A professional self-portrait. This is my characterisation for the book with the title ‘The Framework of Corporate Insolvency Law’, written by Hamish Anderson. Hamish was a partner and now consultant of Norton Rose Fulbright LLP, and – since 2016 – a Honorary Professor at Nottingham Trent University. Anderson and (now) Lord Justice David Richards (I take from his Foreword to the book) started practice in the same period (I guess in the late 70s) when English insolvency law was a patchwork of primary and secondary legislation and cases, and Anderson belonged (as he writes in the Preface) to a generation of insolvency lawyers which were largely self-taught.
Anderson has set out to write a book that he wished he had had to hand when he started his journey. To take away any uncertainty, I think he past his self-imposed task gloriously. Practitioners as well as scholars will not be disappointed with the meal served by the author. He typically looks at themes and matters in a more functional, practical way, which Anderson deals with in 22 Chapters. In doing so, it strikes, that the author focuses throughout on understanding the purpose and the function of a certain rule, and he provides a demonstration how that understanding might guide or form an impulse for future developments. From a non-UK angle, I will make a few remarks.
The scene is set by chapters 2 to 5, with topics such as the functions and objectives of insolvency law, the concept of insolvency proceedings, the meaning of insolvency and the ‘modern patchwork’ of sources of English corporate insolvency law, ie the Insolvency Act 1986, the Company Directors Disqualification Act, its secondary and other domestic legislation, ‘common law’, ‘equitable principles’ and European law. The author treats the latter (mainly the EU Insolvency Regulation, constantly but mysteriously referring to ‘Regulations’ in plural) as a source of English law, as European law has an overriding effect (save for section 426). I would add as distinctive feature that this part of the law follows its own interpretation rules, guided by the CJEU, according to which certain terms will sometimes get an autonomous interpretation, and, when applying the Regulation, a purposive interpretation is much more relevant than for instance a more historic or systematic one.
With the rules of allocating a larger set of procedural solutions in the UK, in which loss is allocated to all stakeholders, I agree with Anderson, that it is doubtful whether the classical divide between legal systems as being ‘creditor-friendly’ or ‘debtor-friendly’ serves a useful purpose any longer. Indeed, changing economic conditions and social attitudes may shift the balance between the rights of the creditors, of the debtor and the interests of the society at large, in which a business rescue tendency might produce certain limitations to the unbridled freedom to exercise individual creditors rights, and bring these for instance in balance with the rights of the creditors as a whole and a country’s policy to support restructuring and rescue attempts.
Chapters 6 to 10 consider the English corporate insolvency proceedings available under the Act (liquidation, administration and company voluntary arrangements), including ‘the rise and fall’ of administrative receivership, taking away steering mechanism to influence the conduct of administration via a bank holding a qualifying floating charge. At that time, we heard loud shouts from banks predicting doom on the provision of credit! It turned out better, to the detriment of a bank’s reputation to reliably predict the development of a market. Well-known in Europe are schemes of arrangement, however – as Anderson explains – these are no insolvency proceedings; they have their basis in the Companies Act and can be initiated without a requirement of being insolvent or even anticipated insolvency. Schemes have become popular since the early 2000s as a means of restructuring the claims of finance creditors of both English and non-English companies, especially when these companies have no trade creditors, rather act as finance vehicles within a group structure, and the underlying business is carried out by separate operating subsidiary companies. Anderson contrasts in detail Schemes and CVAs. One of these differences is the rather unsettled use of a Scheme (also after Apcoa and Codere) in respect of jurisdiction and, consequentially, the recognition of an English Scheme elsewhere. New to the string of cases is Re Algeco Schotsman PIK S.A.  EWHC 2236 (Ch), concerning a Luxembourg company, ‘… an example, if one has to use the phrase, of “good forum shopping”’, Hildyard J said. The author furthermore paints the future in the light of the Review of the Corporate Insolvency Framework, a report issued in 2016 by the Insolvency Service, and the ‘judicial construct’ of insolvency proceedings as a creditors’ rights class remedy.
