The Joint Administrators of LB Holdings Intermediate 2 Limited (Appellant) v The Joint Administrators of Lehman Brothers International (Europe) and others (Respondents) The Joint Administrators of Lehman Brothers..
[2017] UKSC 38
Easter Term
[2017] UKSC 38
On appeal from: [2015] EWCA Civ 485
| JUDGMENT |
The Joint Administrators of LB Holdings Intermediate 2 Limited (Appellant) v The Joint Administrators of Lehman Brothers International (Europe) and others (Respondents) The Joint Administrators of Lehman Brothers Limited (Appellant) v Lehman Brothers International (Europe) (In Administration) and others (Respondents) Lehman Brothers Holdings Inc (Appellant) v The Joint Administrators of Lehman Brothers International (Europe) and others (Respondents)
before
Lord Neuberger, President
Lord Kerr
Lord Clarke
Lord Sumption
Lord Reed
JUDGMENT GIVEN ON
17 May 2017
Heard on 17, 18, 19 and 20 October 2016
Appellant (LBHI2 Joint Respondents (Anthony Administrators) Victor Lomas and ors) Robert Miles QC William Trower QC Louise Hutton Daniel Bayfield QC Rosanna Foskett Stephen Robins (Instructed by Dentons (Instructed by Linklaters UKMEA LLP) LLP) Appellant (LBL Joint Respondent (CVI GVI Administrators) (LUX) Master Sarl) David Wolfson QC Robin Dicker QC Nehali Shah Richard Fisher Ruth den Besten Charlotte Cooke (Instructed by DLA Piper (Instructed by Freshfields
UK LLP) Bruckhaus Deringer LLP)
Appellant (LBHI)
Barry Isaacs QC
(Instructed by Weil,
Gotshal and Manges
(London) LLP)
LORD NEUBERGER: (with whom Lord Kerr and Lord Reed agree)
1. This appeal and cross-appeal raise a number of points of insolvency law,
which arise out of the collapse of the Lehman Brothers group of companies (“the
Group”) in 2008.
Introductory
The basic facts
2. The Group’s main trading company in Europe was Lehman Brothers
International (Europe) (“LBIE”), which is an unlimited company. Its share capital
consists of a number of ordinary shares as well as a number of redeemable shares. All these shares, except for one ordinary share, are held by LB Holdings
Intermediate 2 Ltd (“LBHI2”), whose sole function was to act as LBIE’s immediate
holding company. The remaining ordinary share is held by Lehman Brothers Ltd
(“LBL”), which was the service company for the Group’s operations in the UK,
Europe and Middle East.
3. LBIE and LBL have been in administration since September 2008, and LBHI2 has been in administration since January 2009. The purpose of the administrations of these companies has been the realisation of their respective assets to best advantage, rather than the preservation of the companies as going concerns.
Contrary to many people’s expectations when LBIE went into administration, it now
appears that it is able to repay all its external creditors in full.
4. Under the provisions of the Insolvency Act 1986 as amended (“the 1986
Act”), an administrator of a company is permitted to make distributions to creditors
of the company. Once an administrator gives notice of an intention to make a distribution, the administration is commonly referred to as a distributing administration. Since 2 December 2009, LBIE has been in distributing administration, but LBHI2 and LBL have not been. In November 2012, the joint
administrators of LBIE declared and paid a first interim dividend to LBIE’s
unsecured creditors of 25.2 pence in the pound, totalling some £1.611bn.
5. Lehman Brothers Holdings, Inc (“LBHI”) is the ultimate parent of the Group.
In September 2008, it began Chapter 11 bankruptcy proceedings in the United States Bankruptcy Court, and it emerged from those proceedings in March 2012. LBHI is an indirect creditor of many companies in the Group, and its primary interest relates
to LBHI2’s assets, including its right to recover subordinated loans made to LBIE
and other issues relating to those subordinated loans.
6. The LBIE administrators received proofs of debt from various unsecured
creditors including LBL and LBHI2. LBL’s initial proof was for £363m, and LBHI2
submitted a proof for an unsecured claim of around £1.254bn in respect of sums advanced to LBIE under three subordinated debt agreements made in November 2006 (together with a separate unsecured claim of around £38m). The LBL administrators received proofs from LBHI2 in the sum of £257m, and from LBIE for £10.4bn. The proof from LBIE included £10bn, which was the LBIE
administrators’ estimate of LBL’s contingent liability to LBIE as a contributory
under section 74 of the 1986 Act. This claim led to LBL seeking leave to amend its
proof in LBIE’s administration from £363m to £10.934bn. It is also relevant to
mention that some of the proofs submitted to LBIE’s administrators were in respect
of debts denominated in foreign currencies.
7. In February 2013, the administrators of LBIE, of LBL and of LBHI2 issued proceedings seeking the determination of the court on a number of questions arising out of the administrations. On 14 March 2014, David Richards J delivered a judgment (reported at [2015] Ch 1) dealing with those questions, and he subsequently made consequential declarations, which were set out in paras (i) to (x) of an order. The declarations in paras (i) to (ix) were challenged on appeal or cross- appeal, and the Court of Appeal (Moore-Bick, Lewison and Briggs LJJ) upheld most, but varied some, of them in a decision which is reported at [2016] Ch 50.
8. The order made by David Richards J is set out in an appendix to the judgment of the Court of Appeal, and the contents of paras (i) to (ix) have now been the subject of argument in this Court. It is sensible to address them in the same order as they were discussed in the judgments in the Court of Appeal. Before turning to the issues, however, it is right to set out the principally relevant legislative provisions. It is also right to pay tribute to the well expressed and illuminating judgments below, which helped to ensure that the arguments were developed in this Court in a disciplined and clear way.
9. Hereafter, unless the contrary is stated, all references to sections and Schedules are to sections of and Schedules to the 1986 Act, and all references to
rules are to those in the Insolvency Rules 1986 (SI 1986/1925) as amended (“the 1986 Rules”). (It is right to add that the 1986 Act was preceded by the Insolvency
Act 1985 and the Companies Act 1985 which between them contained the great majority of the provisions now to be found in the 1986 Act. It was decided to repeal those 1985 statutes and consolidate all insolvency law in the 1986 legislation. For present purposes, the changes effected in 1985 can be elided with those in 1986, and accordingly I shall disregard the 1985 Act when describing the changes to insolvency law effected in the 1980s.)
