Challenging proofs of debt

This application concerned a challenge by one creditor to the decision of a supervisor of a CVA to accept a proof of debt from another.

The company concerned carried out works under a JCT Minor Works contract. The employer (JKR) claimed it had overpaid following the issue of a final certificate in 2019 and submitted a proof of debt based on that, together with a claim for liquidated damage. Levi Solicitors, another creditor to the tune of over £760,000, sought various directions, including one that the proof should be rejected. A series of issues, including who carried the burden of proof, and the correct interpretation of the wording of the JCT Minor Works contract came before Mr Justice Fancourt.

Prior to this, there was no authority for where the burden of proof lay when a creditor challenged a proof submitted by another. This was a fresh determination of the claim at which fuller evidence could be considered. On that basis the burden lay on the creditor seeking to have its proof admitted, not the applicant challenging it, just as it would if the office holder had rejected the proof.

The court also went on to consider the payment provisions in the JCT Minor Works contract and in doing so concluded the proof should be accepted but for a slightly reduced sum. The JCT Minor Works form contains a separate mechanism (at Clause 6.7) to determine the final balance of the account due from or to the insolvent contract following termination and completion of the works. Mr Justice Fancourt summarised the authorities and concluded that parties were free to agree this mechanism, subject to s. 111 of the Housing Grants, Construction and Regeneration Act 1996 which provided for the service of pay less notices within a strict time period. Those provisions still applied where the contractor is subject to a CVA.

Here the payment mechanism in Clause 6.7 applied automatically on the contractor becoming insolvent and whilst the contract stated that an account should be set out within three months in a certificate issued by the Architect or Contract Administrator, or a statement prepared by the employer, that three months was not a strict time limit. Therefore even a certificate issued after three months could still form the basis of a claim, as it did here. 

Levi Solicitors LLP v Wilson & Anor [2022] EWHC 24

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