Meaning of ‘contributory’ for the purpose of the old insolvency Rules (Burnden Group Holdings Ltd v Hunt)

Meaning of ‘contributory’ for the purpose of the old insolvency Rules (Burnden Group Holdings Ltd v Hunt)

The High Court held, in Burnden Group Holdings Ltd v Hunt, that ‘contributory’ was to be given a wide meaning and included members who held fully paid-up shares. However, as Mark Spackman of St Philips Chambers comments, the ruling is relevant only to cases brought under the Insolvency Rules 1986, SI 1986/1925 (IR 1986) (ie before the new Insolvency (England and Wales) Rules 2016, SI 2016/1024 (IR 2016) came into force).

Burnden Group Holdings Ltd v Hunt (liquidator of Burnden Holdings (UK) Ltd) [2018] EWHC 463 (Ch), [2018] All ER (D) 106 (Mar)

What are the potential implications of this case?

At its heart, this was a case concerning the meaning of ‘contributory’ for the purpose of IR 1986, r 4.79(b). The issue was whether a fully paid-up member of the company—as opposed to only a partly paid up member—was a contributory for the purposes of the rule, and thus entitled to require Mr Hunt, the liquidator of the company, to permit inspection of the proofs filed (but not adjudicated upon) by the creditors of the company.

As it happens, the practical effects of the decision on the question of who is entitled to inspect proofs are likely to be of historic interest only because this was a case brought under the IR 1986, which confined the categories of persons entitled to inspect the proofs to any creditor who had submitted his proof (as long as it had not been rejected), a contributory of the company, and any person acting on behalf of the aforementioned.

Under IR 2016, r 14.6, the class of persons entitled to inspect the proofs has been extended to ‘member or contributory’, so the issue in Burnden would no longer arise. The case is still useful to practitioners however in that it clarifies that the definition of contributory in section 79 (and section 74) of the Insolvency Act 1986 (IA 1986) encompasses members (past and present) who hold (or held) fully paid-up shares.

What was the background?

Burnden Holdings (UK) Ltd was a holding company for subsidiaries trading in conservatories, and in power and energy. Two of the di

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About the author:

Anna joined the Restructuring and Insolvency team at Lexis®PSL in August 2013 from Berwin Leighton Paisner where she was a senior associate in the Restructuring Team.

Anna has worked on a number of large scale restructurings primarily in the UK market acting on behalf of lending institutions.

Recent transactions include the restructuring of a UK hotel chain and the administration sale of part of the Connaught group. Anna has also spent time on secondment at The Royal Bank of Scotland and trained at Clifford Chance qualifying in 2007.