Overview Of Adjudication Of Creditor Claims By An Insolvency Practitioner
The adjudication of creditor claims by an Insolvency Practitioner is done to determine which creditors should be able to participate in the insolvency process and receive a dividend if sufficient realisations are made.
Once creditors have submitted their claims if there is a decision to be taken that requires their input or certainly if the Insolvency Practitioner is in a position to pay a dividend to creditors he or she will formally adjudicate their claims.
To try to ensure that the Insolvency Practitioner has the claims of creditors entitled to claim he or she will advertise the right to claim in the Gazette newspapers. Creditors who have not heard about the insolvency or not as yet come forward can then submit a Proof of Debt to claim. This will involve creditors filling in the relevant form and when called upon supplying documents to prove their claim.
Adjudication Of The Creditor’s Claim
Adjudication of the creditor’s claim is the formal process whereby the Insolvency Practitioner will review the documents and the Proof of Debt form to decide:
- If the claim is valid such that the creditor is indeed a creditor of the insolvency.
- If information is available that suggests the claim ought not to be accepted.
- If it is determined to be a valid claim then the next step is to place an amount on the claim.
The burden is on the creditor to prove its claim (Levi Solicitors LLP v Wilson  EWHC 24 (Ch)). The Insolvency Practitioner will invite the creditor to prove but may well not undertake an inquisitional role in the process.
Acceptance Of Creditor Claim
If a creditor’s claim is accepted then the creditor should usually rank for both voting and dividend purposes.
Rejection Of A Creditor Claim
If the Insolvency Practitioner has received information that suggests that the creditor’s claim is not valid and or that the information supplied is insufficient to prove the claim, in the first instances they will typically seek out further information to investigate the matter.
An Insolvency Practitioner should be satisfied as to the veracity of a creditor’s claim. If however upon further review the Insolvency Practitioner remains unconvinced that the claim ought to be accepted then they can take steps to formally reject the claim.
The Process Of Formal Rejection Of A Creditor Claim
The process of formal rejection of a creditor claim is set out in Rule 14.7 of the Insolvency (England and Wales) Rules 2016 which states that the Insolvency Practitioner:
must deliver to the creditor a statement of the office-holder’s reasons for doing so, as soon as reasonably practicable.
Appeal Against Rejection Of Creditor Claim
If a creditor has their claim rejected they are entitled if they so wish to appeal to the Court under Rule 14.8 of the Insolvency (England and Wales) Rules 2016.
A creditor who wishes to appeal the rejection of their claim must do so within 21 days of receipt of the notice of it being rejected.
Costs Of An Appeal Against Rejection
The usual rule (Rule 14.9(2) the Insolvency (England and Wales) Rules 2016) is that an Insolvency Practitioner is not personally liable for the costs of the creditor who appeals, even if the appeal against the rejection is successful.