Without notice applications and partnership contributions

Liquidators were appointed over a partnership. The liquidators obtained the court’s permission to call upon the partners to each contribute £292,820 into the insolvent partnership. This sum represented the partnership’s liabilities and the expenses of the liquidation.

The liquidators’ call order application was made without notice to any other parties and the application stated there were no other parties. The partners were therefore unable to make representations in the liquidators’ application. The partners appealed, alleging the call order was an abuse of process and citing other irregularities.

Upholding the liquidators’ application, the judge noted that the applicable law was a mixture of the Insolvency Act 1986 (the “Act”), Insolvency Rules 2016 (the “Rules”) and Insolvent Partnerships Order 1994, which all required cross-interpretation.  

The judge determined that Sections 74 and 226 of the Act and Rule 7.88 did apply to partnership contributions. The judge found there was no procedural irregularity because Rule 7.88 expected liquidators’ call applications to be made without notice.

The judge noted the contribution was not expected to perfectly reflect the partnership’s liabilities nor the expenses of the liquidators. The liquidators’ estimated required contribution may not be exact and a surplus may result.

The judge distinguished the original call order from its enforcement. Enforcement would require a further application which would be on notice and include the contributor(s). Therefore there was no abuse of process as the enforcement application would provide the contributor(s) with the opportunity to challenge the call order.

Re Scott-Hake [2020] EWHC 3677 (Ch)

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