The 1986 Act and the 1986 Rules: introductory
10. The 1986 Act and the 1986 Rules (“the 1986 legislation”) were introduced
following the publication of the 1982 Report of the Review Committee on Insolvency Law and Practice (Cmnd 8558) (the Cork Report), and a 1984 Government White Paper, A Revised Framework for Insolvency Law (Cmnd 9175). Para 1 of the White
Paper acknowledged the “thorough analysis” contained in “the Cork Report”, which
is accurately characterised by Sealy and Milman in their Annotated Guide to the
Insolvency Legislation, 19th ed (2016), vol 1, p 1, as “[t]he main inspiration for the reforms” contained in the 1986 legislation. Para 2 of the White Paper described the
objectives of the proposed new legislation, which included “establish[ing] effective
and straightforward procedures for dealing with and settling the affairs of corporate
and personal insolvents in the interests of their creditors”. In para 3 of the White
Paper it was stated that the law of corporate insolvency had “altered very little over the past century”, and that there was “an urgent need to reform, update and
strengthen the insolvency legislation so that the objectives … set out in para 2 can be met”. Para 4 set out six objectives for the proposed changes which became the
1986 Act and the 1986 Rules. The third of those objectives was “To simplify
wherever possible corporate and personal insolvency procedures”. And the fifth
included “the introduction of a new insolvency mechanism, known as the
administrator procedure, designed to facilitate the rehabilitation and re-organisation of companies faced by insolvency but where there are reasonable prospects for a
return to profitability”.
11. The 1986 legislation consolidated in a single statute and set of rules the legislative provisions regarding both personal insolvency and corporate insolvency. Until then, they had been dealt with in separate legislation - most recently the
Bankruptcy Act 1914 (“the 1914 Act”) and the Bankruptcy Rules 1952 (SI
1952/2113), which covered personal insolvency, and the Companies Act 1948 (“the 1948 Act”) and the Companies (Winding-Up) Rules 1949 (SI 1949/330) (“the 1949
Rules”), which applied to corporate insolvency. Nonetheless, the 1986 legislation
contains almost entirely separate regimes for personal insolvency and corporate
insolvency. Thus, in the 1986 Act, sections 1 to 251 deal with “company
insolvency”, sections 251A to 385 with “insolvency of individuals”, and the
remaining sections, 386 to 444, while applicable to both types of insolvency, are concerned with matters such as insolvency practitioners and subordinate legislation.
And this is reflected in the 1986 Rules: Parts 1 to 4 are concerned with “company insolvency”, Parts 5 and 6 deal with “insolvency of individuals”, and Parts 7 to 13
are of general application, being concerned with court procedures, notices, meetings and a few common definitions. In many ways, there was greater overlap between personal and corporate insolvency in the preceding legislative regimes, because section 317 of the 1948 Act provided that the principles applicable in bankruptcy
“with regard to the respective rights of secured and unsecured creditors and to debts
provable and to the valuation of annuities and future and contingent liabilities”
applied “[i]n the winding up of an insolvent company”.
12. As anticipated in the White Paper, the 1986 legislation represents a comprehensive overhaul of the insolvency legislation, adding new procedures and new rules and rewriting many of the established procedures and rules. Most, indeed probably all, fundamental principles apply just as they always have done - the pari passu principle is an obvious example. However, when it comes to less fundamental procedures and rules, it cannot be assumed that judicial decisions, even at the highest level, relating to previous insolvency legislation necessarily hold good in relation to the 1986 legislation. Where the wording of a provision in the 1986 legislation has not changed from that of a provision in previous legislation, then, at least prima facie, it may normally be assumed that the effect of the provision was intended to be unaltered, but where the language has been significantly changed, such an assumption may easily lead to error.
13. Further, despite its lengthy and detailed provisions, the 1986 legislation does not constitute a complete insolvency code. Certain long-established Judge-made rules, albeit developed at a time when the insolvency legislation was far less detailed, indeed by modern standards sometimes positively exiguous, nonetheless survive. Recently invoked examples include the anti-deprivation principle (see Perpetual Trustee Co Ltd v BNY Corporate Trustee Services Ltd [2012] 1 AC 383), the rule against double-proof (discussed in In re Kaupthing Singer & Friedlander Ltd (in administration) (No 2) [2012] 1 AC 804, paras 8 to 12), the rule in Cherry v Boultbee (1839) 4 My & Cr 442 (also discussed in Kaupthing (No 2) [2012] 1 AC 804, paras 13 to 20), and certain rules of fairness (alluded to in In re Nortel GmbH [2014] AC 209, para 122). Provided that a Judge-made rule is well-established, consistent with the terms and underlying principles of current legislative provisions, and reasonably necessary to achieve justice, it continues to apply. And, as Judge- made rules are ultimately part of the common law, there is no reason in principle why they cannot be developed, or indeed why new rules cannot be formulated. However, particularly in the light of the full and detailed nature of the current insolvency legislation and the need for certainty, any judge should think long and hard before extending or adapting an existing rule, and, even more, before formulating a new rule.
14. One of the reforms introduced by the 1986 legislation and foreshadowed by the White Paper is the administration procedure. It was introduced as part of the so-
called “rescue culture” which has been described as “a philosophy of reorganising
companies so as to restore them to profitable trading and enable them to avoid liquidation” - Goode, Principles of Corporate Insolvency Law, 4th ed (2011), para
11-03. The procedure was less successful than had been hoped. Accordingly, the provisions of the 1986 legislation relating to administration were substantially
amended as a result of the Enterprise Act 2002 (“the 2002 Act”). Among the changes
introduced by the 2002 Act were the conferring of a power on an administrator to make distributions to unsecured creditors and a greater flexibility of exit routes from administration.
15. Schedule B1 to the 1986 Act contains provisions dealing with administration.
Para 53 of that Schedule provides for a creditors’ meeting to approve the proposals
of an administrator following his appointment. Paras 65 and 66 empower an administrator to make distributions to creditors, normally only with the prior consent
of the court. Para 67 requires an administrator to take custody of the company’s
assets, and para 68 enables him to carry on the company’s business in accordance with proposals approved under para 53. Para 69 states that “[i]n exercising his
functions under this Schedule the administrator of a company acts as its agent.”
Paras 76 to 86 of Schedule B1 provide for various routes by which the company can exit from administration. Paras 76 to 81 set out a number of different ways in which the company can, in effect, be restored to its pre-administration status. Para 82 provides for a public interest winding-up. Para 83 entitles an administrator to move
the company from administration to creditors’ voluntary liquidation where, in
summary terms, there are sufficient assets to pay the company’s liabilities in full.
