Act 1986. Adam Goodison,instructed by Linklaters LLP, obtained theorders. The Powerstation Group owed itslenders in the order of £275m. The lenders

were willing to wait no longer.On 24 January 2012 Hildyard J appointed

administrators over Petroplus UK companies.Adam Goodison, instructed by CliffordChance LLP, obtained the orders. Petroplus,whose Swiss parent had just collapsed,supplied a large percentage of the petrol forthe South East of England from a refinery atCoryton, Essex. Petroplus owed its lenders in

excess of US $2.7 billion. Again, thelenders were not willing to wait anylonger, despite the UK Government beingworried that supplies might run out.

BATTERSEA POWER STATION CORYTON REFINERY

On 16-17 January 2012 Robin Dicker QC

and Joanna Perkins travelled to The Hague

for the opening conference of the Panel of

Recognised International Market Experts in

Finance (“P.R.I.M.E”), to which they have

both been appointed.

The newly constituted panel draws

together experts from academia, financial

institutions, regulatory agencies, and the

legal profession, with the aim of increasing

legal certainty and stability in global

financial markets. P.R.I.M.E has ambitious

plans for the dissemination of financial

knowledge and plans to assist in judicial

training and well as to develop a library

and database of precedents and valuable

resources.

One of the themes of the conference was

the need for an international forum for

the resolution of disputes involving

standard form financial contracts and

complex structured products.

Robin Dicker QC contributed to a panel

discussing, inter alia, Section 2 (a)(iii) of the

ISDA Master Agreement, “flip clauses”, the

anti-deprivation principle and the Supreme

Court decision in Belmont Park Investments

v BNY Corporate Trustee and Lehman

Brothers Special Financing [2011] UKSC 38.

The panel also discussed the case of

Administrators of Lehman Brothers

International (Europe) v JRB Firth Rixson,

Inc and others and The International

Swaps and Derivatives Association Inc. (as

Intervenor) [2010] EWHC 3372 (Ch) in

which Robin represented the Third

Respondent.

Joanna Perkins presented a talk on the

interpretation of standard form financial

agreements, focusing particularly upon

case-law relating to set-off. The talk also

identified other terms within the ISDA

Master Agreement which may give rise to

issues of uncertainty in the future. The

weight of the complexities and

uncertainties generated by financial

innovation were grounds, Joanna said, to

welcome this initiative to establish a

specialist international forum for financial

dispute resolution.

P.R.I.M.E Conference

ROBIN DICKER QC JOANNA PERKINS

FEBRUARY 2012

23

HM The Queen opensthe Rolls Building…Her Majesty The Queen formally opened

the Rolls Building on 7 December 2011 -

the world's largest specialist centre for

the resolution of financial, business and

property disputes.

Located off Fetter Lane in the City of

London, the Rolls Building brings under

one roof the expertise of the Chancery

Division of the High Court, the Admiralty

and Commercial Court and the

Technology and Construction Court.

Middle Temple ReaderMichael Crystal QC has been elected

Autumn Reader at Middle Temple for

2012. The office of Reader at Middle

Temple has been in existence for many

centuries and it is a great honour to be

elected.

The Reader is involved in Moots and

other student activities and is responsible

for calling forward to the Bar successful

students and presenting them to the

Treasurer on Call Day. The dates for Call

to the Bar during Michael’s Readership in

2012 are 24 July, 11 October and 22

November. Michael’s reading at the

Reader’s Feast on 8 November 2012 will

be on the topic ‘International Insolvency

and the Common Law’.

Jersey Trust ConferenceOn 22 March 2012, IBC, with MourantOzannes, will be holding a one-dayInternational Trusts & Private ClientForum at the Grand Jersey Hotel,Esplanade, St Helier, Jersey. David Alexander QC will participate in a

panel session entitled “Key Threats toTrusts – the Three New Certainties: Death,Insolvency and Regulation” together withJeremy Kosky of Clifford Chance, NicholasLe Poidevin of New Square Chambers and

Kathryn Purkis of Collas Crill.

DAVID ALEXANDER QC GRAND JERSEY HOTEL

Judge guilty ofwife beating isremoved fromjudiciaryA deputy High Court judge who beathis wife because she made him waitfor his dinner has been removedfrom his post.

