Tuesday, 30 June 2009

House of Lords panel announced for the Sigma Finance appeal

The House of Lords panel for the Sigma Finance appeal has been distributed. The hearing starts tomorrow (Wednesday 1 July – Thursday 2 July) under the name of: In re Sigma Finance Corporation (in Administrative Receivership) and In re the Insolvency Act 1986 (First appeal); In re Sigma Finance Corporation (in Administrative Receivership) and In re the Insolvency Act 1986 (Second appeal); In re Sigma Finance Corporation (in Administrative Receivership) and In re the Insolvency Act 1986 (Third appeal) (Conjoined Appeals). The panel will consist of: 
  • Lord Hope of Craighead 
  • Lord Scott of Foscote 
  • Lord Walker of Gestingthorpe 
  • Lord Mance 
  • Lord Collins of Mapesbury
The first instance judgment can be seen here. The Court of Appeal judgment can be seen here.

Picture Credit: http://www.publications.parliament.uk/pa/ld200203/ldbrief/img/la.gif.  The Lords of Appeal in Ordinary (The Law Lords) : Front Row from left to right, Lord Hutton, Lord Hoffmann, Lord Nicholls of Birkenhead, Lord Bingham of Cornwall, Lord Steyn, Lord Hope of Craighead. Back Row, Brendan Keith (Clerk of the Judicial Office), Lord Walker of Gestingthorpe, Lord Scott of Foscote, Lord Hobhouse of Woodborough, Lord Saville of Newdigate, Lord Millett, Lord Rodger of Earlsferry. 

Creditors one and all - History of Bankruptcy Shorts (HOBS)

I thought it might be interesting to the blog readers if I posted up some points of authority from bygone periods that might be of general interest. These will be called History of Bankruptcy Shorts (HOBS). Here is the first:
He that is a bankrupt to one creditor is accounted in law a bankrupt to all the creditors; and, being once adjudged so, is always so to the rest of the creditors - 22 Car.I. B.R.

Picture Credit: Muir Hunter Museum of Bankruptcy, KU.

Monday, 29 June 2009

Some early perceptions of a bankrupt - some evidence to support my earlier contentions

Following my entry on Dubai bankruptcy law and its parallels with English insolvency law of the sixteenth century, I thought it might be prudent to post some supporting evidence for my contentions. The following passage sums up the early eighteenth century perception of a bankrupt:
"But a bankrupt, with us, signifieth generally either man or woman, that, living by buying and selling, hath gotten other persons goods into his or her hands, and concealeth himself from his creditors, or commits other acts, which make him a bankrupt, according to the statutes in that cafe made and provided."
The early derivation of bankruptcy as a term has been linked to both route and vestigium. Both terms signify the idea that when a tradesmen slipped away he left only vestigia, i.e. some signs, his table or his shop. In the modern context we could say that his abandoned car at Dubai international airport is evidence of the flight of a bankrupt. 

Picture Credit: Muir Hunter Museum of Bankruptcy, KU.

Sunday, 28 June 2009

The ramifications of Mr Jackson's passing away on AEG and 02?

The sad news that the King of Pop has passed away (Mr Michael Jackson (MJ) not Sir Cliff Richard) has highlighted MJ's money issues and a brush with insolvency. The BBC report that MJ was heavily in debt, noting:

"He refinanced these loans in in 2006 in an effort to stave off insolvency. But even this couldn't keep him out of debt."

MJ's 50 date "This is It" tour of the 02 Arena may have improved his (and his creditors) position, but what might be the long term ramifications for AEG Live and The 02 who were both heavily involved in The 02 Arena event now that this cannot go ahead? The Telegraph have reported that AEG are going to be left with a £300 million bill, mainly because they were unable to insure against MJ pulling out through ill health. Will MJ's insolvency now lead to further insolvencies?

Picture Credit: http://www.celebrific.com/wp-content/uploads/2007/08/michael-jackson-birthday-8-29-07.jpg

Saturday, 27 June 2009

Dubai's bankruptcy laws - a parallel with 16th century England?

