Insolvency 31/03/2023 Class

- We’ve covered enough for you to appreciate them for. One, that receivership
is not strictly speaking an insolvency jurisdiction. Why? Because it is not, it is
not a jurisdiction that is collective in nature. This is not a jurisdiction that is
designed to protect creditors. That is moved by the creditors in general. It is
really the remedy which the holder of an appropriate security, the remedy that
that holder uses. To enforce his rights, the appointment of the receiver. Now
we have looked at the distinction between the receiver and the receiver
manager. To enforce his rights, the appointment of the receiver. Now we have
looked at the distinction between the receiver and the receiver manager.

- We have also looked at what is meant by the “necessity” for making a demand
in the context of the appointment of a receiver. It's necessary for us to go over
that a bit because I take it that you've looked at the, assignment question and
even if you have not, it's, this is key to an understanding of the movement of
the law in this area. So, let's look that tonight and this is where some of it
would be us rehashing material that we've already covered.

- So, we have to look at one, what is meant by a demand. Is it necessary? And if

it is, If it is necessary, how much time do you need to give after a demand and
before pointing a receiver?

- In the 19th century common law decision of Norton v Elam it was held that
there is no obligation to make a notice. If you choose to make demand part of
the contract you may do so. The cause of action arises instantly on the loan.

- In Lister v Dunlop the Canadian courts held that for the purposes of Canada,
service of a demand for payment must be made

- In 20th century England, the decisions of Winsor Refrigerator Company and

Cripps v Wickenden the courts seem to recognize that a demand is necessary
but in both cases the debenture actually provided for the service of a demand.

- In Australia the courts have not gone as far as Canada. They held it was all a
matter of construction to see what the parties agreed – Pan Foods Company v
New Zealand Banking Group

- In the Barbados case of CIBC v Gypsy the trial judge followed the Australian
decision. The Court of Appeal followed Lister. But the CCJ followed the
position of the Australian Courts. This decision is out of line with the
jurisprudence in Canada and the general movement in the law towards
corporate rescue.

- Because of these international trends, some regional legislation has stipulated

that a receiver can only be appointed after a demand is given. E.g. Bankruptcy
and Insolvency Act of Barbados.
- How much time must the borrower be given to satisfy debt to the lender-
cases – Toms v Wilson 122 ER at 524, Cripps v Wickenden, Bright v Norton,
Bank of Baroda v Panessar

- In the UK the borrower gets sufficient time to put the mecanics of payment
into work for payment of the debt. In Panessar the court held that the creditors
must give only enough time to a borrower to allow them to get the money
from “some convenient place”. The borrower is not in default till he has a
reasonable opportunity to implement the mechanics of payment needed to
discharge the debt

- If you look at the cases, the time the court held to be sufficient was just an
hour or two. This is stringent and erodes the “reasonableness” of the test.

- Shepphard v TSB Bank is another case to look at. It says that if the debtor
makes it clear that the funds are not available there is default an not need fo r
notice.

- Australia took the middle road approach. See Bond Brewery v National
Australia Bank. Borrowers should be given sufficient time to effect
refinancing. This is echoed in the Canadian cases.

- Also see the Canadian cases of Broadloom v Bank of Montreal and Kavcar v
Aetna Financial Services

- In all of these cases the Canadian courts say that the borrower is entitled to
reasonable time to effect the financial obligations. That’s a progressive step
away from the mechanics of payment test which exists at common law in
England because it does not allow a borrower time to effect financing; it
simply allows the borrower time to implement the mechanics of payment
towards paying the loan. Re what is meant by “Reasonable time to effect
financing” see Article by Jacob Ziegel.

- Also see the decision of Whonnock Industries v National Bank of Canada

1987 6 war 316

- In jurisdictions such as Barbados with the Bankruptch legislation demand

must be made + time must be given for compliance.