And para 84 enables the company to pass straight from administration to dissolution,
but only where it “has no property which might permit a distribution to its creditors”
(a potentially narrower restriction, which should probably be construed widely).
16. The provisions of the 1986 Rules governing distributing administrations were introduced by the Insolvency (Amendment) Rules 2003 (SI 2003/1730) (“the 2003 Amendment Rules”). In a distributing administration, as in a liquidation, the duty of
the office-holder, whether administrator or liquidator, is to gather in and realise the
assets of the company and to use them to pay off the company’s liabilities (see
sections 107 and 143 in relation to liquidators and paragraphs 65 to 67 of Schedule
B1 in relation to administrators).17. I summarised the priorities in relation to such payments by a liquidator or a
distributing administrator in the following terms in In re Nortel GmbH [2014] AC
209, para 39:
“In a liquidation of a company and in an administration (where
there is no question of trying to save the company or its
business), the effect of insolvency legislation …, as interpreted
and extended by the courts, is that the order of priority for
payment out of the company’s assets is, in summary terms, as
follows:
(1) Fixed charge creditors; (2) Expenses of the insolvency proceedings; (3) Preferential creditors; (4) Floating charge creditors; (5) Unsecured provable debts; (6) Statutory interest; (7) Non-provable liabilities; and (8) Shareholders.”
This description of what is known as the waterfall is a generalised summary of the distribution priorities in an insolvency. It was not intended to be treated as some sort of quasi-statutory statement of immutable legal principle, and it would have been better if I had said so at the time.
The centrally relevant provisions of the 1986 Rules
18. I turn then to describe provisions of the 1986 Rules which apply to
administrations, and which play a part in relation to the issues which have to be
resolved on this appeal.
19. Part 2 of the 1986 Rules is concerned with “Administration Procedure”, and Chapter 10 of that Part (“Chapter 10 of Part 2”), which includes rules 2.68 to 2.105,
deals with “Distributions to Creditors”. The rules in Chapter 10 of Part 2 are very
similar indeed to, and were no doubt based on, the rules concerned with “proof of debts in a liquidation”, which are to be found in Chapter 9 of Part 4 of the 1986
Rules.
20. Rule 2.68(1) provides that Chapter 10 applies “where the administrator
makes, or proposes to make, a distribution to any class of creditors ...”. Rule 2.69
provides that provable debts rank equally between themselves and are paid in full unless the assets are insufficient to meet them, in which case they abate in equal proportions between themselves. This embodies the fundamental principle of equality, which applies similarly to liquidations - see rule 4.181. Rules 2.72 to 2.80 set out the machinery for proving debts, including the submission of a proof, its
admission or rejection by the administrator and appeals against the administrator’s
decision.
21. Rule 2.72 (which is in very similar terms to rule 4.73, which applies in a
liquidation) is headed “Proving a debt”, and it provides:
“(1) A person claiming to be a creditor of the company and wishing to recover his debt in whole or in part must (subject to any order of the court to the contrary) submit his claim in writing to the administrator.
(2) A creditor who claims is referred to as ‘proving’ for his
debt and a document by which he seeks to establish his claim
is his ‘proof’.”
The remaining paragraphs of this rule set out the machinery by which a debt should be proved. Rule 2.77 provides that a proof may be admitted for payment of a dividend in whole or in part, and rule 2.78 contains appeal procedures where a proof is refused or not admitted in its full amount. Rule 2.79 permits a proof to be withdrawn or varied by agreement with the administrator, and rule 2.80 enables the
court to “expunge a proof or reduce the amount claimed” on the application of the
administrator “where he thinks the proof has been improperly admitted, or ought to
be reduced” or “on the application of the creditor, if the administrator declines to
interfere in the matter”. The equivalent provisions applicable in a liquidation are
rules 4.82 to 4.85.
22. Rules 2.81 to 2.94, 2.102, 2.103 and 2.105 are concerned with quantifying claims made in paying administrations. With one exception, namely rule 2.88 (whose equivalent is to be found in the 1986 Act rather than the 1986 Rules, as explained in para 28 below), these rules are very similar indeed in their language to (and were no doubt based on) rules 4.86 to 4.99, which relate to claims in liquidations.
23. Rule 2.81 requires the administrator to “estimate the value of any debt which,
by reason of its being subject to a contingency or for any other reason, does not bear
a certain value”, and the rule goes on to provide that “he may revise any estimate
previously made … by reference to any change of circumstances or to any information becoming available to him”. He is also required to “inform the creditor
as to his estimate and any revision to it”. (Rule 4.86 is the equivalent provision in
liquidations.)
24. Rule 2.83 entitles a secured creditor, who has realised his security, to prove for such part of his debt which remains unsatisfied. And rule 2.90 entitles a secured creditor who has proved for his debt on the basis of putting a value on his security to amend that value with the agreement of the administrator or the court. (Rules 4.88 and 4.95 have similar effect in liquidations.)
25. Rule 2.85 provides for mutual credits and set-off of debts as at the date that the administrator gives notice that he proposes to make a distribution, and such a notice is provided for in rule 2.95. Rule 2.85(3) read together with rule 2.85(2) provides that, as at the date on which an administrator gives notice of his intention
to make a distribution, there should be a set-off in respect of what is owing “between the company and any [proving] creditor of the company” in respect of “mutual
dealings” between them. “Mutual dealings” are defined in rule 2.85(2) as “mutual credits, mutual debts or other mutual dealings”, subject to exceptions all of which
relate to events which arise after the administration date. Rule 2.85(4) states that rule 2.85 applies, inter alia, to future, contingent or other quantifiable liabilities, and rules 2.81, 2.86, 2.88 and rule 2.105 apply for the purposes of rule 2.85. (Rule 4.90, which applies in liquidations, is in very similar terms to rule 2.85, save that the date by reference to which set-off is to be effected is the liquidation date.)
26. Rule 2.86 provides:
“(1) For the purpose of proving a debt incurred or payable in a currency other than sterling, the amount of the debt shall be converted into sterling at the official exchange rate prevailing on the date when the company entered administration or, if the administration was immediately preceded by a winding up, on
the date that the company went into liquidation.”
Rule 2.86 is virtually identical in its terms to rule 4.91, which applies to proving a debt incurred or payable in a foreign currency in a liquidation.
