Having recently spent a week or so in Somerset enjoying the unseasonal blue skies (but yes, you’re right, the photo is not Somerset!), I’ve managed to accumulate quite a pile of BAILII reports. I don’t want to skip them entirely, as one day I do want to create a searchable index of my posts, so I’ve tried to give credit where I can to other write-ups of the judgments. Much is old news, therefore, but if you missed them the first time around…
• Olympic Airlines – failure to meet “establishment” test of European Insolvency Regulation rules out secondary insolvency proceedings.
• Jetivia v Bilta – argument that the company, by its liquidators, could not pursue claims based on a fraud to which it was party failed.
• Tchenguiz v SFO – liquidators’ reports not subject to litigation privilege, as litigation was not the dominant purpose for their production.
• Southern Pacific Personal Loans – liquidators were not data controllers for data processed by company pre-liquidation and, subject to certain conditions, they could destroy the data.
• JSC BTA Bank v Usarel Investments – useful comments regarding the absence of inevitable bias of court-appointed receivers when faced with prospect of taking action against party that sought their appointment.
• Bestrustees v Kaupthing Singer – reversal of administrators’ part-rejection of pension scheme claim, as changes in assets and liabilities after the actuary’s certificate “irrelevant”.
• Wood & Hellard v Gorbunova – receivers’ indemnity out of assets restricted, as respondent’s costs increased due to receivers’ “inappropriate conduct of the application”.
• JSC BTA Bank v Ablyazov – subject’s drawing down of £40m loans not “assets” for the purposes of a freezing order.
The Trustees of the Olympic Airlines SA Pension & Life Insurance Scheme v Olympic Airlines SA (6 June 2013) ( EWCA Civ 643)
A successful appeal against a secondary winding-up in England provides clarification of the meaning of “establishment” of the European Insolvency Regulation, but makes it difficult to call on the PPF where a scheme is exposed to an insolvency with main proceedings in another EU/EEA state.
A couple of good summaries (although with differing views on how things may change on the revision of the EIR) are provided by Malti Shah of Taylor Wessing (http://goo.gl/0m0aDZ), and Justin Briggs & Charles Crowne of Burges Salmon (http://goo.gl/P0I3G4).
(UPDATE 07/08/14: The enactment of the Pension Protection Fund (Entry Rules) (Amendment) Regulations 2014 have opened the way for this scheme to access the PPF. The Regulations cease to have effect on 21 July 2017 and set down such specific criteria that it seems unlikely that it will help many more schemes access the PPF. For a more detailed analysis, see Mayer Brown’s article at: http://goo.gl/Xzyx5q)
(UPDATE 21/05/15: the Supreme Court considered an appeal and swiftly dismissed it, endorsing the Court of Appeal’s earlier decision that having three employees in the country involved only in winding up the company’s affairs did not amount to “economic activity”. The judgment, given on 29 April 2015, can be found at: http://www.bailii.org/uk/cases/UKSC/2015/27.html)
Jetivia SA & Anor v Bilta UK Limited (in liquidation) & Ors (31 July 2013) ( EWCA Civ 968)
Bilta, by its liquidators, brought claims for conspiracy and dishonest assistance against the appellants, who sought to defeat the claims on the basis that, as Bilta was party to the illegal act, it could not bring the claims (the ex turpi causa principle). The appeals were dismissed.
Tom Henderson of Herbert Smith Freehills LLP has produced a good summary of the case, I think: http://www.lexology.com/library/detail.aspx?g=ead603c4-454c-4d19-ae54-4ed2196ec771
Tchenguiz & Ors v Director of the Serious Fraud Office & Ors (26 July 2013) ( EWHC 2297 (QB))
The court found that the joint liquidators’ reports were not subject to litigation privilege, as the judge was not convinced that the dominant purpose for which the reports were originally produced was for obtaining information or advice in connection with pending or contemplated litigation, or for conducting or aiding in the conduct of such litigation.
Timothy Wright and Nicholas Greenwood of Morgan Lewis & Bockius LLP – http://www.lexology.com/library/detail.aspx?g=c1be8860-2d7d-466b-a1b7-3d3be7b93431 – have produced a pretty good summary of the case.
(UPDATE 15/10/13: this decision is subject to an appeal by the liquidators.)
(UPDATE 16/03/14: the liquidators’ appeal, heard on 20/02/14, was dismissed: http://www.bailii.org/ew/cases/EWCA/Civ/2014/136.html. As in the first instance, the judge emphasised “the need to establish which of dual or even multiple purposes was dominant if a plausible claim to privilege was to be made out” (paragraph 22), and felt that the appellants had not demonstrated that the dominant purpose of the communications was for use in actual or anticipated litigation. He agreed with Counsel for the respondents that, even with liquidations of this nature, it cannot be right to assume that everything that a liquidator does is in contemplation of litigation.)
Re. Southern Pacific Personal Loans Limited (8 August 2013) ( EWHC 2485 (Ch))
Liquidators estimated that the costs of responding to data subject access requests (“DSARs”) on a case amounted to £40,000 per month. Thus, they sought directions on whether there was a way of avoiding this ongoing expense.
