Insolvency—administration—personal costs liability of administrator—Insolvency Rules 2016, Rules 14.8 and 14.9

Insolvency—administration—personal costs liability of administrator—Insolvency Rules 2016, Rules 14.8 and 14.9

Chief Insolvency and Companies Court (ICC) Judge Briggs has refused to order that an administrator should be personally liable to pay the costs of a creditor’s successful application against the rejection of its proof of debt under Rule 14.8 of the Insolvency Rules 2016 (IR 2016), SI 2016/1024. Given the limited caselaw to date, the judgment now provides valuable guidance as to the circumstances in which the court should depart from the default rule in IR 2016, r 14.9 that the office holder is not liable to pay costs unless the court ‘orders otherwise’. Insolvency practitioners will be reassured by the court’s affirmation that since the office holder is acting in a neutral, quasi-judicial capacity, her or she will not be deprived of the ability to recoup their costs from the insolvent estate without ‘special circumstances’ or ‘good reason’. Creditors should also be aware that even where their appeal is successful, the costs are likely to come out of the insolvent estate and reduce the assets available for distribution. Written by Zoe O’Sullivan QC, barrister at Serle Court Chambers.

Nimat Halal Food Ltd v Nimish Patel (as administrator of Tariq Halal (Wholesale) Ltd (in administration) [2020] EWHC 734 (Ch)

What are the practical implications of this case?

Under IR 2016, SI 2016/1024, r 14.8, a creditor has the right to appeal to the court against the administrator’s rejection of its proof of debt. The hearing is a hearing de novo, in which the court is entitled to consider further evidence and reach its own view: see Buckley J in Kentwood Constructions Ltd, Re [1960] 2 All ER 655n.

It is well established that in deciding whether to admit or reject a creditor’s proof, the administrator is acting in a quasi-judicial capacity: see Etherton J in Menastar Finance Ltd (in liq), Re, Menastar Ltd v Simon [2002] EWHC 2610 (Ch), [2002] All ER (D) 26 (Nov). For this reason, IR

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About the author:

Zahra started working as a paralegal at Lexis Nexis in Banking and Insolvency teams in April 2019. Zahra graduated with a 2.1 honours in a BA French and Spanish, completed the GDL at BPP University and is seeking some experience before commencing the LPC. She has undertaken voluntary work for law firms in London, Argentina and Colombia.