A report in today's Telegraph sparks an interesting parallel between modern Dubai bankruptcy legislation and the policy and themes that influenced early modern bankruptcy legislation is England. The article is entitled: British entrepreneur flees debts in Dubai. The story notes:
"Simon Ford, who founded a "gift experience" company that prospered in the United Arab Emirates' boom years, said he had been forced to escape as he feared being sent to debtors' prison under strict bankruptcy laws...Dubai's bankruptcy laws mean that debtors can go to prison merely for bouncing a cheque, while breaching stringent rules on trading while insolvent can bring lengthy terms."
The rest of the story relates to how an increasing number of business people are fleeing Dubai to escape their creditors, often leaving their cars at the airport. It is the "fleeing" from creditors that is of interest in terms of the parallels as the first bankruptcy statute 0f 1542 (or 1543 depending on your view) was enacted to preclude this form of debtor activity, and "departing the realm" or "fleeing the realm" was an act of bankruptcy for over three centuries in England. The imprisonment for debt element is also interesting. Dubai is not of course the only country to retain such measures. Israel also maintains this form of debtor treatment. 

Picture Credit:http://beautifuldecay.com/wp-content/uploads/2009/03/dubai.jpg

Friday, 26 June 2009

Professor Sir Kenneth Calman's Corporate Insolvency Recommendations

Following the recent blog entry on Dealing with Debt in Scotland and the comment that the entry attracted I thought it might be prudent to add up what Professor Sir Kenneth Calman's committee proposed in terms of corporate insolvency laws in the Calman Report on Devolution. The Calman Report recommends: 
"RECOMMENDATION 5.23: The UK Insolvency Service, with appropriate input from

the relevant department(s) of the Scottish Government, should be made responsible

for laying down the rules to be applied by insolvency practitioners on both sides of

the border. This should be achieved by UK legislation."

Here is the meat of the discussion in the Calman report:
"Corporate insolvency

5.267 Company law is in general reserved, and the Scotland Act achieves this by reserving

“business associations” (which include partnerships as well as companies). But company

law interacts with other aspects of Scots law, including the procedures which are

followed by courts when winding up companies which are insolvent. The boundary

which is drawn in the Scotland Act between these two areas of law is quite complex,

because the law itself is inevitably complicated also. The Scotland Act (Schedule 5,

Part II, Section C2) reserves (in relation to business associations) “(a) the modes of,

and grounds for and the general legal effect of winding up, and the persons who may

initiate winding up, (b) liability to contribute to assets on winding up, (c) powers of courts

in relation to proceedings for winding up, other than the power to sist proceedings, (d)

arrangements with creditors and (e) procedures giving protection from creditors”. But

it devolves “(a) the process of winding up, including the person having responsibility

for the conduct of a winding up or any part of it, and his conduct of it or of that part,

(b) the effect of winding up on diligence, and (c) avoidance and adjustment of prior

transactions on winding up” and “floating charges and receivers, except in relation

to preferential debts, regulation of insolvency practitioners and co-operation of

insolvency courts”.

5.268 Essentially this means that the ways in which winding up can happen, and the grounds

for doing so, are reserved. This prevents there being different circumstances under

which winding up can happen in different parts of the UK. The reservation of the

general legal effect of winding up allows for a consistent legislative response to court

rulings affecting insolvency. The “process of winding up” – which is devolved – refers

to procedural issues arising in practice (for example, who would need to be served with

information or documents about the case, and by what timescales, by various parties

to proceedings).

5.269 The elements involved in this process have changed since the Scotland Act came into

force. Previously the winding-up process in Scotland could be seen as analogous to

the procedure used for (personal) bankruptcy. But changes to the administration

procedure in Great Britain (made by the Enterprise Act 2002) to allow winding up

through administration has meant that there could be undesirable differences in the

processes governing winding up depending on the jurisdiction under which that

winding up happens.

5.270 Bankruptcy law in Scotland has a different history to the law in England and Wales and

has always been subject to a separate legal framework (as the Scotland Act recognises

in the exceptions made in Schedule 5).

5.271 It was suggested to the Commission that legislation relating to corporate insolvency

in Scotland has lagged behind that in England and Wales. The Scottish Government

has said that it proposes to make amendments to the Scottish Insolvency Rules in 2009

to remove cross-references to personal insolvency and replace them with stand-alone

provisions with the intention of making the Rules clearer, and that additional resources

have been made available by the Accountant in Bankruptcy. The Rules are also being

reviewed to identify areas where administrative burdens can be eased by simplifying

processes and ensuring consistency between insolvency procedures. A similar

modernisation project is being carried out for England by the Insolvency Service.

