Corporate insolvency – insolvency appointments – r.4.70(2) Insolvency Rules 1986 – creditors’ meetings – cross claims – liquidated sums – voting
Adlon had a judgment debt against Kingstons in the sum of approximately £335,500 arising from a construction contract. Kingstons went into CVL and Adlon submitted a proof of debt in the sum of approximately £1.2 million, comprising the judgment debt, an additional sum pursuant to the JCT Conditions for delay, damage, loss and expense (the DDLE claim) and retained monies not yet paid under the construction contract (the moiety). At the creditors’ meeting on Adlon’s claims, the chairman admitted for voting purposes the judgment debt, deducted from the DDLE claim a set-off for alleged defects and allowed £1 in respect of the claim for the moiety. Had the chairman allowed the claim for the moiety in full the creditor would have had sufficient voting power to pass its resolution to appoint a joint liquidator (in addition to the one appointed in the event).
Adlon applied for an order under r.4.70(2) to vary or set aside the decision of the liquidator as to the amount for which it was admitted for voting purposes.
The Registrar held there were strong arguments in favour of treating a claim and a cross claim separately when valuing a debt for voting purposes, notwithstanding r.4.90. Rule 4.90 did not displace the clear wording of r.4.70(3) and, accordingly, if the chairman was in any doubt whether a proof should be admitted, the chairman should mark the debt as objected to yet still allow the creditor to vote. Further, the chairman was not entitled to value the claim in respect of the moiety at £1 – she had to either admit the claim, reject it or mark it as objected to and allow the creditor to vote upon it.
At the hearing the liquidator sought to augment the value of the cross claim in an attempt to defeat the claim in respect of the moiety. The Registrar held that, there being no cross appeal, she was not entitled to do so. The remit of the court under r.4.70(4) was limited to the scope of the appeal itself and to determining whether or not the debt existed at the date of the meeting, not to determining its quantum. The liquidator should have admitted the debt relating to the moiety in its entirety.
Since the respondents had shown every intention of rejecting the creditor’s proof at a subsequent meeting, the court itself appointed the joint liquidator.
The case highlights the importance of carefully wording any appeal to the court pursuant to r.4.70(2). It also illustrates circumstances in which the court may intervene to take direct action pursuant to r.4.70(4) rather than merely ordering a new meeting.
