Liquidator’s assignment of claim challenged

A creditor (the Applicant) of a company in Liquidation (the Company) sought to set aside the Liquidator’s assignment to a litigation funder of causes of action which either vested in the Company or were statutory claims of the Liquidator (in this case, claims for a transaction at an undervalue and preference).

The Applicant was a director of the Company and a creditor in respect of monies she had loaned to the Company. The Liquidator alleged claims against the Applicant’s parents which they assigned to a litigation funder.

The Applicant challenged the assignment pursuant to section 168(5) of the Insolvency Act 1986 on the basis that it was perverse because the Liquidator had failed to take legal advice on the claims or seek offers for the claims from the obvious source, being the Applicant and her parents.

Rejecting the application, the court held that the Applicant did not have a legitimate interest in the relief sought. The Applicant was motivated in protecting her parents, not the general creditor body as a whole. Her complaint lay with the substance of the claims themselves, rather than the assignment.     

Re Edengate Homes (Butley Hall) Limited (In Liquidation) [2021] EWHC 2970 (Ch)

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