High court's ruling on proof of debt in insolvency

The High Court has upheld a decision by joint administrators to reject a proof of debt in BV8 Ltd v BV9 Ltd & Ors [2023] EWHC 3048 (Ch).

The proof of debt was submitted, claiming over £1 million. The Claimant’s appeal was dismissed due to the nature of the debt claimed had changed significantly during the proceedings.

On 26 March 2021, David Shambrook of RSM UK and Anthony Wright of FRP Advisory were appointed joint administrators of BV9 Limited.

BV8 Limited submitted a proof of debt claiming £1,074,036.91 and that the liability resulted from BV8 Limited’s earned interest margin from loan book assignments to BV9 Limited. The administrators rejected the claim.

Legal Contention

BV8 Limited appealed the administrators’ decision under rule 14.8 of the Insolvency Rules 2016 (“IR16”). Despite what BV8 Limited had claimed in its proof of debt, it proceeded to present its claim differently, arguing that the amounts were due regarding a loan from BV8 Limited to BV9 Limited on 16 December 2020.

The administrators contested that they had not been given reasonable notice of the updated claim until shortly before trial and that the change was not reflected in the proof of debt, nor was it the parties’ understanding. BV8 Limited argued that it had given the administrators reasonable notice of its claim and that it was set out in its skeleton argument.

Key Legal Principles

Various legal principles were considered, including (but not limited to) the necessity for detailed information in the proof of debt in accordance with rule 14.4 IR16 and the importance of accurate and contemporaneous record-keeping for understanding company transactions under the Companies Act 2006.

Dismissal of Appeal

The appeal was dismissed on the basis that BV8 Limited’s claim had essentially changed during the course of proceedings, there was not sufficient evidence to address the appeal, BV8 Limited did not amend nor provide a new proof of debt, including its altered claim and its purported estoppel claim was unfounded.

Reaffirmation of Court’s Stance

This case law reaffirms the requirement to submit a proof of debt with sufficient detail which accurately outlines the nature of the claim together with adequate evidence. Parties cannot diverge from initial claims submitted in proofs of debt without formal amendments and satisfactory notification.

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