Challenging the Liquidator’s Decision

Challenging the liquidator’s decision:

1. A liquidator’s decisions can be challenged. A creditor who is dissatisfied with a liquidator’s decision to reject the creditor’s claim or the liquidator’s estimation of the amount claimed may apply under section 284(1)(b) of the Companies Act 1993 to confirm, modify, or reverse the liquidator’s decision. The creditor will need to obtain leave of the Court first before making the application. It cannot apply as of right to confirm, modify or reverse the liquidator’s decision.

2. Section 284 is concerned with testing the reasonableness of a liquidator’s decision. It is not appropriate for a creditor to use this provision to make an assessment of the underlying legal rights associated with a claim that has been rejected by the liquidator. If the underlying legal rights of a rejected claim are to be assessed, the creditor should apply for leave to commence legal proceedings against the company in liquidation (under section 248) to determine the validity of the claim, and not apply to reverse the decision of a liquidator under s 284.

3. The Court is generally reluctant to interfere with a liquidator’s decision that has been made in good faith, and in accordance with the duty to act in a cost effective and efficient manner. The Court is more likely to intervene where it is obvious that the liquidator has not acted reasonably. For example, where the liquidator has not requested or considered the relevant evidence, or where there is new and relevant evidence before the Court that was not available to the liquidator. The Court will not usually hold a liquidator accountable for a mere error in judgment.

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