Nortel Networks SA, Re

The court may use its power under paragraph 63 of Schedule B1 to the Insolvency Act 1986 to set a deadline for administration expense claims and authorise distributions to lower-ranking unsecured creditors without reserving for claims notified after that date.

The discretion should be exercised by balancing protection for potential expense creditors against the need to bring the insolvency to an efficient conclusion. Relevant considerations include the age and publicity of the insolvency, the opportunity given to potential claimants, the size and uncertainty of possible claims, and safeguards for late claims.

The joint administrators of Nortel Networks SA sought directions fixing 29 January 2019 as the deadline for notifying claims said to rank as administration expenses. Without a deadline, potential claims by former employees, software licensors, a former landlord and the French Tax Authority would require continuing reserves and could prevent a distribution to ordinary unsecured creditors through a proposed company voluntary arrangement.

The application followed earlier directions made in relation to other Nortel EMEA companies. The central issue was whether it was just and appropriate to impose the proposed Expense Bar Date and permit distribution without provision for unnotified expense claims.

1. Application granted. An Expense Bar Date of 29 January 2019 was fixed, and the administrators were authorised to make funds available to unsecured creditors through the proposed company voluntary arrangement without retaining funds for expense claims not notified by that date.
2. Under paragraph 63 of Schedule B1 to the Insolvency Act 1986, the court may give directions to assist administrators in identifying liabilities that rank as administration expenses and may authorise distribution to lower-ranking unsecured creditors without regard to expense claims not made by a specified date. The court followed and applied its earlier decision in Re Nortel Networks UK Ltd and others [2017] EWHC 1429 (Ch), [2018] Bus LR 206.
3. The discretion is whether it is just and appropriate to give the directions. The court must protect persons who may have expense claims while recognising the need for an efficient conclusion to the insolvency process.
4. The discretion was properly exercised here. NNSA had been in administration for nine years; substantial funds were available for distribution; the possible claims were potentially large; and continuing uncertainty would materially prejudice ordinary unsecured creditors. The proposed timetable gave known potential claimants substantial notice and time to formulate claims.
5. The order would not extinguish late claims, although it might reduce or exhaust the funds available to meet them. The order also contained adequate safeguards, including permission to apply to vary or set it aside by 4 p.m. on 9 August 2018 where a person had inadequate notice.