5.272 Notwithstanding moves by the Accountant in Bankruptcy to bring the law relating to

insolvency procedure in line with that of England and Wales, the Commission has heard

from insolvency practitioners who question the necessity of duplicating work in Scotland

and the potential this allows for divergence in policy and practice. The Institute of

Chartered Accountants of Scotland (ICAS), for example, argues that this is unhelpful in a

field in which businesses operate across the UK, supported by lenders who also operate

common policies across different jurisdictions

5.273 Given that the Scotland Act 1998 reserved company law as a whole to the UK

Parliament, there is an argument that the current division of responsibility for liquidation

between the UK and Scottish Parliament should be ended.

5.274 On the other hand, some of the exceptions to the general reservation in the Scotland

Act relate to matters where the law of Scotland is materially different from the law of

England, not least because of the distinction between law and equity. This underlies

much of English law on securities, bankruptcy, receivership and winding up and does

not exist in Scots law. Scots law must therefore find different solutions appropriate to

the nature of the problem. In addition, the Scottish courts exercise a wide supervisory

jurisdiction in relation to liquidators, receivers, administrators and other aspects of

winding up. The procedures of the Scottish courts are, of course, a matter of Scots law.

5.275 The Commission is, however, persuaded that devolution has produced an unsatisfactory

state of affairs relating to corporate insolvency in that:

• there is an absence of clarity as to where responsibility lies for drawing up the rules

to be followed by insolvency practitioners dealing with corporate insolvencies;

• there are unnecessary and confusing divergences between the insolvency rules

applying in England and Scotland; and

• there have been unnecessary and damaging delays in introducing new rules in


5.276 Many corporate insolvencies involve companies operating on both sides of the border.

Clarity, consistency and speed are essential, particularly in the present economic and

financial climate. Whether or not, as some submissions have suggested, the necessary

expertise is lacking in Scotland (which the Commission is not in a position to judge), that

does not alter the importance of clarity, consistency and speed.

5.277 In the opinion of the Commission, the serious issues raised in connection with corporate

insolvency might be resolved without altering the reserved/devolved boundary in

Schedule 5 in relation to primary legislative competence. The essential point appears to

be that the UK Insolvency Service, with appropriate input from the relevant department(s)

of the Scottish Government, should be made responsible for laying down the rules

to be applied by insolvency practitioners on both sides of the Border. This could be

achieved by UK legislation to which the Scottish Parliament would consent by legislative

consent motion under the Sewel Convention.

5.278 If such a solution is not possible for technical reasons (or if, which the Commission hopes

would not be the case, the Scottish Government and Parliament were to withhold their

consent or cause unnecessary delays in agreeing a solution), then it would be necessary

for the UK Parliament to amend Section C2 of Schedule 5. Given the complexity of this

area of the law generally, and the terms of Section C2 in particular, the Commission is

not in a position to suggest the terms of an appropriate amendment, nor would it be

appropriate to do so. The Commission does, however, consider that this is a problem

which should now be resolved with the minimum of delay."

R3 have responded to the proposal in the positive. There seem to be some mixed messages coming from north of the border on this subject. The comment on the original blog post was: 
"So on the 15th the Calman Comission proposes re-reserving insolvency matters to Westminster to eradicate the divergences, and eight days later, The Scottish Parliament proposes further divergences. Good to see they're all singing from the same hymn sheet North of the border."
Quite so, I can add nothing to this critical evaluation of these two recent corporate insolvency proposals.
Picture Credit:http://www.universitystory.gla.ac.uk/images/UGSP00498.jpg

Thursday, 25 June 2009

Proof of debts and some interesting comments on old bankruptcy statutes - Official Receiver v McKay [2009] EWCA Civ 467

