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Fit for purpose implied term

Re: Fit for purpose implied term

Postby atticus » Sun Dec 17, 2017 8:53 am

The primary limitation period for liquidator's claims is 6 years after the date on which the company goes into liquidation.

There was a s423 case something over 10 years ago where the liquidator was held entitled to go back as far as 20 years before liquidation when looking at transactions to which s423 applies. As I recall, that was a case where the transaction was, in essence, a tax fraud and HMRC was prepared to fund the court action.
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Re: Fit for purpose implied term

Postby SPQR49 » Sun Dec 17, 2017 8:59 am

A bit harsh. I will cede the point and acknowledge your interpretation is the correct one!

If this section is engaged however, intention is difficult (sec.423 (3)) as I have insurance of £1 million that covers these claims (they are not debt claims). On that basis the transfers of the assets (which would not cover the potential liability anyway) is secondary (and would have happened in any event as is customary following an acquisition). In other words the purpose is not to defraud anyone because it is my understanding that the insurance will pay out worst case (that is what it is for after all).
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Re: Fit for purpose implied term

Postby atticus » Sun Dec 17, 2017 9:52 am

Be sure that your clever games do not give the insurers grounds to deny cover and leave you without a paddle.
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Re: Fit for purpose implied term

Postby SPQR49 » Sun Dec 17, 2017 9:58 am

20 years. Indeed so atticus:

https://insolvencyviews.wordpress.com/2 ... creditors/

It seems then, the intention/purpose of the transfer is key. As I said the intention of the hive-up (the transaction of transferring the assets) was to release synergies, align business processes, unify common practices, no doubt some tax reasons, TUPE staff across on the same Ts and Cs etc. etc. All the complex reasons one does this kind of this with a Group re-structuring following an acquisition. The purpose was/is not to deprive any creditor even if the consequence of doing so is prejudicial to them. I think that defeats a sec. 423 claim even if it ever got that far, which is extremely unlikely.

Thanks for your valuable contribution on this, much appreciated. I now have a clearer picture of the risks.
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Re: Fit for purpose implied term

Postby atticus » Sun Dec 17, 2017 10:28 am

Funnily enough, that is not the case I was thinking of, although I was aware at the time that Mark Sands was bringing a similar claim in a bankruptcy case.
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Re: Fit for purpose implied term

Postby atticus » Sun Dec 17, 2017 10:31 am

In your list of reasons, you omit one you have mentioned elsewhere in this thread: leaving behind a contract you have described as toxic. Never mind all the management-speak claptrap, that reason will be enough for a liquidator and a court.
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Re: Fit for purpose implied term

Postby SPQR49 » Sun Dec 17, 2017 11:50 am

"clap-trap" I beg your pardon - How very dare you!! Actually, I had an inkling you might say that?!

If the assets are transferred at full value then there can be no claim that they have been transferred at an undervalue. So even if the Inter-Group Business Transfer Agreement transferred all of the (other) assets at full value, leaving this one contract behind as risk allocation, you think that would be enough for a liquidator to invoke sec. 423?

In Delaney v Chen 2010 EWHC Civ 1455 a property transaction by way of sale and leaseback had the effect to deprive creditors. The Debtors claimed their purpose in the transaction was to "retain somewhere to live". And that was accepted even if the (blindingly obvious) effect of that was to make the property immune from the creditors. So my argument following that reasoning is that the "clap-trap" should not be dismissed out-of-hand.

Consider if I had suggested that my reason in a case similar to Delaney was that I structured this deal by way of a transaction that although had the effect of prejudicing creditors claims, my purpose was "simply to find somewhere to live" - I have no doubt you would have given that fairly short shrift! If the other is clap-trap (it isn`t btw) then the Delaney reasoning must be poppy-cock. And yet, it held up.

Obviously, there is a difference between a business (and business assets) and an individual (and individual assets).
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Re: Fit for purpose implied term

Postby atticus » Sun Dec 17, 2017 12:43 pm

If assets are being transferred at full value then exactly how are you leaving the company a shell? It was your repeated use of that phrase that led me to draw the Insolvency Act to your attention.

But perhaps the meaning conveyed by your words was not what you intended.
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Re: Fit for purpose implied term

Postby atticus » Sun Dec 17, 2017 1:16 pm

And how exactly do you "release" a "synergy"?
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Re: Fit for purpose implied term

Postby SPQR49 » Sun Dec 17, 2017 7:14 pm

If assets are being transferred at full value then exactly how are you leaving the company a shell?


Easy.All of the assets except X are being transferred. There is thus 1 contract left behind. - For risk allocation purposes, as I have said..
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