Judge James Allen QC, who sat as adeputy High Court judge and arecorder, was convicted of assault atBradford Magistrates’ Court in May.

Allen was reported to have flowninto a rage and punched his deputycounty coroner wife in the face threetimes because she had delayedmaking dinner to speak with theircleaner.

At trial the couple, who arereportedly still together, wereaccused of lying under oath afterAllen and his wife both claimed thatshe had punched herself in the faceto stop him from leaving.

In a statement, a spokesperson forthe Office for Judicial Complaintssaid: “Judge James Allen, who sat asa deputy High Court judge and arecorder, was convicted of assault atBradford Magistrates’ Court.

The Lord Chancellor and the LordChief Justice are of the view that hisactions had brought the judiciaryinto disrepute and have removedJudge Allen from his judicialpositions.”

Filming will not turn courtsinto ‘theatre’, pledges ClarkeJustice secretary Ken Clarke has insisted

he will not allow courts to become

“theatre” despite allowing cameras inside

for the first time.

The government is planning to change

the law to remove the ban on cameras in

court, starting with the Court of Appeal

and expanding to the Crown court in due

course.

But Clarke, speaking in the House of

Commons, emphasized he will not allow

filming of juries, victims and witnesses

under any circumstances.

He said: “The judge, when he gives a

sentence or a judgment, is a public

official performing a public function; his

words can be quoted, he will be reported

and there is no real reason why he should

not be filmed.

“The other people involved, I think,

need to be protected because, otherwise

the whole nature of the proceedings will

be changed, some people will be

intimidated and some people’s behaviour

will be affected.”

Clarke said he will also allow

broadcasting to be stopped if a defence

lawyer is abusing privilege during

mitigation.

“Of course the lawyer is entitled to put

forward mitigation for his client after the

plea, but I strongly disapprove of any

attempt for this to be used for people to

make allegations against the victims.”

MICHAEL CRYSTAL QC MIDDLE TEMPLE HALL

24

DIARY DATES2012

1-3 March 2012.

Four Seasons, Provence at Terre

Blanche, France.

Trusts & Estates Litigation Forum.

22 March 2012.

Grand Jersey Hotel, St Helier, Jersey.

International Trusts Forum.

23-24 March 2012.

Luton Hoo, England.

ILA Annual Conference.

16-18 May 2012.

Barcelona.

R3 Annual Conference.

20-22 May 2012.

Miami, USA.

INSOL International Annual

Conference, Miami.

11-14 October 2012.

Brussels, Belgium.

INSOL Europe Annual Conference.

2013

19-22 May 2013.

The Hague, Netherlands.

INSOL World Congress.

On Tuesday 24 January 2012 the Business,

Innovation and Skills Committee held its

first oral evidence session on the

Insolvency Service.

The Select Committee is conducting an

inquiry into the role and function of the

Insolvency Service.

Topics being considered include the

role of the Insolvency Service in relation

to pre-pack administrations, possible

further regulation and sanction of

licensed insolvency practitioners, creation

of an "Insolvency Ombudsman" and

insolvency practitioners' remuneration.

Lord Justice Carnwath CVO and Lord Reedappointed as Justices of the SupremeCourt. The two appointments follow thedeath of Lord Rodger in June 2011 and theforthcoming retirement of Lord Brown inApril 2012. The appointments were made by the

Queen on the advice of the Prime Ministerand Lord Chancellor, following therecommendation of an independentselection commission. Lord Phillips said: “The independent

selection commission were faced with a

New Supreme Court Judgesvery strong field of candidates who appliedfollowing open advertisement of thevacancies. “Lord Reed brings depth of experience in

Scots law and practice, as well as insightsinto the work of the European Court ofHuman Rights. “Lord Justice Carnwath’s range of

experience as a senior judge iscomplemented by his Chairmanship of theLaw Commission, his work reforming thetribunals system and his service as the firstSenior President of Tribunals”.

Select Committee HearsEvidence in Relation to Roleof the Insolvency Service

In November 2011, the Insolvency

Service’s began a consultation on the

reform of the process to apply for

bankruptcy and compulsory winding up.

The consultation contains proposals for

migrating three distinct categories of

insolvency process from a court

application to an administrative process

managed by an official in the Insolvency

Service (to be known as the

“adjudicator”).

