Re Kaupthing Singer and Friedlander Ltd (In Administration) [2010]
Under rule 2.85 of the Insolvency Rules 1986, where an administrator proposes to make a distribution, any sums due from the creditor to the company must be set-off against any sums due from the company.
If a balance is owing to the company, this sum must be paid to the administrator unless the balance is otherwise payable at some time in the future.
The Court of Appeal had to decide whether any future debt to the company should be discounted in accordance with rule 2.105 in the same way as any future debt due from the company to a creditor is discounted. The court decided that rule 2.105 did not apply in this situation and that any creditor whose future debt has been set-off in part against sums owing by the company nevertheless remains liable to pay the balance of the debt in full.
Court of Appeal determined that, after the set-off of cross-claims between a company in administration and a creditor, the balance payable by the creditor to the company (under rule 2.85 of the Insolvency Rules 1986) in respect of a future debt had to be paid to the administrator in full and not in a discounted amount.
This judgment has two important consequences:
- It prevents debtors from taking advantage of the fact that sums are payable to a company in administration at a future date as any such payments will be paid in an equivalent undiscounted amount.
- It accords with the principle for the administration of an insolvent company that the value of the company and its assets should be preserved and, where possible, maximised.