English court considers permission requirements for counterclaim against company in administration

The High court has recently considered whether permission should be given retrospectively to lift an administration moratorium to allow a counterclaim to proceed. 

Background

The counterclaim had been brought by WWTAI against CargoLogicAir Ltd (in administration) (CLA) without the consent of the administrators or the Court. CLA contended that the counterclaim was issued in breach of the statutory administration moratorium and should be struck out. 

Solely to set off

The Court followed Mortgage Debenture Ltd v Chapman [2016] EWCA Civ 103 in holding that a counterclaim for money will require permission from the administrator or the court to proceed unless it is pleaded solely to raise a defence by way of set off. The counterclaim here had the potential to exceed the sum due to CLA and sought proprietary relief and so permission was required.

Considerations

The Court allowed the claim to proceed noting certain themes to be considered:

• It will often be in both the creditors’ collective interests and the individual claimant’s, to have a decision on liability and therefore understand the company’s financial position.
• Individual’s proprietary rights are likely to be favoured.
• Even if a claim is not solely defensive, the fact that it is closely connected with a claim that the company is making, may be important. If the administrators choose to maintain a claim, they will inevitably have to devote the resources necessary to deal with the defence.
• The Court may give permission on terms. Here, permission was conditional on WWTAI not enforcing any money judgment obtained without the permission of the Court or the administrators.

Find out more

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring and Insolvency team.

CargoLogicAir Ltd v WWTAI AirOpCo 1 Bermuda Ltd [2024] EWHC 508 (Comm)