Expunging of proof of debt

In the case of Re Globe Legal Services Limited ("Globe") heard on 13th September 2000 before Neuberger J, the Court had to decide the question as to what constituted the proper standard of proof for a liquidator, seeking to expunge proof of a debt, pursuant to Rule 4.85 of the Insolvency Rules 1986.

Rule 4.85 provides that "the Court may expunge a proof or reduce the amount claimed on the liquidator's application, where he thinks that the proof has been improperly admitted, or ought to be reduced".

In this case, the liquidator of Globe admitted a proof of debt submitted by a creditor, Miller Gardner, in the amount of GBP 30,000. The creditor then revised the amount set out in its proof to GBP 173,000. The liquidator accepted this amendment but subsequently informed the creditor that the admission of the proof of debt was a mistake and then applied to the Court seeking to expunge the proof on the basis that it had been improperly admitted, pursuant to Rule 4.85(a).

The Court held that the correct standard of proof in determining whether a proof of debt had been improperly admitted was the civil standard of balance of probabilities rather than the test set out in an earlier case (Re Browne [1960] 2 All ER 625), that it had to be established beyond reasonable doubt that the proof of debt was improperly admitted. The Court distinguished that case by saying that it was an exceptional one, as it related to a debt which was 48 years old, which had made it difficult to put together the evidence required because key witnesses had died and documents had been lost.

The Court held that the liquidator had admitted the proof of debt by mistake and in addition, the creditor could not say that it had relied on the liquidator's decision because the liquidator had informed it of his mistake within a few days of his original decision. In the circumstances, the proof of debt would be expunged.

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