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Case Study: Joining Legal Proceedings During A Moratorium

In the case of Cook v Mortgage Debenture Ltd [2016] the Court of Appeal considered whether the statutory moratorium prevented a person being joined to proceedings which were started by a company which is now in Administration.

The Claim

Mr Cook was a Partner in a law firm and sought to be joined to proceedings which had been started by Mortgage Debenture Ltd, prior to it being placed into Administration.  Mr Cook’s application was rejected on the basis that it was prevented by Para 43(6) Sch B1 IA 86, which imposes a moratorium on any legal proceedings being instituted or continued against a company in Administration (without the consent of the Administrator or agreement from the Court).  Mr Cook appealed.

The Ruling

The Court of Appeal considered the application and rejected the fact that the moratorium prevented the action as Para 43(6) referred to proceedings "against the company”.  In this scenario, the proceedings had been instigated by the company.

Further, it was established law that defendants to proceedings should not be prevented from taking action to defend themselves.  The Administrator argued however that the application by Mr Cook to join the proceedings, took the form of an active step against the company rather than a defensive step, and the costs of the Administrator would be greater as a result. 

The Court disagreed.  It was determined that Mr Cook should be given the opportunity to be heard on an issue that affected his firm and that the Administrator would need to consider the potential benefit from continuing the action against the likely costs.

Posted: 29.09.2017
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