Chapters 11 to 13 turn the focus on insolvency office-holders, the ‘inherent’ jurisdiction of the English court over ‘officers of the court’, and the regulation of insolvency practice. There are many characteristics of insolvency officeholders, including (as explicitly in Germany) the personal nature of an insolvency appointment, the fiduciary nature of the officer’s role and the officer’s interactions with the court. The rule in Ex Parte James, a 1874 case, is explained, which means that an office-holder acting as an officer of the court is not allowed to pursue a course of conduct or take advantage of a technical position in law, where it would be dishonourable to do so. From this it follows that Article 36 EU Insolvency Regulation Recast, the unilateral undertaking of a main insolvency practitioner to foreign creditors as if secondary proceedings had been opened (synthetic secondary), is a European concept in its own right and not substituting the English rule, as developed in Nortel Network and Collins & Aikman. With ‘Insolvency practice is highly regulated’, the author begins an overview of the specific organisation of the regulation of insolvency practice, a mix of government control (and within it the Insolvency Service), the licensing of around 1650 IPs by (now 5) recognised professional bodies (RPBs), responsible for ensuring the IPs compliance with the law and practice standards. I agree with Anderson that regulation is needed as the day-to-day conduct of insolvency proceedings is in the hand of IPs who are trying to align sometimes contrasting interests. The English complaints procedure, both with regard to IPs as well as the services of the Insolvency Service, can stand out as a true benchmark for professional behaviour.
In Chapters 14 and 15, the meaning of ‘property’ (as the basis of the insolvency estate) is extensively explained, whilst the ‘reconstitution’ of the estate (the Dutch and the French call it ‘reconstruction’) leads Anderson to a creative categorisation of transaction avoidance remedies in three separate groups: retentive, restorative and dispositive avoidance. A practical assessment continues by the necessity for an office-holder to fully understand the debtor’s property, business and affairs and the provisions in the Act that support office-holders (and do not apply to CVAs). They relate to duties to cooperate, powers to (public, and more important private) examination, the role of the privilege against self-incrimination and legal professional privilege. Anderson observes that most insolvencies result ‘… from a degree of culpable mismanagement’, subsequently explaining all type of offences and the potential tensions in the co-operation of an office-holder with prosecuting and regulatory authorities, a paragraph Dutch office-holders may consider to read, after the July 1 legislation has brought a duty to report fraud. These paragraphs conclude with subjects that provide a good insight into fraudulent and wrongful trading and the English 30+ years system of disqualification of company directors.
Under the heading ‘Phoenixism and Pre-Packing’ Anderson examines controversial phenomena, that came to Europe more recently from across the Channel. Here the inherent tension between opposite interests: the insolvency office holder’s duty to maximise realisation (obtaining the ‘best’ and the ‘proper’ price, ie market value) and the policy of taking appropriate steps to achieve this, including disposal to connected parties and sufficient transparency, and the Statement of Insolvency Practice (SIP 13) are reviewed, as well as the pre-pack, the role of the court and SIP 16, and the Graham Review (‘big questions’, the author acknowledges). He concludes that the logic model of administration in the Act no longer meets the commercial needs of stakeholders. Anderson states that the present solution in a new paragraph 60A, under which the Secretary of State has the power to make regulation to prohibit sales to connected persons in certain circumstances is not radical enough. Stricter rules will be necessary to give creditors more confidence in the whole process. Anderson now should have time, based on his experiences, to develop his proposals for further discussion.
Chapters 19 to 21 related to the distribution of the estate, the concept of priority of expenses including their priority and the ranking of creditors. The drivers of distribution are legislative rules as well as practical policies. With a final chapter on cross-border insolvency, explaining the ‘characteristic Anglo-Saxon cocktail of measures’ in this field (Insolvency Act; 2006 Regulations, common law, EU Insolvency Regulation) the book ends. The practical application of these rules, Anderson must have experienced personally, lead to ‘… a form of legal archaeology in which the practitioner digs through successive layers of law in search of a solution’. He describes the high-water mark of modified universalism in Re HIH and the retreat from Cambridge Gas to Rubin v Eurofinance SA (the battle between Lord Hoffmann’s ‘… principle of (modified) universalism, which has been the golden thread running through English cross-border insolvency law since the 18th century’ and Lord Collins’ retort, that it is ‘only a trend’). Indeed, judicial communication and cooperation is a rapidly developing field, as Anderson observes. The JIN Guidelines, he shortly refers to, if fact already have been integrated in London procedural practice, see http://www.bobwessels.nl/blog/2017-10-doc3-chancery-guide-amended/.
A long career as a practitioner allowed Anderson to invite the reader to look into his mirror, a journey of some 40 years as a professional. Many of the tourist tips he gives may be of use for continental practitioners as well as inspirational for scholars. They should take account of the broad and thorough explanations given during the critical examination of modern English corporate insolvency law.
Hamish Anderson, The Framework of Corporate Insolvency Law, Oxford University Press 2017, 304 pp. ISBN 978 0 19 880531 1
Note: this book I received free of charge from the publisher with the request to announce it or to review it on my blog at www.bobwessels.nl.