A liquidator rejected creditors’ claims. The creditors successfully appealed that decision and sought the costs of that application from the liquidator personally under rule 4.83 of the Insolvency Rules 1986 (as it then was) on the assertion that the reason the liquidator rejected the claims was that they exceeded the value of a potential misfeasance claim against the creditors and he did not want set off to defeat the misfeasance claim.
- The creditors suggested that the liquidator had been acting for his own personal advantage regarding the uplift arrangement in place for the misfeasance claim, but this was rejected by the Judge
- The creditors also asserted that the liquidator’s motive was to advance the misfeasance claim by rejecting the claims in the run up to a limitation deadline. The Judge found however that the liquidator was ‘entirely justified’ in rejecting the original proof of debt and could not be criticised for not giving the creditors more time to amend their claims
- In respect of the liquidator’s conduct during the proceedings, the Judge found that he was justified in contesting the claims and had acted reasonably.
The Judge therefore dismissed the application, but held that the costs were payable as a liquidation expense, albeit that the Judge only awarded the creditors 80% of their costs.