27. Rule 2.88 deals with interest. Rule 2.88(1) provides that “Where a debt
proved in the administration bears interest, that interest is provable as part of the debt except in so far as it is payable in respect of any period after the company
entered administration”. Para (1) was amended by the Insolvency (Amendment)
Rules, 2005 (SI 2005/527) (“the 2005 Amendment Rules”) by adding the words “or,
if the administration was immediately preceded by a winding up, any period after
the date that the company went into liquidation”. Rule 2.88(7) states that:
“Any surplus remaining after payment of the debts proved
shall, before being applied for any purpose, be applied in paying interest on those debts in respect of the periods during which they have been outstanding since the company entered
administration.”
Para (8) states that all interest so payable “ranks equally”, and para (9) provides that
the rate of such interest is to be the higher of the judgment debt rate or the rate
applicable to the debt apart from the administration.28. Virtually identical provisions to rule 2.88(7) to (9) are contained in section 189(2) to (4) which applies to post-liquidation interest on debts proved in a liquidation. Section 189(2) plays a significant part in some of the arguments on this appeal, and it should be set out in full:
“Any surplus remaining after the payment of the debts proved
in a winding up shall, before being applied for any other purpose, be applied in paying interest on those debts in respect of the periods during which they have been outstanding since
the company went into liquidation.”
29. Rule 2.89 permits a creditor whose debt is not yet due for payment to prove
“subject to rule 2.105”. Rule 2.105 provides that, in the case of such a debt, “[f]or
the purpose of dividend (and no other purpose) the amount of the creditor’s admitted proof … shall be reduced by applying [a specified] formula”, which basically
represents a discount for early payment, calculated by reference to the date of administration (or, if relevant, the date of any preceding liquidation). In practice this means that the debt is reduced by 5% for each year between the administration and the contractual due date. Similar provisions for future debts in liquidations are to be found in rules 4.94 and 11.13.
30. Rule 2.95 provides that an administrator who is proposing to make a
distribution should give “28 days’ notice of that fact”. Rule 2.97 permits, indeed it
enjoins, an administrator thereafter “to declare the dividend to one or more classes of creditor”. Rule 2.98 deals with notification, and rule 2.99 with payment. Rule
2.101 applies where “the amount claimed by a creditor is increased” after a dividend
has been paid, and rule 2.102 applies where “a creditor re-values his security” after
a dividend has been declared. There are fairly similar rules for liquidations in Part
11 of the 1986 Rules.31. Reference should also be made to two rules which contain definitions
applicable generally to the 1986 Rules. Rule 13.12(1) states that “in relation to the
winding up of a company”, the word “debt” means:
“(a) any debt or liability to which the company is subject at the date on which it goes into liquidation;
(b) any debt or liability to which the company may become
subject after that date by reason of any obligation incurred
before that date; and
(c) any interest provable as mentioned in rule 4.93(1).”
Rule 13.12(4) defines “liability” as meaning “[in] any provision of the [1986] Act
or the Rules about winding up”:
“… a liability to pay money or money’s worth, including any
liability under an enactment, any liability for breach of trust, any liability in contract, tort or bailment, and any liability
arising out of an obligation to make restitution.”
Rule 13.12(3) explains that a debt or liability for this purpose can be “present or
future, … certain or contingent, … fixed or liquidated, … capable of being
ascertained by fixed rules or as a matter of opinion”. Rule 13.12(5) applies these
definitions to a case “where a company is in administration”, so the references in
these definitions to winding up and rule 4.93(1) must respectively be taken to be to
administration and rule 2.88(1).32. Rule 12.3(1) provides:
“Subject as follows, in administration, winding up and
bankruptcy, all claims by creditors are provable as debts against the company or, as the case may be, the bankrupt, whether they are present or future, certain or contingent,
ascertained or sounding only in damages.”
33. There are certain specified exceptions to this definition, but rule 12.3(3) makes it clear that they are not exhaustive. However, as is clear from the strikingly wide words of rules 13.12(1) and (3) and 12.3(1), the statutory policy, which Briggs J rightly identified at first instance in In re Nortel GmbH [2011] Bus LR 766, paras 102-103, and which is supported by the Supreme Court in the same case at [2014] AC 209, paras 92-93, is that claims should, if at all possible, be admitted to proof rather than being excluded from proof. Nonetheless, some non-provable liabilities, not specified in rule 12.3, still survive. The most obvious examples are claims which only arise after the date a company goes into administration or liquidation (see In re Nortel GmbH at [2014] AC 209, para 35), such as damages for personal injury in an accident which occurred after that date.
The issues on this appeal
34. The first issue on this appeal concerns the ranking in the waterfall summarised in para 17 above which can be claimed by LBHI2 in its capacity as holder of the three subordinated loans made to LBIE. The second issue arises from
the fact that LBIE’s creditors who have debts denominated in foreign currency, will
be paid out on their proofs at the rate of exchange prevailing at the date LBIE went
into administration (“the administration date”), and, in some cases, sterling
depreciated on the foreign exchange markets between that date and the date of payment. Those foreign currency creditors contend that they are entitled to claim the shortfall. The third issue raises the question whether, if interest which should have been paid during an administration under rule 2.88(7) was not in fact so paid, it can nonetheless be claimed in a subsequent liquidation.
35. The remaining four issues arise because LBIE is an unlimited company and therefore its members can be called upon to make contributions pursuant to section 74 of the 1986 Act to meet liabilities if LBIE is in liquidation. The fourth issue is whether such contributions can be sought in respect of liability for interest under rule 2.88(7) and for liabilities of LBIE which are not provable. The other three issues arise because LBHI2 and LBL are not only creditors of LBIE, but are also members of LBIE and liable to contribute as such. The fifth issue is whether LBIE can prove in the administrations of LBHI2 and of LBL in respect of those respective
companies’ contingent liabilities to make contributions in LBIE’s prospective
liquidation. If they can, it is conceded that LBIE can set off its provable claims for
contributions against the proofs lodged by LBHI2 and LBL in LBIE’s
administration. If LBIE cannot so prove, the sixth issue is whether LBIE can nonetheless exercise such a right of set-off. The seventh issue, which only arises if LBIE loses on the fifth and sixth issues, is whether LBIE can nonetheless invoke the so-called contributory rule which applies in a liquidation, namely that a person cannot recover as a creditor of a company in liquidation until he has discharged his liability as a contributory.