The case is particularly interesting to those who are interested in the history of the subject as it contains the following passage:
"As Mr Ritchie pointed out in his helpful submissions, the 1986 Act is a mixture of new law and re-enactment of old law. Provisions such as section 282 are in very similar terms to the preceding law but other provisions are very different and in many significant respects the legislative regime is altogether different. In Re Smith Ex parte Braintree District Council [1990] 2 AC 215 at 238 Lord Jauncey said that the 1986 Act was to be construed "as a piece of new legislation without regard to 19th Century authorities or similar provisions of repealed Bankruptcy Acts." However, it is not always right to ignore previous authorities, as Hoffmann J said in Re a Debtor (No 784 of 1991) [1992] Ch 554 at 558:
"That approach to construction was approved by the House of Lords in In re Smith (A Bankrupt), Ex parte Braintree District Council [1990] 2 A.C. 215, in which Lord Jauncey of Tullichettle said, at p. 238, that, in view of the changes in policy shown by the new Act, he felt justified in construing the provision of the Act of 1986 "as a piece of new legislation without regard to 19th century authorities or similar provisions of repealed Bankruptcy Acts."
Those authorities show that, in approaching the language of the Act of 1986, one must pay particular attention to the purposes and policies of its own provisions and be wary of simply carrying over uncritically meanings which had been given to similar words in the earlier Act. It does not, however, mean that the language of the new Act comes to one entirely free of any of the intellectual freight which was carried by words and phrases in earlier bankruptcy or other legislation.
Decisions of the court upon the meanings of phrases used in Acts of Parliament may come, in the course of time, to give them the quality of terms of art which Parliament may well be assumed to have intended them to bring with them when used in subsequent legislation. In section 265, for example, terms such as "domiciled," "personally present," "ordinarily resident," have had attributed to them, both in the context of bankruptcy and in that of civil procedure generally, a wealth of refined construction which it is difficult to suppose Parliament did not intend equally to apply when those words were used in the Act of 1986. Is there any reason why that should not apply equally to the words "has carried on business?" There does not seem to me to be anything in the policy of the new Act which suggests that in this provision Parliament was intending to give those words a different meaning from those which they had been held to bear under the Act of 1914."
Picture Credit: http://www.hmcourts-service.gov.uk/cms/images/lj_lloyd.jpg

"realises" for the purposes of the IA86 s.283A(3)(a) - Lewis & Anor v Metropolitan Property Realisations Ltd [2009] EWCA Civ 448 (12 June 2009)

Picture Credit: http://i.dailymail.co.uk/i/pix/2007/07_03/judgeDM0108_228x367.jpg

Wednesday, 24 June 2009

Dealing with Debt - in Scotland.

The Scottish Parliament has issued a press release entitled "Dealing with Debt". The press release notes: 
"Dealing with debt, 23/06/2009
Further measures will be taken to help Scots who are struggling to deal with debt. Responding to the report of the Debt Action Forum, Community Safety Minister Fergus Ewing said the Scottish Government would bring forward legislation to:
  • Extend the protection offered to the family home in bankruptcy to protected trust deeds
  • Extend the period for which a sheriff may postpone the sale of a family home from one to three years
  • Introduce a requirement for trustees in bankruptcy and trust deeds to notify the local authority of the sale of a family home
  • Allow the exclusion of specified assets from protected trust deeds
  • Extend access to bankruptcy by allowing a certified route that is fair and open
  • Exempt any essential vehicle valued at £3,000 or less from bankruptcy proceedings
  • Introduce new grounds for bankruptcy restrictions to encourage debtors to take responsibility for their on going liabilities
  • Remove the requirement to advertise bankruptcy in the Edinburgh Gazette

Mr Ewing said: "We are very grateful to the members of the Debt Action Forum for the time and effort they have put into the group. Some very helpful and positive areas came up for discussion. "The Debt Action Forum has provided a comprehensive review of the support and advice available for those who are unable to manage their debt. This has been food for thought for the Government. "Given the current economic downturn I am moving quickly to announce that we will bring forward legislation, at the earliest opportunity, to put into place some of the changes discussed by the group. "For example we will extend the protection that's given to the family home during bankruptcy to protected trust deeds. We will build on the success of the Low Income Low Asset route into bankruptcy and widen access to debt relief through bankruptcy by creating a certified route that is fair and open. "We will also put in place measures to protect cars, where the value doesn't exceed £3,000, from being sold by the trustee in bankruptcy to make sure that families are not unnecessarily deprived of their main method of transport. "In addition to this immediate programme of work, we recognise that some of the areas discussed by the Forum are more complex and need further consideration. That's why we will be consulting on a number of further changes. "Meanwhile the Scottish Government will continue to press the UK Government to take action on consumer credit, lending protocols and debt collection practices. "I hope these changes can help us ensure that as many Scots as possible receive the help and support they need while they are suffering under the strain of unmanageable debt."

