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29-05-2014

Contrarian Funds Llc v Lomas and others Re Lehman Brothers International (Europe) (in Administration)  

We are all aware of the amendments to CPR3.9 and the onerous regime now in place for compliance with court rules and orders in the conduct of litigation. There is undoubtedly a split in courts' approaches to this regime and whether it should be strictly and rigidly enforced (Mitchell v Mirror Newsgroup Papers) or whether there is latitude so as not to prevent a claimant from bringing its claim (Chartwell Estate Agents v Fergies Properties).

In the Contrarian Funds case, Mr Justice David Richards had to consider the impact on the new sanctions regime to an application by a creditor for permission to bring out of time proceedings to challenge the office holder’s rejection of a proof of debt. The court concluded that such an application has to be considered in the light of the modern amendments to CPR3.9 and the desire for litigation to be conducted efficiently. He made further comments that it is desirable that insolvency estates can be administered efficiently and without further costs and delays of such an application being made.

The creditor was refused permission to issue the application to challenge the rejection of their proof of debt. The main reason for this was that the creditor had been aware for a year of the office holder’s stance on their claim. There had been lengthy correspondence and discussions on the issue which involved deciding which company in the group had entered into a contract with the creditor. The comments made by the judge in relation to the actions by the creditor and the impact on the administration are worth reading as follows:  

“It appears to me that Contrarian has been seriously dilatory in its attempts to support its claim. Moreover, there are no substantial grounds for believing that Orange or Goldman Sachs will be able to produce any further information or evidence to rebut the position taken by the administrators. While it is not for me on this application to form any final view on the merits of Contrarian's claim, it has to be said that the evidence so far available appears to go all one way. This too seems to be the position of Contrarian. If it thought that it had good grounds for applying to vary or discharge the rejection of its proof, it would by now have made the necessary application. Its position expressly is that it needs more time to obtain more information to consider whether it is appropriate to make such an application. In my judgment, the time for making that decision has long passed.

I do not consider that there is anything in the point made on behalf of Contrarian that there remains still much to be done in the administration of LBIE. While that is undoubtedly true, it is important that any administration, and particularly an administration on this scale, should proceed as expeditiously as possible. The figures given earlier in this judgment as to the amount of distributions so far made shows the scale of the task which the administrators have faced and continue to face in dealing with claims and making distributions. It is vitally important to the conduct of the administration that the momentum in dealing with claims is maintained. The administrators are required to deal fairly as between all claimants. If they were to take a relaxed attitude towards Contrarian, they would be required to take a similar attitude towards other claimants. This would result in wholly unacceptable delays in dealing with the administration.”

There we have it. The Jackson Reforms will undoubtedly have an impact on all manner of potential court applications. The creditor applicant here perhaps made this a relatively easy decision given the delays that had been incurred and their knowledge of the office holder’s stance for such a long time prior to the formal rejection of their proof. We are, however, in a different world than previously.

Delays have to be less tolerated and it is always going to be wiser to comply with time limits in all rules which could lead to court applications for extensions of time but, if further time is needed, there is an extremely good reason why that time is needed and an application to court is made as soon as possible.

Regrettably, “I have been too busy to do it”, is never going to be an acceptable excuse. The need to obtain further evidence or the unreasonableness of the other side in assisting in resolving the issue may well get you home on an application for more time provided you make that application promptly.      

Graham McPhie    

If you wish to discuss this issue please contact Frances Coulson fcoulson@moonbeever.com; or Graham McPhie gmcphie@moonbeever.com  

This is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information contained here. Should you wish to instruct us on any detailed matter, please contact Frances Coulson or Graham McPhie.  

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