The three categories in respect of which

changes are proposed are (i) debtor

initiated bankruptcy petitions (ii)

“undisputed” creditor initiated bankruptcy

petitions and (iii) “undisputed” creditor

initiated petitions for compulsory winding

Consultation on the Reform of Bankruptcyand Compulsory Winding Up

up. The proposals have come under

criticism from a number of quarters on the

basis that they will not do justice to

debtors or their creditors and will not

produce the desired benefits in terms of

cost and efficiency.

Further, whilst described as an

“administrative” process, the proposals

make clear that the adjudicator will be

tasked with deciding whether or not the

petition debt is disputed – a judicial role

which has formerly been performed by

the courts. The consultation contain

numerous other far-reaching proposals for

reforms, including a proposal to abolish

the requirement to advertise winding-up

petitions in the Gazette.

CONTRIBUTORS

John Briggs • Mark Arnold • Lloyd Tamlyn Jeremy Goldring • Tom Smith

Richard Fisher • Adam Al-Attar

C

CROSS BORDER

INSOLVENCY

GENERAL EDITOR

RICHARD SHELDON, QC

Third Edition

C

SSRO BO

REDOR

I

I EVLVOSN

YCNE

idEdihT

i

RI

DELARENEG

DRAHC S EH

tidEdrihT

R OTID

CQNODLE

noit

ohn Briggs • Mark Arnold • LloJJeremy Goldring • T

Richard F

RI

TUBIRTNOC

ggs • Mark Arnold • Lloeremy Goldring • T

isher • Adchard F

DRAHC S EH

SROT

y amlyd T Taml old • Lloom Smith • T o

arttam Al-A d

CQ,NODLE

yn

MARK ARNOLD RICHARD FISHER RICHARD SHELDON QC

Cross-Border Insolvency (3rd Edition) (earlier editions writtenby Professor Smart) has now been published by BloomsburyProfessional. The General Editor is Richard Sheldon QC and the

Contributors, all from South Square, are John Briggs, MarkArnold, Lloyd Tamlyn, Jeremy Goldring, Tom Smith, RichardFisher and Adam Al-Attar. In addition to updating the positionat common law, the work has new chapters on the EUInsolvency Regulation, the UNCITRAL Model Law and theInsolvency Act 1986 s 426.

Cross-Border Insolvency

JOHN BRIGGS

FEBRUARY 2012

25

I had certainly heard of South Square

before I even applied for the role. The

Chambers has an excellent reputation as

an insolvency and commercial set: look at

many of the major business cases reported

in the Financial Times, and you will usually

find a South Square barrister’s name

tucked up somewhere in the “legals”. So,

before I arrived, I knew I would be

working with some big hitters at the Bar,

and in a set with a fearsome reputation

for skilled advocacy and getting the right

result for clients.

The many meetings which I have had

with the barristers here at South Square

since my arrival have been both useful

and illuminating. I think the first point

which, I am delighted to say, struck me

forcefully was the mutual respect given by

members to their colleagues in Chambers,

and the fact that, without exception,

everyone I interviewed has stated that the

quality and skills of their colleagues have

been major factors in making South

Square a good place to work.

This is not simply about friendship;

there is a positive spin-off for clients:

members of Chambers, within the bounds

of confidentiality, effectively have on

hand some fantastic legal brains off which

they can bounce a point of law, or a

complex aspect of an even more complex

case. The “team” is mutually supportive:

as a client, you may be retaining one

particular barrister, but you are also

tapping into a rich seam of relevant skill

and knowledge. That must be good news.

As well as the members of Chambers, I

have got to know the staff; members here

are supported by a professional and

dedicated team, many of whom have long

service at South Square under their belts.

They know what they have to do to

support members of Chambers, they know

the clients and they do their best to

ensure that the entire client experience is

sensitive, effective and supportive.

All these points made, I strongly get the

sense that no one here at South Square is

prepared to sit on their laurels; we know

the Bar is changing, the market place is

becoming more challenging and, most

obviously, that clients have choice. We

know we have to work hard to make sure

that barristers at South Square are the

clients’ preferred counsel, and we are very

clear that it is vital that we understand

client needs and exceed them at every

opportunity.

