On the winding up of the company, there had unexpectedly been a surplus of assets after payment of all debts. The court was now asked to determine claims to be allowed before a distribution was made.
Held: The court made declarations as follows: ‘i) The claims of LBHI2 under its subordinated loan agreements with LBIE are subordinated not only to provable debts but also to statutory interest and un-provable liabilities.
ii) Creditors of LBIE whose contractual or other claims are denominated in a foreign currency are entitled to claim against LBIE for any currency losses suffered by them as a result of a decline in the value of sterling as against the currency of the claim between the date of the commencement of the administration of LBIE and the date or dates of payment or payments of distributions to them in respect of their claims. Such currency conversion claims rank as un-provable liabilities, payable only after the payment in full of all proved debts and statutory interest on those debts.
iii) If the administration of LBIE is immediately followed by a liquidation, any interest in respect of the period of the administration which has not been paid before the commencement of the liquidation will not be provable as a debt in the liquidation nor will it be payable as statutory interest under either rule 2.88 of the Insolvency Rules or section 189 of the IA 1986.
iv) Those creditors of LBIE with debts which carry interest by reason of contract, judgment or other reasons unconnected with the administration or liquidation of LBIE will be entitled to claim in a liquidation of LBIE, which immediately follows the administration, for interest which accrued due during the period of the administration, as an un-provable claim against LBIE, payable after the payment in full of all proved debts and statutory interest on such debts.
v) The obligation of members to contribute under section 74(1) of the IA 1986 extends not only to provide for proved debts but also for statutory interest on those debts and un-provable liabilities.
vi) The contributory rule (that is, the rule that a contributory of a company in liquidation cannot recover anything in respect of any claims he may have as a creditor until he has fully discharged his obligations as a contributory) applies only in a liquidation. It does not apply in an administration, including the administration of LBIE. The equitable rule in Cherry v Boultbee also does not apply.
vii) LBIE, acting by its administrators, will be entitled to lodge a proof in a distributing administration or a liquidation of either LBL or LBHI2 in respect of those companies’ contingent liabilities under section 74(1) of the IA 1986 which may arise if LBIE were to go into liquidation. The valuation of such claims would be a matter of estimation under the provisions of the Insolvency Rules.
viii) In a distributing administration or liquidation of LBL or LBHI2, the claims of those companies respectively as creditors of LBIE would be the subject of mandatory set-off against the claims of LBIE in respect of those companies’ contingent liabilities as contributories. I have reached the conclusion that the decision in In re Auriferous Properties Limited (No 1) [1898] 1 Ch 691 was wrong and should not be followed.
ix) In the administration of LBIE the contingent liabilities of LBL and LBHI2 as contributories will be the subject of mandatory set-off against the admitted proofs of debt of those companies as creditors of LBIE.’
Judges:
David Richards J
Citations:
[2014] EWHC 704 (Ch), [2014] WLR(D) 132, [2015] 1 Ch 1, [2014] 3 WLR 466, [2014] BCC 193
Links:
Jurisdiction:
England and Wales
Cited by:
At ChD – LB Holdings Intermediate 2 Ltd, (The Joint Administrators of) and Others v Lomas and Others CA 14-May-2015
Applications after recovery of surplus funds to repay creditors of Lehmann Brothers Ltd. The court had given orders as to the several uses of the surpluses. The parties appealed some elements of those orders.
Held: Most elements were upheld, . .
At ChD – LB Holdings Intermediate 2 Ltd, The Joint Administrators of v Lehman Brothers International (Europe), The Joint Administrators of and Others SC 17-May-2017
In the course of the insolvent administration of the bank, substantial additional sums were received. Parties appealed against some orders made on the application to court for directions as to what was to be done with the surplus.
Held: The . .
Lists of cited by and citing cases may be incomplete.
Insolvency
Updated: 07 August 2022; Ref: scu.522457
