Thursday, 9 May 2013

UK: Supreme Court gives judgment in BNY Corporate Trustee Services appeals

The Supreme Court gave judgment today in the BNY Corporate Trustee Services Limited appeals: see here (pdf). A summary is available here (pdf). Amongst other things, the court considered the practical effect of section 123 ("Definition of inability to pay debts") of the Insolvency Act 1986. In this regard, Lord Walker (with whom Lords Mance, Sumption Carnwath agreed) observed (para. [37]):

[T]he provisions of section 123(1) and (2) should in my view be seen ...  as making little significant change in the law. The changes in form served, in my view, to underline that the “cash-flow” test is concerned, not simply with the petitioner’s own presently-due debt, nor only with other presently-due debt owed by the company, but also with debts falling due from time to time in the reasonably near future. What is the reasonably near future, for this purpose, will depend on all the circumstances, but especially on the nature of the company’s business. ... The express reference to assets and liabilities is in my view a practical recognition that once the court has to move beyond the reasonably near future (the length of which depends, again, on all the circumstances) any attempt to apply a cash-flow test will become completely speculative, and a comparison of present assets with present and future liabilities (discounted for contingencies and deferment) becomes the only sensible test. But it is still very far from an exact test, and the burden of proof must be on the party which asserts balance-sheet insolvency"

A summary of the court's decision was delivered by Lord Hope and can be watched here:

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