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The court has recently clarified that presentation of a petition occurs when the petition is filed at court, not when it is issued by the court. In this case, a petition was presented to the court by one of the company’s creditors on 5 July. On 21 July, the company, unaware of the petition, gave notice of its intention to appoint joint administrators out of court. The petition was not issued by the court until 25 July. The court held that the Rules make it clear that there are two stages to issuing a petition. The first is where it is presented to, or filed at, court (r 4.7(1) IR 1986). The second is when the court seals the petition, endorses it with the venue for the hearing and issues it to the petitioner (r 4.7(5), (6) IR 1986). Although the notice of intention to appoint the administrators was given before the petition was issued, it was given after the petition had been presented and therefore the appointment was invalid. An administrator cannot be appointed by the company out of court when a winding up petition has been presented but not yet dealt with (para 22 Sch B1 IA 1986). A search of the Central Registry of Winding Up Petitions will reveal any petitions which have been presented against a company but not yet heard (a search can be made in person at the Companies Court General Office at the Royal Courts of Justice or by telephone on 0906 7540043 (a premium rate number)). |
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When is a petition presented? See CLM: ¶7672, ¶8765 |
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Re Blights Builders Ltd [2007] All ER (D) 147 (Jan) |
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RECENT CASES |
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UK provides inadequate pension protection for employees of insolvent employers See CLM: ¶7908, ¶8012, ¶8044 |
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Robins and others v Secretary of State for Work and Pensions (ECJ case C-278/05) |
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Under EC law, the UK is required to make adequate provision to protect employees whose employers are insolvent by guaranteeing certain sums due to them as a result of their employment relationship, including retirement and similar benefits (EC Directive 80/987/EEC). The UK has implemented this obligation by enabling “guaranteed payments” to be paid out of the National Insurance Fund to the employees. The NIF then proves as a creditor in the employer’s insolvency instead of the employees for these sums. In addition, occupational pension scheme contributions could be claimed as preferential debts. The applicants in this case were former employees of ASW Ltd, a company in liquidation. There were insufficient assets in ASW Ltd’s pension schemes to secure the benefits of all of the schemes’ members. According to the order of priority set out in the schemes’ rules, pensioners’ benefits had to be secured first, then non-pensioners’ benefits, resulting in the non-pensioners’ benefits being reduced. A group of former employees commenced proceedings against the UK for failing to provide them with the level of protection required by the EC Directive. The High Court sought the ECJ’s opinion on (amongst other things) whether the UK’s system of protection for employees was compatible with art 8 of the EC Directive (which requires member states to protect employees’ and former employees’ rights to benefits under company or inter-company pension schemes outside of the state pension scheme). On the evidence, two of the applicants would receive only 20% and 49% of their entitlements respectively. The UK also provided figures showing that in 2004 around 65,000 members of pension schemes lost over 20% of their expected benefits, with around 35,000 of them losing over half of those benefits. Therefore, the ECJ ruled that the UK’s system could not be said to “protect” employees in accordance with art 8 of the EC Directive. This opinion was not changed by subsequent amendments to the relevant legislation. |
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The case of Barber and Henry v CI Ltd (see Issue 5) has come before the courts again. Mr S, the director of S Ltd, borrowed £65,000 from CI Ltd which was paid into S Ltd's bank account. This made Mr S, and not CI Ltd, the creditor of S Ltd. S Ltd subsequently paid £50,000 (when it was already insolvent) to CI Ltd in discharge of Mr S's debt to CI Ltd and S Ltd's debt to Mr S. Mr S then repaid the remainder of his debt to CI Ltd personally. The joint liquidators of S Ltd applied for a declaration that the £50,000 payment constituted a preference or a transaction at an undervalue. At first instance, the district judge held that the payment constituted a transaction at an undervalue because S Ltd had received no consideration for the payment as it had not been obliged to make it. It was not a preference because CI Ltd was not a creditor of S Ltd. The High Court agreed that the payment constituted a transaction at an undervalue, but on the ground that the consideration for it was so precarious that it could not be treated as valuable consideration. The Court of Appeal has now decided that the payment constituted a preference. By making the payment to CI Ltd, S Ltd gave a preference to Mr S (its creditor) by repaying most of its debt to him and his debt to CI Ltd at the same time. The court found that CI Ltd was aware of S Ltd's financial circumstances at the time it loaned the money to Mr S. It paid the money into S Ltd's bank account because it was more convenient for Mr S. Therefore, it knew (or at least turned a blind eye to the fact) that S Ltd was insolvent when it made the payment. As a result, the court was not prevented from ordering that CI Ltd repay the £50,000. See ¶7811+ for transactions at an undervalue and ¶7819+ for preferences. |
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Transaction at an undervalue or preference? See CLM: ¶7812 |
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Re Sonatacus Ltd, CI Ltd v The Joint Liquidators of Sonatacus Ltd [2007] EWCA Civ 31 |