36. I turn now to address these issues.
The ranking of the subordinated debt
Introductory
37. As mentioned above, there were three subordinated loan agreements (“the
Loan Agreements”) made by LBHI2 to LBIE, under which a substantial sum of
money remains outstanding. As recorded in para (i) of the order which he made, David Richards J decided that the aggregate debt due under the Loan Agreements
(“the subordinated debt”) was provable, but that it was “subordinated to provable
debts, statutory interest and non-provable liabilities, all of which … must be paid in full before … LBHI2 is entitled to prove and require the LBIE administrators to
admit such proof in respect of its claims under [the Loan]”. The Court of Appeal
upheld this order in so far as it decided that the subordinated debt was provable and subordinated to provable debts, statutory interest and non-provable liabilities.
However, they disagreed with the Judge’s view that LBHI2 was not entitled to prove
until all other proving creditors had been paid in full.
38. On this appeal, while accepting that the subordinated debt ranks behind other provable debts, the LBHI2 administrators argue that the courts below were wrong to hold that the subordinated debt ranked behind statutory interest or non-provable liabilities. By contrast, the LBIE administrators contend that the Court of Appeal ought to have concluded that the Judge was right to hold that LBHI2 was not entitled to prove for the subordinated debt until all liabilities, including statutory interest and non-provable liabilities, had been paid in full.
39. The Loan Agreements were revolving credit facilities made under
agreements which contained certain “Variable Terms” and certain “Standard
Terms”. Clause 9 of the Variable Terms provided for repayment “subject always to
[clause] ... 5 ... of the Standard Terms”.
40. Clause 1 of the Standard Terms (“clause 1”) contained some definitions. “Insolvency Officer” meant “any person duly appointed to administer and distribute
[LBIE’s] assets in the course of [its] Insolvency”, and the term “Insolvency”
extended to administration as well as liquidation. “Liabilities” were defined as “all
present and future sums, liabilities and obligations payable or owing by [LBIE]
(whether actual or contingent, jointly or severally or otherwise howsoever)”, a wide definition. “Excluded Liabilities” were “Liabilities which are expressed to be, and
in the opinion of the Insolvency Officer of [LBIE], do, rank junior to the Subordinated Liabilities [defined in turn as liabilities under the Loan] in any
Insolvency of [LBIE]”. “Senior Liabilities” were “all Liabilities except the
Subordinated Liabilities and Excluded Liabilities”.41. Clause 4 of the Standard Terms (“clause 4”) dealt with repayment, and it was expressed to be “subject in all respects” to clause 5. Clause 4(4) provided that in the
event of certain defaults in repayment LBHI2 could, subject to giving prior notice,
“enforce payment by instituting proceedings for the Insolvency of [LBIE]”. Clause
4(7) stated that:
“No remedy against [LBIE] other than as specifically provided
by this [clause] 4 shall be available to [LBHI2] whether for the recovery of amounts owing under this Agreement or in respect of any breach by [LBIE] of any of its obligations under this
Agreement.”
42. Clause 5 of the Standard Terms (“clause 5”) contained two sub-clauses of relevance which provided as follows:
“(1) Notwithstanding the provisions of [clause] 4, the rights of [LBHI2] in respect of the Subordinated Liabilities are subordinated to the Senior Liabilities and accordingly payment of any amount (whether principal, interest or otherwise) of the Subordinated Liabilities is conditional upon -
(a) (if an order has not been made or an effective resolution passed for the Insolvency of [LBIE] …)
[LBIE] being in compliance with not less than 120% of its Financial Resources Requirement immediately after
payment by [LBIE] …; and
(b) [LBIE] being ‘solvent’ at the time of, and immediately after, the payment by [LBIE] and accordingly no such amount which would otherwise fall due for payment shall be payable except to the extent that [LBIE] could make such payment and still be
‘solvent’.
(2) For the purposes of sub-[clause] (1)(b) above, [LBIE]
shall be ‘solvent’ if it is able to pay its Liabilities (other than
the Subordinated Liabilities) in full disregarding -
(a) obligations which are not payable or capable of
being established or determined in the Insolvency of
[LBIE], and
(b) the Excluded Liabilities.”
43. Clause 7 of the Standard Terms (“clause 7”) included undertakings by LBHI2
not without the consent of the Financial Services Authority (now the Prudential
Regulatory Authority) to:
“(d) attempt to obtain repayment of any of the Subordinated
Liabilities otherwise than in accordance with the terms of this
Agreement;
(e) take or omit to take any action whereby the subordination of the Subordinated Liabilities or any part of them to the Senior Liabilities might be terminated, impaired or
adversely affected.”
44. As explained above, the LBHI2 administrators contend that the subordinated debt ranks ahead of statutory interest and non-provable liabilities (ie categories (6) and (7) in the waterfall set out in para 17 above). Their case in relation to non-
provable liabilities is that, although they are “Liabilities” within clause 1, they are “not payable or capable of being established or determined in the Insolvency of
[LBIE]” within the meaning of clause 5(2)(a), and therefore their existence does not
prevent repayment of the subordinated debt. So far as statutory interest is concerned,
the LBHI2 administrators’ primary case is that it is not one of the “Liabilities” within
clause 5(2)(a), because, although very widely defined, the term “Liabilities” in clause 1 is limited to obligations “payable or owing by [LBIE]”, and statutory
interest is payable and owing by LBIE pursuant to rule 2.88(7), which does not render its payment the responsibility of the company in administration. The LBHI2 administrators alternatively contend that, if statutory interest is nonetheless within
“Liabilities”, it is excluded from clause 5(2)(a) for the same reason as non-provable
liabilities.
45. I turn first to deal with statutory interest, and will then deal with non-provable liabilities. Finally, I will discuss the question of proving for the subordinated debt.
Subordination to statutory interest
46. It is convenient to discuss this issue in relation to liquidations, although the analysis that follows in paras 47 to 55 below is equally applicable to administrations - unsurprisingly, given that, as explained in para 28 above, rule 2.88(7), (8) and (9) are in effectively the same terms as section 189(2), (3) and (4) respectively.
47. The effect of section 189 is that a company in liquidation ceases to be liable
for contractual interest which falls due after it goes into liquidation, and instead, in
the event of a surplus, there is a liability for statutory interest.
