BNY Corporate Trustee Services Ltd and Others v Neuberger: SC 9 May 2013

Potential Insolvency effect under guarantee

The various parties had entered into complex and substantial financial arrangements incorporating guarantees. The guarantees were conditional upon the guaranteed party being solvent. The parties disputed whether a party which would otherwise be insolvent could call in aid possible longer term claims.
Held: The appeal failed, but the result was upheld on a different reasoning. Section 123 should not be read to have substantially change the law, and therefore when considering projected cashflows, it was correct to include debts falling due from time to time in the forseeabe reasonable future as well as those already due. It was necessary however to avoid including sums which would be properly described as merely speculative. Each case must be looked at in its own particular context, having particular regard to the nature of the business. The relevant test was properly the ‘balance sheet test’. A party wishing to say that a sum should not be so properly included had the responsibility of establishing that.
Lord Hope, Deputy President, Lord Walker, Lord Mance, Lord Sumption, Lord Carnwath
[2013] UKSC 28, [2013] BCC 397, [2013] 1 WLR 1408, [2013] 3 All ER 271, [2013] 1 BCLC 613, [2013] Bus LR 715, [2013] 2 All ER (Comm) 531, UKSC 2011/0086
Bailii, Bailii Summary, SC Summary, SC
Insolvency Act 1986 123
England and Wales
At First InstanceBNY Corporate Trustee Services Ltd v Eurosail-UK 2007-3BL Plc and Others ChD 30-Jul-2010
The parties disputed whether the respondent was in law insolvent at the time it entered into financial transactions with it.
Held: The Court rejected the Noteholders’ submission that Eurosail was plainly insolvent for the purposes of section . .
Appeal fromBNY Corporate Trustee Services Ltd v Eurosail-UK 2007-3BL Plc and Others CA 7-Mar-2011
The court was asked questions to interpret the terms of interest-bearing notes, which were issued by Eurosail-UK 2007-3BL PLC, a special purpose vehicle formed to hold income-producing assets, consisting of mortgage loans, to be used to meet the . .
CitedCornhill Insurance plc v Improvement Services Ltd 1986
Held: Where a company was under an undisputed obligation to pay a specific sum and failed to do so, it could be inferred that it was unable to do so; that accordingly, the defendants could properly swear to their belief in the plaintiff company’s . .
CitedIn Re European Life Assurance Society 1869
Sir William James V-C dismissed a petition for the winding up of a company which had issued large numbers of life policies and annuity contracts, and appeared to be in financial difficulties. He rejected the basis of the ‘just and equitable’ ground . .
CitedIn Re Capital Annuities Ltd ChD 1979
Slade J said: ‘From 1907 onwards, therefore, one species of ‘inability to pay its debts’ specifically recognised by the legislature as a ground for the making of a winding up order in respect of any company incorporated under the Companies Acts was . .
CitedIn re a Company (Bond Jewellers) ChD 21-Dec-1983
A tenant company had a propensity for postponing payment of its debts until threatened with litigation. Nourse J felt unable to make an order under section 223(d), and considered, but ultimately did not make an order, on the ‘just and equitable’ . .
CitedByblos Bank SAL v Al-Khudhairy CA 1987
The parties disputed the validity of the appointment of a receiver. The ostensible ground for appointment of the receiver was not made out, but the bank relied on a new ground, section 223(d) of the 1948 Act. Nicholls LJ observed: ‘Construing this . .
CitedIn re a Company (No 0012209 of 1991) ChD 1992
It is an abuse of the process of the court to make a statutory demand or present a winding-up petition based on a claim to which there is a triable defence. Where a statutory demand is made but disputed on reasonable grounds, the creditor may find . .
ApprovedIn re Cheyne Finance Plc (No 2) ChD 17-Oct-2007
The court was asked as to the treatment of the assets of the company in case of a future insolvency.
Held: Briggs J decided section 123(1)(e) required: ‘In my judgment, the effect of the alterations to the insolvency test made in 1985 and now . .
CitedRainy Sky Sa and Others v Kookmin Bank SC 2-Nov-2011
Commercial Sense Used to Interpret Contract
The Court was asked as to the role of commercial good sense in the construction of a term in a contract which was open to alternative interpretations.
Held: The appeal succeeded. In such a case the court should adopt the more, rather than the . .

Lists of cited by and citing cases may be incomplete.
Updated: 28 July 2021; Ref: scu.503498