BL-2022-000438 - [2025] EWHC 2212 (Ch)

Cashflow insolvency

The Defendant also contends that the Company was insolvent on a cashflow basis by March 2010 because the cashflow insolvency test includes examining debts which fall due in the “reasonably near future”. The Defendant argues that the villas were meant to be sold as soon as reasonably practicable and the “reasonably near future” encompassed a time when the villas would be sold. Mr Dunn’s loan would need to be repaid once the villas were sold and the Company would have been unable to repay the loan in full.

As regards the legal principles, I rely on Lewison LJ’s judgment in Bucci v Carmen (Liquidator of Casa Estates (UK) Ltd) [2014] BCC 269 [27] to [28] which in turn sought to summarise the Supreme Court’s decision in Eurosail. I note the passages which state “The cash-flow test looks to the future as well as to the present”, “The future in question is the reasonably near future; and what is the reasonably near future will depend on all the circumstances, especially the nature of the company's business”, “The test is flexible and fact-sensitive”, “The test of cashflow insolvency and balance sheet insolvency stand side by side” and “The express reference to assets and liabilities [in the balance sheet test] is a practical recognition that once the court has to move beyond the reasonably near future any attempt to apply a cash-flow test will become completely speculative and a comparison of present assets with present and future liabilities (discounted for contingencies and deferment) becomes the only sensible test”.

This argument by the Defendant is effectively a repackaging of the balance sheet insolvency argument. I do not consider it illuminating to consider the issue through the lens of cashflow insolvency. My conclusions are as follows:

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