48. LBHI2’s first contention is that statutory interest is not payable “in the
Insolvency” of LBIE within the meaning of clause 5(2)(a) - ie in an insolvency
process of LBIE, as the LBHI2 administrators put it in argument. As a matter of ordinary language, it is hard to see any satisfactory basis for this contention. It is clear, indeed it is common ground, that statutory interest is payable by a liquidator pursuant to the provisions of section 189, and it is in respect of interest on debts
which have been indubitably proved and paid “in the Insolvency”. Briggs LJ rightly
said in the Court of Appeal, at [2015] Ch 50, para 190, that “payment of statutory
interest” is “plainly” a “part of the winding-up scheme”, and that it is therefore not
easy to see why statutory interest is not payable “in the Insolvency”.
49. The LBHI2 administrators, however, argue that the expression “obligations
which are not payable … in the Insolvency” in clause 5(2)(a) effectively means
obligations which are not capable of being the subject matter of a proof. That does
not seem to me to accord with the natural meaning of the expression “in the
Insolvency”. Further, I can see no good commercial reason to exclude statutory
interest from the “obligations” which fall within clause 5(2)(a). Contractual interest
on provable claims falling due before the administration date or liquidation date (ie the date on which the company concerned goes into administration or liquidation as the case may be) would undoubtedly be such an obligation, and it is hard to see any business sense in excluding interest which falls due after that date from the expression, bearing in mind the overall commercial purpose of the Loan. The fact that interest falling due after the liquidation date is treated somewhat differently in the insolvency legislation, and therefore in the waterfall, does not seem to me to be a good reason for treating it differently for the purposes of clause 5. Of course, clause 5 could have been expressed in a way which had such an effect, but my point is that given that, as drafted, it does not naturally read as having that effect, there is no commercial reason for rejecting its natural meaning.
50. The LBHI2 administrators also argue that the need for consistency in the application of clause 5(2) supports its contended interpretation, because statutory interest would, as it were, be excluded from any solvency test if LBIE was not subject to insolvency proceedings. I accept that factual premise, but I do not accept
that it assists the LBHI2 administrators’ argument. The fact that an expression has a
single meaning self-evidently does not prevent it from producing different outcomes in different circumstances. There are inevitable and often substantial differences between a company which is in insolvency proceedings and a company which is not. The conclusion reached by the courts below did not involve giving a different meaning to clause 5(2) when applied to a company in insolvency proceedings from that which it would have when applied to a company not in such proceedings. If LBIE, not being in such proceedings, had failed to pay interest on a debt due, its
liability for interest would be an “obligation”; and it seems consistent with this that,
if LBIE is in insolvency proceedings, any interest payable on a sum due until
payment is also an “obligation”. Nor do I consider that the LBHI2 administrators
derive any assistance from the fact that “Insolvency” includes a foreign insolvency.
51. The second contention raised by the LBHI2 administrators is that any
statutory interest is not “payable or owing by [LBIE]” within the definition of
“Liabilities” in clause 1. Statutory interest cannot give rise to a provable debt, as it
is only payable out of a surplus after payment of proven claims in full, but that would
not prevent it being within the expression “Liabilities”. More powerfully, the LBHI2
administrators argue that section 189(2) (which is set out in para 28 above) is worded in such a way as to make it clear that the liability to pay statutory interest is not an obligation on the part of the company concerned, and that any such obligation is imposed on the liquidator. The LBHI2 administrators point to the fact that, when a company is in liquidation, its assets are under the custody, control and management of the liquidator, who has statutory duties, including the duty to comply with section 189(2).
52. It is true that the company in liquidation cannot be sued for the purpose of enforcing section 189, and indeed that no claim can be made against the company if section 189 is infringed, because the relevant claim should be made against the liquidator: see the discussion in In re HIH Casualty & General Insurance Ltd [2006] 2 All ER 671, paras 115-121. However, in my judgment, that does not mean that
statutory interest is not “payable or owing by” the company concerned, at least so
far as the meaning of the contractual definition of “Liabilities” in clause 1 is
concerned.
53. Section 189(2) effectively confirms that interest, which would, in the absence of the liquidation, normally be expected to be contractually payable by the company from the liquidation date until repayment of the principal, is payable in the liquidation, but only if there is a surplus. Possibly because the effect of a liquidation is thought to be like that of a judgment in that it stops contractual interest running, or possibly as compensation for such interest ranking below unsecured provable debts, section 189(4) gives a creditor the option of claiming such interest at the judgment debt rate rather than the contractual rate. Given that the creditor is owed the debt until the date of repayment, and given that the company would normally expect to pay interest on the debt to the creditor until that date, it would, as mentioned in paras 49 and 50 above, be surprising if the liability for this interest was not treated as that of the company.
54. Further, the LBHI2 administrators’ case proves too much. If payment of
interest pursuant to section 189(2) is not treated as “payable and owing” by the
company, because it is payable and owing by the liquidator, then it would appear to
follow that even provable debts are not “payable and owing” by a company in a
winding-up. As Millett LJ explained in Mitchell v Carter, In re Buckingham International Ltd [1997] 1 BCLC 673, 684, the making of a winding-up order
“divests the company of the beneficial ownership of its assets”, and those assets
become “subject to a statutory scheme for distribution among the creditors and
members”, who have the right to have them administered by the liquidator “in
accordance with the statutory scheme”. When a company goes into liquidation and
a creditor proves in respect of a debt, it seems to me that the logic of the case
advanced by the LBHI2 administrators would be that the debt is no longer “payable
and owing” by the company: there is a proof which is payable and owing out of the
assets got in by the liquidator. If, as it must be, that argument is rejected, it would be on the basis that a payment out of the assets of the company by the liquidator of a proof which statutorily replaces a debt of the company should be treated as
satisfying a liability “payable and owing” by the company. If that is so, it seems to
me very hard to justify a different conclusion in relation to payment of statutory
interest by a liquidator under section 189.55. If payment of interest under section 189(2) involves paying a “sum” or
meeting a “liabilit[y]” which is “payable or owing by” the company concerned
within the meaning of clause 1, payment of interest by an administrator under rule 2.88(7) seems to me to be a fortiori. As Lewison LJ pointed out at [2016] Ch 50, para 45, when paying the interest, the administrator acts as agent of the company pursuant to paragraph 69 of Schedule B1, and, as in the case of a company in liquidation, legal title to the assets from which the interest is paid remains vested in the company.
56. Accordingly, I consider that under the terms of the Loan Agreements statutory interest enjoys priority over the repayment of the subordinated debt. In any event, in the light of my conclusion in para 63 below as to the priorities as between the non-provable liabilities and the subordinated debt, it seems to me that statutory interest must take priority over the subordinated debt as explained in paras 65 and 66 below.
