Courts Plc (In Liquidation)

Courts Plc (In Liquidation)

Section 176A(5) does not confer jurisdiction to partially disapply section 176A(2); the disapplication is all or nothing. The principle of pari passu distribution prohibits selective exclusion of creditors from the prescribed part. The court cannot sanction a regime where only larger creditors benefit. Even if jurisdiction existed, the arbitrary threshold and unfairness inherent in the proposed order would preclude its exercise.

Parties
Applicant: Courts plc (in liquidation); Applicant: Joint Liquidators (Christine Laverty and Michael McLoughlin)
Jurisdiction
England and Wales
Judgment Date
09 October 2008
Procedural Posture
Company Liquidation Application / Judgment on Application for Qualified Disapplication Order and Costs Order
Outcome
Application for qualified disapplication order refused; costs order granted.
Legal Topics
Prescribed Part Distribution, Pari Passu Principle, Liquidator's Costs, Disapplication of Statutory Provisions
Insolvency Company Law Prescribed Part Distribution Pari Passu Principle Liquidator's Costs Disapplication of Statutory Provisions

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Parties

Courts plc (in liquidation)

Applicant

Joint Liquidators (Christine Laverty and Michael McLoughlin)

Applicant

Procedural Posture

Company Liquidation Application / Judgment on Application for Qualified Disapplication Order and Costs Order

Legal Issues

  1. 1 Whether the court has jurisdiction under section 176A(5) of the Insolvency Act 1986 to partially disapply section 176A(2) for creditors with claims £28,000 or less
  2. 2 Whether the cost of making a distribution to certain unsecured creditors is disproportionate to the benefits
  3. 3 Whether the court should approve the liquidators' costs for processing claims

Ratio Decidendi

Section 176A(5) does not confer jurisdiction to partially disapply section 176A(2); the disapplication is all or nothing. The principle of pari passu distribution prohibits selective exclusion of creditors from the prescribed part. The court cannot sanction a regime where only larger creditors benefit. Even if jurisdiction existed, the arbitrary threshold and unfairness inherent in the proposed order would preclude its exercise.

Court Disposition

Application for qualified disapplication order refused; costs order granted.

Orders

  • Refusal to make qualified disapplication order under section 176A(5)
  • Approval of liquidators' costs not exceeding £62,000 to be paid out of the prescribed part