Summary

The case provides guidance for liquidators as to the appropriate exercise to conduct when deciding whether the threshold of 25% in value of creditor claims has been reached in support of a request for a creditors’ meeting under s 171.

Key point

  • A liquidator is not required to apply a ‘strict proof’ test to a creditor’s claim at the requisition stage of a creditors meeting.

The facts

In November 2014, the company entered into a creditor’s voluntary liquidation.

In September 2015, the applicant requested that the liquidator hold a creditors’ meeting for the purpose of considering his removal as liquidator, pursuant to s 171 Insolvency Act 1986. The liquidator refused on the grounds that the request had not been supported by 25% in value of the company’s creditors. The court considered the exercise that should be carried out in order to ascertain whether the 25% threshold had been reached.

The applicant argued that the liquidator was not required to assess the merits of a creditor’s claim at the requisition stage. Conversely, the liquidator argued that he was obliged to put the claim to strict proof by assessing each creditor claim based on the evidence available to him.

Decision

Guidance on the issue had been given in the dicta set out in Re Greenhaven Motors. The exercise in respect of creditor claims to be undertaken by the liquidator at a creditors meeting was different from that at the requisition stage. Determining whether 25% in value of the creditors had requested the meeting only required the liquidator to eliminate ‘connected party’ or obviously wrong claims.

The degree of scrutiny exercised by the liquidator in deciding whether (and then refusing) to call a meeting of the creditors exceeded what was necessary at that stage.