Subordination to non-provable liabilities
57. In the Court of Appeal at [2016] Ch 50, para 60, Lewison LJ accepted that a non-provable liability was “neither determined nor established in the Insolvency of [LBIE]”. However, he said that, as a “liquidator’s duties continue until the moment
comes to make a distribution to members [and] non-provable liabilities rank higher
than members”, “the liquidator must pay those claims before making a distribution
to members”, and accordingly those claims are “payable in the Insolvency”. Moore-
Bick and Briggs LJJ not only agreed that non-provable liabilities were “payable”, but also considered that they were “established or determined”, “in the Insolvency”
of LBIE.
58. In my judgment, a liquidator who meets a non-provable liability of the
company is making a payment “in the Insolvency”, in the sense in which those words
are used in clause 5(2)(a). It is true that there is no express reference to non-provable liabilities, and therefore inevitably no mention of any duty to meet such liabilities, in the 1986 legislation. However, section 107 states that, in a voluntary liquidation,
the liquidator must apply the company’s assets “in satisfaction of the company’s
liabilities” prior to distributing them to members; and section 143 requires a
liquidator in a winding-up by the court to distribute “the assets of the company … to the company’s creditors, and, if there is a surplus, to the persons entitled to it.”
As Briggs LJ pointed out at [2016] Ch 50, paras 185 to 189, these stipulations,
properly interpreted, require a liquidator to meet the company’s non-provable
liabilities out of any assets remaining after paying proven debts and statutory interest
in full, before paying over any outstanding sum to the members of the company.59. In In re T & N Ltd [2006] 1 WLR 1728, paras 106 and 107, David Richards J explained that, although there was no express reference in the 1986 legislation to non-provable liabilities, once all liabilities for which statutory provision has been made have been met by a liquidator, anyone with a non-provable claim would no longer be precluded from enforcing it by proceedings. Accordingly, a liquidator will
in practice have to pay off non-statutory liabilities out of the company’s remaining
assets before distributing to shareholders any surplus remaining after payment of
provable debts and statutory interest.60. Thus, while it is true that there is no provision in the 1986 legislation which specifically requires a liquidator to pay non-provable liabilities, he is in practice obliged to pay off any such claims. Otherwise, if there would still be a surplus after paying off non-provable liabilities in full, he could not distribute that remaining surplus to members, and, even if there would be no such remaining surplus, he would be in an impossible position, able neither to pay the money he held to satisfy the non-provable liabilities nor to pay it over to members. Support for that conclusion may be found in a number of first instance cases, including Gooch v London Banking Association (1886) 32 Ch D 41, 48, per Pearson J, In re Fine Industrial Commodities Ltd [1956] Ch 256, 262, per Vaisey J, and In re Islington Metal & Plating Works Ltd [1984] 1 WLR 14, 23-24, per Harman J, and also in the Court of Appeal in In re Lines Bros Ltd (In Liquidation) [1983] Ch 1, 21, per Brightman LJ.
61. At [2016] Ch 50, para 185, Briggs LJ said that, although “the statutory
scheme provides no detailed machinery for dealing with” non-provable liabilities,
“they have always been dealt with in accordance with Judge-made principles”.
Given that the company concerned remains in liquidation, that the duties of the liquidator have not been completed (as payment to members of any final surplus is part of his express duty), and that, before they can be completed, he must in practice satisfy any non-provable liability by making a payment, it appears to me that such a
payment would be effected “in the Insolvency” even if sections 107 and 143 did not
have the effect described in para 58 above. The proposition that a liquidator is liable to pay off non-provable liabilities if there is a surplus after paying statutory interest is an example of a principle of Judge-made law which survives despite the increasingly full codification of insolvency law. Not merely is there nothing inconsistent with the principle in the 1986 legislation: the principle is effectively necessarily implied by the provisions of the legislation, and those responsible for drafting the legislation must have been well aware of the long-standing and consistent judicial approval of the principle.
62. The same conclusion must apply to a distributing administration, although it is fair to say that an administrator would not necessarily face the quandary identified in para 60 above. Whether a person to whom a company in administration has a non-
provable liability would be a “creditor” for the purposes of paragraph 65 of Schedule
B1 was not argued, and I prefer to leave the point open. It is unnecessary to decide the point because it seems to have been accepted in argument that, if non-provable
liabilities are “payable in a liquidation”, they are “payable in the Insolvency of
[LBIE]” within the meaning of clause 5(2)(a). In my view, that is plainly right.
“Insolvency” in clause 5(2)(a) would appear to be a generic expression. In any event,
if an administrator cannot pay off non-provable liabilities, then, where there is a surplus once he has paid off all proofs and all statutory interest, he would have to put the company into liquidation, whereupon the liquidator would have to pay off any non-provable liabilities.
63. Accordingly, in agreement with the Court of Appeal and the Judge, I consider that the non-provable liabilities are payable “in the Insolvency”. It is unnecessary to
resolve the small difference between Moore-Bick and Briggs LJJ and Lewison LJ
as to whether they are also “established or determined” in the insolvency.
Conclusion as to priorities64. Looking at the issue from a broader, purposive, perspective, the conclusion that both statutory interest and non-provable liabilities have priority over the subordinated debt seems to me to accord both with the eponymous nature of the subordinated debt, and with what a reasonable reader would expect from the general thrust of the terms of the Loan Agreements. The purpose of the parties to those agreements was to ensure that all those with claims on LBIE would have priority over the holders of the subordinated debt. In summary terms, the perception of the reasonable reader would be that the holders of the subordinated debt were to be at the end of the queue - and, in the event of an Insolvency, at the bottom of the waterfall. As to the two categories over which LBHI2 claims priority, the only difference between non-provable liabilities and statutory interest in the present connection is that statutory interest is specifically provided for in the 1986 legislation, whereas non-provable liabilities are not. However, they are both categories of liabilities which have to be met after paying out proofs in full and before any balance can properly be used for another purpose (ie paid over to the members, or rendered subject to a liquidation). It would therefore be surprising if they were treated differently for the purposes of a provision such as clause 5(2)(a).