Mr Justice David Richards concluded that the rights to control the data remained vested in the company and the company remained under a statutory obligation to deal with the DSARs. He stated that, as the liquidators acted as agents of the company, they were not data controllers in respect of the data processed by the company prior to liquidation.
In considering application of the fifth data protection principle – that personal data should not be kept for longer than is necessary for the purposes for which it was processed – David Richards J directed that the liquidators might dispose of all personal data in respect of which the company is the data controller subject to two qualifications: (i) that the company retained sufficient data to enable it to respond to DSARs made before the disposal of data; and (ii) that the liquidators retained sufficient data to enable them to deal with any claims that might be made in the liquidation.
JSC BTA Bank v Usarel Investments Limited (24 June 2013) ( EWHC 1780 (Ch))
The circumstances of this case – involving a litigation receiver seeking a ruling that his appointment to defend an action gave him power to conduct an appeal (which was not granted) – are unlikely to arise often, if at all, but I thought that Mr Justice Warren’s comments on the integrity of court-appointed receivers were worth repeating.
Warren J felt that the receivers and managers (who were appointed after the litigation receiver) were just as competent to decide on whether an appeal should be pursued as the litigation receiver. He stated: “I do not consider that it can be said that, whenever the Court appoints a receiver and manager nominated by an applicant for such an appointment, there is inevitably a justified perception of bias if the appointed nominee needs to consider whether to pursue litigation against the person who applied for his appointment. His position, as an officer of the Court, is different from that of a receiver or manager appointed for instance by the holder of a charge over the company’s assets. A perhaps justified perception of bias in relation to a receiver or manager appointed out of Court should not be allowed to infect the perception of an officer of the court” (paragraph 37).
Bestrustees Plc v Kaupthing Singer & Friedlander Limited (in Administration) (31 July 2013) ( EWHC 2407 (Ch))
Bestrustees appealed against the Administrators’ decision to reduce its proof of debt by £2 million. The Administrators’ reason for reducing the proof was because the actuary had certified that the deficit of the occupational pension scheme (“the section 75 debt”) was £74,652,000, but they had attributed no value to the £2 million deposited by the scheme with the company in a trust account, which at that time was subject to legal proceedings but the funds were paid to the scheme later.
The Administrators were ordered to reverse the £2 million reduction to the proof, primarily because they had not challenged the amount of the section 75 debt, as certified by the actuary, and they had not challenged the nil value attributed to the deposit subject to pending litigation at that time. The Chancellor of the High Court, Sir Terence Etherton, observed: “the Employer Debt Regulations require the assets and liabilities of a pension scheme to be valued, for the purposes of ascertaining the section 75 debt, in a notional exercise immediately before the trigger event, here KSF entering into administration on 8 October 2008. Changes in the value of assets or the extent of liabilities after that time are irrelevant. In the present case, just as the value of the £2 million deposit increased after 8 October 2008 as litigation progressively clarified the rights of those, including the Trustee, entitled to the money in the trust account, so the evidence also shows that the scheme’s ‘buy out’ liabilities, that is to say the notional cost of going into the market to purchase the annuities which would match the scheme’s liabilities to its pensioners and members, also increased substantially after that date” (paragraph 35).
Wood & Hellard v Gorbunova & Ors (5 July 2013) ( EWHC 1935 (Ch))
Receivers were indemnified out of the assets only to the extent of two thirds of the costs of one respondent (and 85% of another’s) on the basis that the respondent’s costs “increased by reason of the inappropriate conduct of the application by the receivers” (paragraph 66).
Mr Justice Morgan acknowledged the “difficulties the receivers found themselves in and their proper desire to get the receivership moving” (paragraph 68), but he felt that the receivers had been unwise in seeking wide-ranging orders, some elements of which were dropped later by the receivers, and that they had persuaded themselves that the respondent was being recalcitrant when the judge felt that the respondent had behaved properly throughout and simply had been subject to legitimate constraints in delivering up papers.
JSC BTA Bank v Ablyazov (25 July 2013) ( EWCA Civ 928)
A freezing order was drafted in a standard form to prohibit Mr Ablyazov from in any way disposing of, dealing with, or diminishing the value of his assets. The bank sought to persuade the court that the loan facility agreements entered into by Mr Ablyazov, which enabled him to instruct the lenders to pay £40 million direct to third parties, were “assets” for the purposes of the freezing order.
The court at first instance agreed that they were choses in action, but its decision that not all choses in action were assets was appealed by the bank. Lord Justice Beatson agreed with the earlier judgment: “a man who is entitled to borrow and does so ‘is not ordinarily to be described as disposing of or dealing with an asset’. As Sir Roy Goode has stated, albeit in the context of section 127 of the Insolvency Act 1986, ‘[i]f there is one thing that is still clear in the increasingly complex financial scene … it is that a liability is not an asset and that an increase in a liability is not by itself a disposition of an asset’” (paragraph 72).