Burden of proof on paragraph 74 application

This case concerned an application pursuant to paragraph 74 of Schedule B1 to the Insolvency Act 1986 that the administrators of a company had unfairly harmed the applicant, the sole director and shareholder of the company, by refusing to assign to her a potential claim that the company had against a third party.

Prior case law on this issue was to the effect that the court should not direct the assignment of a claim where the claim was “frivolous or vexatious”. The court held that neither decision was strictly binding in the instant case but that the issues did not have to be grappled with because the relevant passage of the case referred to by counsel for the applicant in their support was not in fact considering the approach a court should take on an “unfair harm” application but was instead providing guidance on how administrators should themselves exercise their own discretion when faced with an assignment offer. 

The court held that the applicant had the burden of proving that the claim was not frivolous or vexatious. The court considered the test further, holding:

  • The expressions frivolous or vexatious are synonymous with the test for “no reasonable prospect of success” under the summary judgment provisions in CPR Part 24. The applicant’s submission that a lesser test was appropriate was rejected.
  • The question had to be determined on the basis of evidence available at the hearing; the administrators were not confined to the reasons that they had advanced when refusing assignment.

The court went on to dismiss the application on the facts.

Dixon v Myers and another, ICC judgment

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