Bucci v Carman (Liquidator of Casa Estates (UK) Limited)
2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
- LORD JUSTICE SULLIVAN
- LORD JUSTICE LEWISON
Areas of Law
- Corporate Law
- Insolvency Law
2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
AI Generated Summary
The case involves Casa Estates (UK) Ltd in liquidation and concerns transactions made to Mrs. Bucci at an undervalue. CASA UK liquidator sought to recover monies arguing insolvency. Initial ruling favored Mrs. Bucci; however, Warren J reversed it on appeal, leading to further appeal by Mrs. Bucci. The key issues involved criteria of company's inability to pay debts and court's authority to re-evaluate facts.
Judgment
Lord Justice Lewison:
The issue
The legal issue raised in this appeal is: when is a company deemed to be unable to pay its debts, with the result that it is insolvent? The procedural issue is whether the intermediate appeal court was entitled to substitute its own evaluation of the facts upon which the answer to the legal question depends.
The issue arises in the context of an application by the liquidator of Casa Estates (UK) Ltd (“Casa UK”) to recover monies paid out by the company to Mrs Bucci under transactions which were transactions at an undervalue. Since Mrs Bucci was a person connected with the company, she had the burden of rebutting the statutory presumption that it was not insolvent at the time when the payments were made. HH Judge Purle QC decided that she had discharged that burden. But on appeal Warren J disagreed with HH Judge Purle QC and held that she had not. Warren J’s judgment is at [2013] EWHC 2371 (Ch) , and is available on BAILII.
Mrs Bucci, represented by Mr John Randall QC and Mr James Morgan, appeals. The appeal is resisted by Mr Hermann Boeddinghaus and Mr Alexander Cook, appearing on behalf of the liquidator.
The legislation
Section 123 of the Insolvency Act 1986 defines when a company is deemed to be unable to pay its debts. Section 123 (1)(e) says that a company is deemed to be unable to pay its debts:
“… if it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due.”
Section 123 (2) says that:
“A company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company’s assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.”
The test in section 123 (1) (e) is usually known as the test of cash-flow solvency; and the test in section 123 (2) as the test of balance sheet solvency, although these are no more than convenient shorthands.
Section 238 enables an office holder, such as a liquidator, to apply to the court for an order reversing a transaction made at a significant undervalue by an insolvent company. In the case of a transaction with a person connected with the company this potentially applies to a transaction made in the two years preceding the onset of insolvency: section 240 (1). It will apply if, at the time of the transaction, the company is unable to pay its debts within the meaning of section 123. But in the case of a transaction mad