65. Even if (contrary to my conclusion in para 56 above) statutory interest were
not “payable or owing by [LBIE]”, then, because non-provable liabilities rank ahead
of the subordinated debt, I would nonetheless have concluded that statutory interest should rank ahead of the subordinated debt. It would not, in my view, be legally possible for the subordinated debt to rank ahead of statutory interest but behind non- provable liabilities. The legislative provisions (as interpreted and, arguably, as extended, by judges) make it clear that statutory interest must be paid off before non-provable liabilities; and the terms of the Loan Agreements, as contractual documents, cannot vary the order in which statutory interest and non-provable liabilities are payable in accordance with the waterfall (unless all those who would thereby be prejudiced have agreed, and there is no public policy reason against giving effect to the variation).
66. Although it may at first sight appear to be equally arguable in terms of narrower logic that the subordinated debt should, in these circumstances, rank ahead of statutory interest and non-provable liabilities, I do not consider that that could possibly be right. Once it is accepted that the terms of the Loan Agreements mean that the subordinated debt ranks behind non-provable liabilities, it must necessarily follow that it ranks behind statutory interest. In agreement with all the parties on this appeal, I can see no objection to giving effect to a contractual agreement that, in the
event of an insolvency, a contracting creditor’s claim will rank lower than it would
otherwise do in the “waterfall”. James LJ’s dictum in Ex p McKay, Ex p Brown; In
re Jeavons (1873) LR 8 Ch App 643, 647 that a person “is not allowed, by stipulation
with a creditor, to provide for a different distribution of his effects in the event of
bankruptcy from that which the law provides” is correct, albeit that it should be
treated as subject to two qualifications. First, that it does not apply where the
“different distribution” involves the creditor in question ranking lower in the
waterfall than the law otherwise provides. Secondly, even if the “different distribution” involves him ranking higher than he otherwise would, the dictum
would not apply if all those who are detrimentally affected by his promotion have agreed to it (unless there was some public policy reason not to accede to the
“different distribution”).
67. Finally, it is right to acknowledge that this conclusion involves giving little,
if any, meaning to the expression “in the Insolvency” in clause 5(2)(a); the argument
that it was intended to exclude claims which were unenforceable as a matter of general law (eg statute-barred claims or foreign tax demands) is not very attractive. However, the fact that an expression in a sentence, especially in a very full document, does not, on analysis, have much, if any, effect if it is given its natural meaning is not, at least on its own, a very attractive or a very convincing reason for giving it an unnatural meaning. As Lord Hoffmann put it in Beaufort Developments
(NI) Ltd v Gilbert Ash NI Ltd [1999] AC 266, 274, “the argument from redundancy
is seldom an entirely secure one. The fact is that even in legal documents (or, some
might say, especially in legal documents) people often use superfluous words”. And,
if one has to choose between giving a phrase little meaning or an unnatural meaning, then, in the absence of a good reason to the contrary, the former option appears to me to be preferable.
When can LBHI2 lodge a proof?
68. The LBIE administrators contend that it would not be open to LBHI2 to lodge
a proof in LBIE’s administration for the subordinated debt until all “Senior
Liabilities” have been paid in full. David Richards J accepted that contention, on the
ground that clause 7(d) and/or (e) had the effect of precluding the lodging of a proof. The Court of Appeal disagreed, and considered that LBHI2 could prove for the subordinated debt at any time. However, they said that, until the Senior Liabilities had been paid in full, the subordinated debt would be a contingent debt, and because of the terms of the Loan, the correct value to ascribe to such a proof before the Senior Liabilities have all been paid would be nil, as nothing could be paid on the proof. If and when the Senior Liabilities were met in full, the Court of Appeal said that the proof in respect of the subordinated debt would be revalued pursuant to rule 2.79 - see at [2016] Ch 50, para 41.
69. In my judgment, David Richards J’s view on this point is to be preferred. The
Court of Appeal’s view appears to me to raise a logical problem. If, at the time such
a proof was lodged, there was a chance that the Senior Liabilities would be paid in full, then, as with any other debt which rests on a contingency that may occur, a valuation of that proof would not be nil: it would have to be a figure which discounted the sum due, in order to allow for the contingency not occurring. However, if the proof is ascribed a valuation greater than nil, it would have to be paid out on any distribution made prior to the satisfaction in full of other proved claims (unless there was one payment of 100%). As David Richards J said, that would appear to fall foul of clause 7. Further, any dividend would be paid out before any statutory interest or any non-provable liabilities had been paid off, which would be inconsistent with the conclusions I have just expressed.
70. It therefore follows that, in my view, it would not be open to LBHI2 to lodge a proof in respect of the subordinated debt until the non-provable liabilities have been paid in full, or at least until it is clear that, after meeting that proof in full and paying any statutory interest due on it, the non-provable liabilities could be met in full. As soon as that has happened, there would, subject to what I say in the next paragraph, be nothing to stop LBHI2 lodging a late proof.
71. On the face of it at any rate, it seems a little strange that a proof can be, or has to be, lodged for a debt which ranks after statutory interest (which can only be
paid out of a “surplus”) and non-provable liabilities. It may be that the proper
analysis is that the subordinated debt is a non-provable debt which ranks after all other non-provable liabilities. It is unnecessary to decide that point, and, as it was not argued, I say no more about it.
72. Accordingly, I would restore para (i) of the order made by David Richards J, because, although I agree with the Court of Appeal that he was right as to the ranking of the subordinated debt, I disagree with the Court of Appeal, and agree with the Judge, as to when the subordinated creditors can prove for the subordinated debt (assuming that they can prove).
The currency conversion claims
Introductory
73. Many of LBIE’s creditors were owed unsecured debts payable in foreign
currencies. Rule 2.86 applies to such debts and it is set out in para 26 above. In effect, it provides that such debts are to be converted into sterling at the official rate on the administration date. As also explained in para 26 above, rule 4.91 is in effectively identical terms in relation to proving foreign currency debts in liquidations.
222. I appreciate that the conclusion which I have reached above as to the true construction of rules 2.86 and 4.91 differs from that reached by the majority. I note that in para 194 Lord Sumption has expressed some misgivings about the reasons for the conclusion that the effect of those Rules is that the unsatisfied balance of a foreign currency debt should not be recoverable, even if there is a surplus from which to pay it. I share those misgivings, but I would go further. I do not think that the Rules are clear enough to give the shareholders a windfall at the expense of creditors where there is a surplus which could satisfy the whole or part of the
company’s liability to the creditors. However, I am pleased to note that the majority
have left open the broader questions identified by Lord Sumption at paras 195 et seq. As matters stand at present I agree with his approach, which is essentially the same as I have tried to describe above. It is, as I understand it, agreed that these are questions for final determination on another day.
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