In this case, a liquidator had commenced proceedings against the former director of a company in relation to transactions which were alleged to have been made at an undervalue and/or with an intention to defraud creditors and/or which were preferential. It was also alleged that the former director had acted in breach of his fiduciary duties in procuring or permitting the transactions to take place.

The liquidator negotiated a settlement of the claims on the basis that all creditors would be repaid in full, but that the repayment would be made over a period of one year. In order to agree the settlement, the liquidator sought the sanction of the company's creditors in accordance with section 165 of the Insolvency Act 1986 ("the Act"). However, the creditors wanted all sums due under the proposed settlement to be paid immediately and refused to sanction the settlement. The liquidator subsequently applied to the High Court for an order sanctioning the settlement in accordance with section 165(2)(b) of the Act. The High Court sanctioned the settlement, and the company's major creditor appealed the decision.

The Court of Appeal upheld the decision of the High Court. The liquidator had obtained an opinion from Counsel in support of the settlement and there was a clear rationale for the settlement to be made. The High Court was therefore correct to sanction the settlement instead of requiring the liquidator to attempt to negotiate immediate payment of the settlement sums in circumstances where there was no evidence that this could be achieved.

Case: Rubin v Coote [2011] EWCA Civ 106