The whole point of the chambers’

structure is the ability to provide cost-

effective support to barristers in the

development of their practices so that

both they and Chambers’ staff can provide

as smooth an experience as possible for

our members’ clients. At South Square, we

do these things, and we do them very

well, but we know we can improve our

offering even further in a number of

ways, some of them internal to South

Square and others which are more

obvious to our clients and the market

place. These changes will take time, but

will yield results for our members and

clients.

I have not yet managed to meet many

of Chambers’ clients (amongst whom I

know there are many who read this

Digest), but I am very much looking

forward to starting that process. Of

course it will be good to hear when things

have gone well, but I am also keen to hear

about the occasions on which you as

clients think that we, or any one of us,

could do better.

To conclude, I am delighted to be here

and delighted to be working with a team

and colleagues focused on the delivery of

quality service to clients. South Square is

already an excellent chambers; by working

together, and with our clients, we can

make South Square even better.

Finally, if you need to contact me about

any matter related to Chambers, please

email me at ronsmith@southsquare.com,

or call on 020 7696 9900.

First impressions countOur new Chambers Director, Ron Barclay-Smith, has beenwith us for a month; he was previously chief executive at

9 Gough Square. Here he gives his first impressions of his

role, and life at South Square……

As a client, you may be retaining one particularbarrister, but you are also tapping into a richseam of relevant skill and knowledge.

RON BARCLAY-SMITH

26

South Square ChallengeA New Year, a new South Square Challenge. This time you have to do what seems to be becoming the norm – look

at the pairs of pictures and work out the name of the case. And then identify the connection between the cases. For

the winner, there will be the usual Magnum of Champagne. All answers to kirstendent@southsquare.com or to the

address on the back page to reach her by 22nd March 2012. In the event of more than one correct answer the

winner will be drawn from the wig tin. Good luck.

1

2

3

4

1905-1943

DAVID ALEXANDER QC

FEBRUARY 2012

27

NOVEMBER CHALLENGEThe correct answers to the November 2011 South Square Challenge were: (1) Howard Smith Ltd v Ampol Petroleum Ltd (2)

Boardman v Phipps (3) Regal (Hastings) Ltd v Gulliver (4) Bell v Lever Bros Ltd (5) Guinness v Saunders (6) Re Washington

Diamond Mining Co (7) Cook v Deeks (8) Aberdeen Rail Co v Blaikie Bros. The connection, of course was and is directors’ duties.

There were more correct entries than usual this time with the result that the winner had to be drawn from the wig tin. And the

winner, who receives two magnums of champagne for this rollover South Square Challenge, is Marieta van Straaten of Moon

Beever Solicitors to whom go many congratulations.

And the connection is?

5

6

7

8

Michael Crystal QC

Christopher Brougham QC

Gabriel Moss QC

Simon Mortimore QC

Richard Adkins QC

Richard Sheldon QC

Richard Hacker QC

Robin Knowles CBE QC

Mark Phillips QC

Robin Dicker QC

William Trower QC

Martin Pascoe QC

Fidelis Oditah QC

David Alexander QC

Antony Zacaroli QC

David Marks QC

Glen Davis QC

Barry Isaacs QC

Felicity Toube QC

Ronald DeKoven

John Briggs

Sandy Shandro

Mark Arnold

Adam Goodison

Hilary Stonefrost

Lloyd Tamlyn

Ben Valentin

Jeremy Goldring

Lucy Frazer

David Allison

Daniel Bayfield

Tom Smith

Richard Fisher

Stephen Robins

Joanna Perkins

Marcus Haywood

Hannah Thornley

William Willson

Georgina Peters

Adam Al-Attar

Henry Phillips

Charlotte Cooke

“FINE ADVOCATES, WHO QUIETLY BUTPROFICIENTLY GO ABOUT THEIR BUSINESS ANDPROVE DEADLY EFFECTIVE IN COURT”.

South Square Gray’s Inn London WC1R 5HP. UK.

Tel. +44 (0)20 7696 9900. Fax +44 (0)20 7696 9911. LDE 338 Chancery Lane. Email practicemanagers@southsquare.com

CHAMBERS & PARTNERS 2012

SOUTH SQUAREBarristers