In Re: Michael McLoughlin Pharmacy Ltd. The examiner sought the High Court’s approval for a scheme of arrangement which limited his liability for negligence. The secured creditor objected as a matter of principle because such limitations of liability had become commonplace in schemes. The secured creditor made it clear that there was no suggestion of any negligence by the examiner in the particular case.

The court considered:

  • the fact that the Companies (Amendment) Act 1990 made no explicit provision for such a clause;
  • that an examiner has recourse to the courts do determine difficult questions pursuant to section 7(6) of the 1990 Act; and
  • that to imply the power to approve such a clause into the 1990 Act would create an anomaly between failed and successful examinerships as no such indemnity would exist in favour of the examiner in a failed examinership

and held that it had no jurisdiction to approve a scheme which contained a limitation of liability.

Comment

Examiners may not insert an exclusion or limitation of liability clause into a scheme of arrangement and to the extent that they may need to make decisions which could potentially expose them to risk they should apply to the court to gain a level of protection.

The decision means that examiners are in a similar position to liquidators or administrators of insolvent insurers which seems appropriate.

To prove negligence against an examiner is likely to be a difficult matter given that the courts are unlikely to want to revisit bona fide commercial judgment by an examiner in execution of his functions.