Picture Credit:http://www.geo.ed.ac.uk/scotgaz/images/Scotland.jpg

Setting Aside Statutory Demands - Dissent in the Court of Appeal - Remblance v Octagon Assets Ltd [2009] EWCA Civ 581

Lord Justice Mummery has dissented from the majority view in the recent judgment of the Court of Appeal in Remblance v Octagon Assets Ltd [2009] EWCA Civ 581. The case makes very interesting reading, not least because of the dissenting judgment, but also because the subject of setting aside statutory demands is given a thorough airing. As Dyson, LJ notes: "The only issue with which we are concerned is whether the judge exercised his discretion properly in refusing to set aside the statutory demand against Mr Remblance under rule 6.5(4)(d) of the Insolvency Rules 1986."

In his dissenting judgment Mummery, LJ notes:
Picture Credit:http://i.thisislondon.co.uk/i/pix/2008/06/judgepage30240608_415x275.jpg

Tuesday, 23 June 2009

Setanta Sports enters Administration - more woe for the beautiful game

Following my blog entry on Scottish football club woes yesterday it has now been announced that Setanta Sports, the Irish broadcaster, has entered administration. The BBC pick up the story here. The Setanta website notes:

"Setanta Sports Customers from England, Wales, Scotland, Isle of Man and
Channel Islands, please be advised that it is with great regret that Setanta GB
is no longer trading.
Setanta Sports is still operating in the Republic of
Ireland and Northern Ireland only. Customers from ROI and NI should go to
www.setanta.com/ie for
more information.
Setanta Sport LimitedSetanta Transmissions (UK)
LimitedSetanta Sports S.a.r.l(All In Administration)(together "the

On 23 June 2009, Neville Kahn, Lee Manning and Nick Edwards were
appointed Joint Administrators of the Companies and now manage the affairs,
business and property of Setanta Sport Limited and Setanta Transmissions (UK)
Limited and Setanta Sports S.a.r.l.. The Joint Administrators contract as agents
of the Companies and without personal liability"

Monday, 22 June 2009

Football Insolvency - continuing problems now in Scotland

Director of Finance online is reporting an interesting story on football insolvency which reports on some recent research from Equifax. This is a subject that has been covered on this blog before. The story notes that three football clubs are technically insolvent. The clubs are:
  • Motherwell
  • Hearts
  • Hamilton Academicals

Following Ronaldo's recent record transfer for the same price as Newcastle Football Club (£85,000,000), this news story throws the different financial ends of the 'beautiful game' into sharp focus. I am currently investigating whether or not the three clubs would also be subjected to some form of point penalty if they enter an insolvency procedure. As I have previously argued, this form of 'added' penalty (excuse the pun), which insolvent clubs face in England and Wales, does not help rescue goals (sorry).

Sunday, 21 June 2009

Swedish Insolvency Law - an interesting article

I apologise for the moratorium on posts. I have been away in Sweden and Denmark attempting to bankrupt myself. They are not cheap countries! Whilst there I thought I would mull on their insolvency laws. An interesting article on the same can be seen here.

Wednesday, 17 June 2009

Sir John Vinelott and his spaniel named Captain

As the owner/servant of a springer spaniel (Bella - pictured) and as someone who is interested in insolvency law, company law and the law of trusts, I was intrigued to read that a springer spaniel named Captain used to accompany his owner, Sir John Vinelott, into the Chancery Division. Sir John's obituary notes: 
"He was often accompanied to
the High Court by his dog, Captain, a springer spaniel who would snooze beside
him when he was on the bench, and, in time off from his courtroom duties, go
sniffing around the corridors in the hope of finding scraps of
A number of questions arise from this quote. First, did Captain ever accompany Sir John to Insolvency Rules Committee meetings (of which Sir John was chair between 1984 and 1993) and perhaps more importantly, how on earth did Sir John manage to keep a springer under control in a court room? Interestingly, Sir John was also vice-president of the Selden Society. I have spoken to Professor David Graham QC about Captain, but he does not recall seeing the springer during his frequent appearances before Sir John. He puts this down to his sight, as opposed to the absence of Captain. If any blog readers remember Captain I would be very interested to hear any anecdotes.

Picture Credit: Bella Kenmillix Tullulah Belle as a puppy.