CR-2018-009110 - [2025] EWHC 2115 (Ch)

An important preliminary point in this litigation arises from the Administrators’ suggestion that the Applicants are not (or may not be) “creditors". The argument, in a nutshell, is that the term “creditor” does not apply to a person who does not have a valid legal claim on the relevant entity, and the Administrators dispute that the Applicants have any such claim.

The starting point – which I think is uncontroversial – is that if a person simply appears out of nowhere and asserts a claim on the entity concerned, the relevant office-holder is perfectly entitled to refuse to treat him as a creditor unless he can produce some evidence to show that he really does have such a claim. However, Mr Isaacs KC, for the Administrators, goes on to say that an Administrator can (or should) disregard claims put forward by creditors whose claims are “putative” or “disputed”. He therefore argues that, since the Administrator disputes the claims of both BAT and BTI, it is entitled to treat them as not being creditors.

Part of the difficulty here is that an office-holder is in fact required to make two determinations in respect of any particular claim. One is when the proof is adjudicated. However, as Mr Isaacs accepted, it cannot be the case that a person is not a creditor until his proof is adjudicated, since there are a number of elements of the process – most significantly the formation of the Creditor’s Committee – which necessarily occur before any proof is or can be adjudicated. At these stages, the office-holder is required to decide who he will treat as a creditor. It is clearly at least possible that a person who the office-holder initially considers to be a creditor will turn out not to be, and this is neither surprising nor concerning. The office-holder has no choice but to make a determination of this kind at a very early stage in the process, and at that stage he should accept as a creditor any person who has submitted a proof of debt which is prima facie valid. There neither is nor should be either consequence or sanction should a person initially accepted as a creditor turn out on adjudication not to be.

This takes us to the question as to whether the Administrators could validly treat the Applicants (who have submitted proofs of debt) as not being creditors of the Company.

The starting point for this determination is the Insolvency Rules 2016. Rule 14.1(3) provides that:

“(3)

“Debt”, in relation to … winding up and administration, means (subject to the next paragraph) any of the following—

(a)

any debt or liability to which the company is subject at the relevant date;

(b)

any debt or liability to which the company may become subject after the relevant date by reason of any obligation incurred before that date”.

David Richards J in In re T & N Ltd [2006] 1 WLR 1728, para 115, explained that that para (a) is concerned with liabilities to which the company “is subject” at the date of the insolvency event, whereas para (b) is directed to those liabilities to which it “may become subject” subsequent to that date, and that there is no overlap between these two categories.

Rule 14.2(1) of the Insolvency Rules states:

“All claims by creditors except as provided in this rule, are provable as debts against the company or bankrupt, whether they are present or future, certain or contingent, ascertained or sounding only in damages.”

Rule 14.1(5) provides:

“(5)

For the purposes of references in any provision of the Act or these Rules about winding up or Administration to a debt or liability, it is immaterial whether the debt or liability is present or future, whether it is certain or contingent, or whether its amount is fixed or liquidated, or is capable of being ascertained by fixed rules or as a matter of opinion; and references in any such provision to owing a debt are to be read accordingly.”

As Neuberger JSC observed in In the matter of the Nortel Companies [2013] UKSC 52, this definition is “strikingly wide” (at [66]).

Having established these principles, we turn to the question of whether the Administrators could legitimately have determined that either BAT or BTI were not in fact creditors. I note in this regard that Mr Isaacs frequently referred to these entities as “possible creditors” or “disputed creditors”. For this purpose, these categories do not exist – the question is simply as to whether the office-holder, acting within the four corners of his authority, should regard the persons concerned as creditors or not.