Lockston Group Inc v Wood

In an administration in bankruptcy of a deceased person’s insolvent estate, provable debts are both identified and quantified at the date of death. Foreign-currency debts must be converted into sterling at the exchange rate prevailing on that date. Interest is provable up to, but not after, the date of death. Post-death interest is payable only from any surplus remaining after payment of the proved debts.

The statutory scheme requires a single common date. Reading separate dates into the legislation would undermine the pari passu distribution of the estate and create inconsistency between the provisions governing proof and statutory interest.

The deceased’s insolvent estate was being administered in bankruptcy under the Administration of Insolvent Estates of Deceased Persons Order 1986. At a creditors’ meeting, the respondent, acting as chairman, declared a resolution appointing the Grant Thornton nominees as trustees.

Lockston challenged that result. It argued that foreign-currency claims should be converted at the date of the insolvency administration order and that interest should be provable until that date. The central issue was whether the statutory scheme required debts to be identified and quantified at death or at the later insolvency administration order.

1. The application was dismissed in substance. The resolution appointing the Grant Thornton nominees as trustees was validly passed.

2. The court held that the statutory scheme requires one common date for identifying and quantifying provable debts. Under the modifications made by the Administration of Insolvent Estates of Deceased Persons Order 1986, that date is the deceased debtor’s date of death.

3. Section 382 of the Insolvency Act 1986, as modified, defines bankruptcy debts by reference to liabilities existing at death or arising from obligations incurred before death. That language extends to the amount of the debt, not merely its existence. The provisions concerning preferential debts and statutory interest reinforce the same conclusion.

4. Foreign-currency debts must therefore be converted into sterling for proof at the exchange rate prevailing on the date of death. Interest on interest-bearing debts is provable only up to that date. Interest accruing thereafter is payable from any surplus under section 328.

5. The court rejected the argument that references to commencement of bankruptcy, the statement of affairs, Form 7, or set-off required quantification at the insolvency administration order. Those provisions had to be read consistently with the modified definition of bankruptcy debt and the overall pari passu structure.

6. This interpretation was consistent with other insolvency regimes, the other forms of administration of deceased estates, the predecessor legislation and the objective of consistency identified in the Cork Report.