BV8 Limited v BV9 Limited (in administration) & Anor

The applicant BV8 appealed under Rule 14.8 of the Insolvency (England and Wales) Rules 2016 against the administrators' rejection of a proof of debt claiming £1,074,036.91 as an "earned interest margin" on assignment of loan books. The court emphasised the mandatory content required of a proof under Rule 14.4 and the need for sufficient particularity to enable adjudication by the office holder.

The court found that BV8 had in effect abandoned the proof as pleaded: the case was reformulated in skeleton argument to assert a loan arising from transfers on 16 December 2020 and then further shifted to a claim dependent on a post-commencement inter-company account. Those reformulations were materially different from the pleaded proof, were first revealed late in the proceedings and so deprived the administrators of an opportunity to investigate and respond. The court accepted the Deeds of Assignment and, on the evidence, the authenticity and contemporaneity of board minutes, but concluded the pleaded Proof of Debt (interest margin on assignment) had been superseded and that the estoppel argument failed. Because the alternative formulations raised numerous unresolved factual, contractual and investigatory issues (including the role of Kookmin and the proper application of the assignment terms) the court declined to decide the new claims on the papers and dismissed the appeal as presented.

Background and nature of the application

• BV8 appealed under Rule 14.8 of the Insolvency (England and Wales) Rules 2016 against the administrators' rejection of a proof of debt dated 20 May 2021 for £1,074,036.91, described as BV8's "earned interest margin on assignment" of loan books to BV9.
• BV8 and BV9 were special purpose vehicles financed by Kookmin; the commercial background involved a two-company structure to address tax/withholding issues (the "Tax Scheme").

Issues before the court

• Whether the claim relied on in the appeal differed from the pleaded proof and, if so, whether the administrators had fair notice and opportunity to investigate the new case.
• Whether BV8 had proved a debt on the balance of probability either as pleaded (an entitlement to interest margin on assignment), as reformulated in skeleton (a loan arising on 16 December 2020), or by reference to a post-commencement inter-company account.
• Whether estoppel or the parties' conduct (including signing of TR4s) prevented the administrators from disputing BV8's asserted entitlement.
• How the contractual documentation (Deeds of Assignment and facility agreements), the board minutes and Kookmin's role affected the legal position.

Reasoning and findings

• The court stressed Rule 14.4 requires mandatory detail in a proof of debt so an office holder can adjudicate. The proof as filed asserted an entitlement to an interest margin on assignment.
• BV8's case changed materially: first to a claim that sums transferred on 16 December 2020 included a loan element of £1,074,036.91 (distinguishing part as BV8's own funds and part as accrued interest), and then to reliance on an inter-company running account produced after the administration began.
• The administrators were entitled to treat the appeal as concerned with the original pleaded claim; the late reformulation in the skeleton argument and during submissions deprived them of opportunity to investigate and present evidence on the new causes of action.
• The Deeds of Assignment and, on balance, the board minutes were accepted as authentic and contemporaneous, but those documents and the facility arrangements raised further issues (including Kookmin's position and whether assets/liabilities were intended to transfer) that had not been investigated or resolved.
• The estoppel argument failed: there was no representation which the administrators had accepted entitling BV8 to rely upon it, and the directors bore duties to keep proper records and account which were not satisfied.
• Because of evidential gaps and numerous investigatory and contractual issues, the court would not determine the alternative claims on the papers and dismissed the appeal as presented.

The appeal is dismissed. The court held that the proof of debt as pleaded (claim for earned interest margin on assignment) had been superseded by materially different claims (a loan allegedly made on 16 December 2020 and later an inter-company account claim). Those reformulations were raised too late for the administrators to investigate; the estoppel argument failed; and there was insufficient, vouched evidence and unresolved contractual and investigatory issues (including Kookmin's role and the application of the assignment terms) to decide the new claims on the papers. Accordingly the administrators' rejection of the proof, as pleaded, is upheld and the appeal dismissed.