In re Sigma Finance Corporation (in administrative receivership) and In re the Insolvency Act 1986 (First Appeal)

Case summary

Case ID

UKSC/2009/0143

Parties

Appellant(s)

B

C

D

Respondent(s)

A

Security Trustee

Administrative Receiver

Issue

See judgment

Facts

Sigma Finance Corporation is a structured investment vehicle (SIV) established to invest in certain types of asset-backed securities and other financial instruments. Sigma aimed to profit from the difference between the cost of funding its activities and the returns made on its investment portfolio. However, the impact on the financial markets stemming from the sub-prime mortgage market in the United States has meant that Sigma’s available assets now fall very far short of the amount needed to pay even the secured creditors of the SIV. All of Sigma’s assets are secured under a security trust deed (STD) in favour of those of its creditors investing in and through Sigma. The dispute in this case is between various classes of creditors as to the correct application of the STD where Sigma has insufficient funds to satisfy all its creditors and had failed to meet a margin call. The STD provided that in that event there should be a 60 day realisation period during which the trustees should use Sigma’s assets to create, so far as possible, two pools of funds relating to its short and long term liabilities. But clause 7.6 of the STD also provided that: “During the Realisation Period the Security Trustee shall so far as possible discharge on the due dates therefor any Short Term Liabilities falling due for payment during such period, using cash or other realisable or maturing Assets of the Issuer.” The Court of Appeal, by a majority, construed clause 7.6 as meaning that the remaining assets fall to be distributed preferentially to the creditors whose debts fall due during the realisation period, with distribution to be made according to the dates when payment became due.

Date of issue

24 February 2009

Judgment appealed

Judgment details

Judgment date

29 October 2009

Neutral citation

[2009] UKSC 2

Judgment links

Appeal

Justices

Lord Hope

Lord Scott

Lord Walker

Lord Mance

Lord Collins

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