Wednesday 25 May 2022

UK: England and Wales: Court of Appeal considers application of section 168(5) of the Insolvency Act 1986

Earlier this month the Court of Appeal gave judgment in Re Edengate Homes (Butley Hall) Ltd [2022] EWCA Civ 626. The case is of interest because of the discussion it contains concerning the application of section 168(5) of the Insolvency Act 1986. This provision provides that where "any person is aggrieved by an act or decision of the liquidator, that person may apply to the court; and the court may confirm, reverse or modify the act or decision complained of; and make such order in the case as it thinks just." Males LJ, with whom Stuart-Smith and Aplin LJJ agreed, stated (at para. [36]): 

It is not sufficient that an applicant for relief under section 168(5) is a creditor of the insolvent company. It must in addition have a legitimate interest in the relief sought. Where the application is to set aside a disposal of property by the liquidator, including the assignment of a claim, an applicant will have a legitimate interest if it is acting in the interests of creditors generally. Typically that will be the case when the effect of the relief sought will be to maximise the assets of the estate. But an applicant will not have standing if the relief sought is contrary to the interests of the creditors as a class, as it will be where that will result in a lesser recovery."

The case reached the Court of Appeal because, it seems, the trial judge was of the view that the case law authorities were inconsistent. This view was rejected by the Court of Appeal, with Males LJ observing: "the principles are clear and have been consistently applied" (para. [37]).

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