Husky Group LimitedHindsight is a wonderful thing isn't it?
Recently we acted for David Watchorn of Elwell Watchorn & Saxton, in challenging the assignment of Husky’s trademarks, some 13 months before it went into liquidation, as a transaction at undervalue under s.238 of the Insolvency Act and transaction defrauding creditors under s.423 (case reference, bailii reference http://www.bailii.org/ew/cases/EWHC/Ch/2014/3003.html
Judgment in the claim was handed down in July 2014. The case is of note in clarifying the extent to which the court can rely on the benefit of hindsight, in determining the issue of whether or not the company was insolvent at the time of the transaction or became so as a result of it.
In this case Husky was prima facie solvent on a balance sheet basis in that the value of its assets exceeded the value of its liabilities. Cash flow insolvency was difficult to establish since there was no evidence to suggest that the company was under creditor pressure at the time of the transaction. The Judge however took the opportunity to refer back to an old case in England and a more recent case in Australia, which enabled him to take advantage of the benefit of hindsight of what happened to the company’s assets after the trademark assignment. Taking account accordingly of the company’s statement of affairs, the truth of which the director had confirmed on oath, and actual values realised subsequently during the liquidation for assets included on the balance sheet, which in the main was nil, the judge found that the assets had no or minimal value so that the company was in fact insolvent on a balance sheet basis at the relevant time notwithstanding the appearance of their accounts.
The case was also notable for the relief obtained by the liquidator, which included an additional sum under the new Part 36 offer to settle rules of 10% of the value of the claim.
What can you expect for the future of insolvency litigation?
April 2015
In the Husky case we acted for the liquidator on the basis of a CFA, with ATE insurance (all recovered in full). While the Government’s decision does not yet appear to be final (maybe it will be shelved before the election), it seems a 99% certainty that the recoverability of CFA mark ups and ATE premium which still applies to insolvency cases will be removed by statute in April 2015. Therefore we recommend a review of all present cases to identify those where proceedings should be commenced now or at least before 1 April 2015, to preserve the ability to claim the CFA mark up and ATE premium. We are here to assist!
And thereafter....
The changes to recoverability of CFA mark ups and ATE premiums follow on 2 years after they were removed in non-insolvency cases. The funding and costs landscape for non-insolvency cases have changed significantly as a result of the Jackson reforms to civil litigation and are likely to change even more as further reforms are made as a part of Lord Justice Jackson’s continuing review and implementations. The next step is likely to be that a fixed cost recovery regime will be introduced for all multi track cases (any claim for less than £2M where the trial will take more than one day), which is likely to be linked to a percentage value of the claim. We are also hearing rumours from those in the know in the judiciary, that the High Court in London will be looking to push more and more insolvency work out to regional District Registries and County Courts. As is apparent from the impending changes to CFA and ATE recoverability, reforms to insolvency litigation tend to follow regular civil litigation reforms 2 or 3 years later. The need to get work done locally and at the right levels of seniority will therefore become more and more important. With our network of offices we are perfectly placed to fulfil your legal requirements.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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