• Consort Healthcare (Tameside) Plc v Tameside and Glossop Integrated Care NHS Foundation Trust [2024] EWHC 1702 (Ch)

    This case is notable as it was the first time the High Court awarded security for costs in a matter concerning a challenge to a proposed restructuring plan. Applications for security for costs in connection with Part 26 schemes and Part 26A plans are rare. Nothing in this judgment suggested that was likely to change. While observing that the court's exercise of discretion in this case was closely linked to the facts of the matter, it should be noted that the court indicated that, although the judgment might nevertheless encourage dissenting creditors in other contested restructuring plan proceedings to make applications for security for costs (which could end up in potential delays or in disruptions to the process), the plan before the court was a continuation of prior adversarial litigation. Whilst this may be a feature of some schemes and plans, it was suggested that this would be rare. No floodgate was opened by this decision. Play Consort Healthcare (Tameside) plc (the Company) was a special purpose vehicle which provided services to the Tameside And Glossop Integrated Care NHS Foundation Trust. This was done under the terms of a 'Project Agreement' entered into in 2007, under a private finance initiative. The Trust was required to redevelop an existing hospital site and then provide services including estate maintenance, security and a help desk. A dispute arose between the Company and the Trust. This went to adjudication, and ultimately resulted in a significant award which was made against the Company in favour of the Trust. The Company's view was that the adjudication award, together with the implications for the level of service that it would have to provide in future, made its business unviable. To avoid this, it proposed a restructuring plan under Pt 26A Companies Act 2006 in order to compromise the claims which had been made against it, and to vary its obligations under the Project Agreement. The Company's view was that without the benefit of a restructuring plan, it would have to go into administration. A restructuring plan was proposed, which involved three creditors. The first two of these supported the plan, but the third opposed it. These were: a) Consort Healthcare (Tameside) Intermediate Limited, which was a group company holding subordinated debt of the Company;   b) Ambac Assurance UK Limited, which was a guarantor of senior debt issued by the Company; c) the Trust.

  • In Re a Company [2024] EWHC 1070 (Ch)

    Did enforcing foreign judgments by winding up just get easier? In this case, the court held that insolvency proceedings were not an "action on a judgment" for the purposes of section 24 of the Limitation Act 1980. This meant that they did not fall within the scope of the Limitation Act, and nor was there any common law limitation period. Play The importance of this judgment is that it brought the principles in Re Drelle v Servis-Terminal LLC (which also appears in this blog) into the wider corporate sphere. The issue of whether any limitation period would apply to prevent the presentation of a winding up petition based upon a foreign judgment was considered here. The present case was essentially an application to restrain presentation of a winding up petition on five grounds. These were: That the judgment debt was time-barred. That it was unclear if there had been an acknowledgment of the debt within the limitation period. That there was a substantial dispute as to whether the judgment debt had been satisfied. That the company was solvent. That it may be appropriate to grant an injunction. The High Court considered whether any limitation period applied to prevent the presentation of a winding up petition based upon a foreign judgment debt that was not subject to the judgment registration schemes under the Administration of Justice Act 1920 or the Foreign Judgments (Reciprocal Enforcement) Act 1933, and was not the subject of a Part 7 claim under the CPR. That would have converted the foreign debt into an English judgment debt. It confirmed the fact that a judgment can be the subject of a petition without such registration or recognition under the Administration of Justice Act 1920 or the Foreign Judgments (Reciprocal Enforcement) Act 1933. In the similar case of Drelle, which is referred to in this blog, whether it was necessary to first seek recognition of a foreign judgment under Part 7 CPR before issuing a bankruptcy petition which was founded upon it was also considered - but in that case the court looked at the similar position arising in the arena of personal insolvency. Crucially, in this case, the court held that the foreign judgment debt could serve as the basis for the presentation of the winding up petition as a matter of English common law. It also held that insolvency proceedings were not an "action on a judgment", so they were not within the scope of the Limitation Act 1980; and that there was no common law limitation period in any case. This meant that the avoidance of 'normal' limitation restrictions in relation to a winding-up petition was an important aspect of this case. The court also found that even if the Limitation Act had applied, the company had acknowledged the judgment debt through its agents within the six year period from the date of the final judgment. It also acknowledged that there was no substantial dispute of a nature which required evidence or hearing. However the court rejected a claim that a payment had been made in satisfaction of the judgment debt. The failure to pay the debt was seen as being of itself an act of insolvency, so the court noted that the underlying solvency of the Applicant was not relevant in this matter. As regards whether it was appropriate to grant an injunction, the court stated that it was likely that a stay in a foreign court, being procedural, would not, in and of itself, stop time running in the English and Welsh jurisdiction.

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    Boughey & Anor v Toogood International Transport and Agricultural Services Ltd (Re Insolvency Act 1986) [2024] EWHC 1425 (Ch)

    Here, the Court considered whose consent was required to extend an administration under paragraph 76 of Schedule B1 to the Insolvency Act 1986; that is, was it current secured creditors only, or was it also secured creditors who had been paid off in full? Play Although the administrators had sought and obtained consent to the extension from the only relevant secured creditor, the issue arose as to whether the administrators should also have sought consent from other parties who had been secured creditors at the time of appointment of the administrators, but had subsequently been paid off.  The Insolvency Service argued that if a creditor was classified as a 'secured creditor' at "the point of entry to the procedure", this classification would remain even if the creditor was then paid in full.  However, the court rejected this contention and held that any creditor whose debt had been paid off was in fact no longer a creditor, citing the definition of "secured creditor" in section 248 Insolvency Act 1986 as a creditor who holds (present tense) security.

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    Re UKCloud Ltd (in liquidation) [2024] EWHC 1259 (Ch)

    Internet Protocol Addresses - fixed or floating charge? The question which arose in this case, and on which the liquidator required the court's direction, was whether the security granted by UKCloud Limited was a fixed charge or a floating charge. Play The reason that the liquidator felt he needed assistance on this question was probably because the label used in a debenture to describe the nature of the charge created over an asset, or class of assets, is a guide to the security the parties intended to create, but it is not conclusive. To attempt to answer this question, the court was fundamentally concerned with the nature of the rights and obligations the parties had intended to create. To come to a conclusion, it considered the essential difference between a fixed charge and a floating charge. The case law indicates that under a fixed charge the assets charged as security are permanently appropriated to the payment of the sum charged, in such a way as to give the chargee a proprietary interest in the assets. For as long as the fixed charge remains unredeemed, the assets can be realised from the charge, though only with the agreement of the chargee. The chargee might have good commercial reasons for agreeing to a partial release. Under a fixed charge, that will be a matter for the chargee to decide for itself. A floating charge contrasts with a fixed charge, however, because in the case of a floating charge the chargee does not have the same power to control the security for its own benefit. In this case, the chargee does have a proprietary interest, but its interest is in a fund of circulating capital. Unless and until the chargee intervenes (by crystallisation of the charge), it is for the trader, not the bank, to decide how to run its business.