Noal SCSp & Ors v Novalpina Capital LLP & Ors

The court determined the statutory test for converting a members' voluntary liquidation (MVL) into a creditors' voluntary liquidation (CVL) under sections 89 and 95 of the Insolvency Act 1986 is whether the company will be able to pay its debts in full, with statutory interest, within the period (not exceeding 12 months) specified in the directors' section 89 declaration. That test is not a balance-sheet solvency inquiry and must be applied at the relevant time; post‑expiry events cannot be used to avoid conversion.

The court held that provable claims under the Insolvency Rules 2016 (in particular Part 14 and rule 14.14) include contingent and disputed liabilities and that such claims must be taken into account when applying sections 89 and 95. A liquidator has no free-standing power under section 95 to carry out a non‑statutory summary valuation to exclude a provable debt: the Insolvency Rules prescribe the adjudication, estimation and appeal processes which the office holder must follow.

Applying those principles to the facts, the judge concluded that the Applicants' Luxembourg proceedings gave rise to a contingent provable claim which, if given any realistic value, meant NCL could not have its debts paid in the 12‑month period. The MVL was therefore required to be converted into a CVL and the court directed conversion and that Mr Horton take the necessary steps.

Background and procedural posture:

• The First Respondent, Novalpina Capital LLP (NCL), entered a members' voluntary liquidation on 10 May 2023 under section 89 Insolvency Act 1986. The Applicants later notified large claims based on alleged negligent due diligence in relation to the acquisition of the Maxbet business; proceedings were and are pending in Luxembourg.
• The Applicants applied to remove and replace the liquidator and for a direction that NCL be converted into a creditors' voluntary liquidation pursuant to section 95 IA 1986. Chief ICC Judge Briggs directed the hearing of preliminary issues; the present judgment decides those preliminary issues.

Nature of the application and relief sought:

• The Applicants sought (inter alia) a direction that the MVL be converted into a CVL and the replacement of the liquidator, on the basis that NCL was unable to pay its debts within the 12‑month period specified in the directors' section 89 declaration.

Issues considered:

1. What test applies when considering conversion under section 95: must debts be paid within the 12‑month period prescribed by the section 89 declaration, or is a balance‑sheet solvency test applicable?;
2. Whether the Applicants' claim is a debt for the purposes of the Insolvency Act and the Insolvency Rules and how such claim should be treated in applying the section 95 test (including whether it is contingent, disputed, provable and how it is to be valued or adjudicated).

Key factual matrix:

• The Applicants are a Luxembourg fund and subsidiaries which relied on due diligence reports. They allege NCL and Mr Kowski improperly removed references indicating uncertainty as to the ultimate beneficial owner of Maxbet; damages claims were issued in Luxembourg.
• The proofs of debt served on the liquidators asserted very large sums (proofs totalling c. £247.6m); alternative valuations were placed in other correspondence. The section 89 sworn declaration did not mention these claims; the 12‑month period expired with NCL having realised only modest assets and with a shortfall sufficient to prevent payment of the expenses of winding up.

Court's reasoning (concise):

• The court gave a textual and purposive construction of sections 89 and 95. Section 89 requires directors to declare they have made a full inquiry and formed the opinion the company will be able to pay its debts in full (with interest at the official rate) within the period specified (not exceeding 12 months). Section 95 requires the liquidator to convert to a CVL where he forms the opinion that the company will be unable to pay its debts within that period.
• The judge rejected the respondents' submission that a balance‑sheet insolvency test (as in section 123) governs section 95. The statutory scheme shows the MVL regime is premised on payment of debts within the short specified period; creditors in a MVL receive no reports in the same way as in a CVL because, if the section 89 promise is fulfilled, creditors will have been paid.
• The liquidator's section 95 assessment must be made at the relevant time (before or at expiry of the 12 months) and may not be postponed to rely on later realisations or funding; post‑expiry events cannot be used to avoid conversion that should have occurred at the statutory time.
• The judge held that the Insolvency Rules define debt and provable claims very widely (Part 14): present or future, certain or contingent are provable. A contingent claim pursued in foreign proceedings is a provable debt and, under rule 14.14, the office holder must estimate its value and inform the creditor; that statutory process cannot be sup-planted by a non‑statutory summary valuation.
• The court found that the Applicants' Luxembourg proceedings gave rise to a contingent provable claim which had not been adjudicated or estimated under the Insolvency Rules before the expiry of the 12 months and that the liquidators had insufficient realised assets to pay debts and expenses within that period.

Subsidiary findings and evidence issues:

• Numerous foreign expert reports were before the court but no Part 35 application had been made; the judge accepted the expert evidence was unnecessary to decide the preliminary issues.
• The court criticised the non‑statutory summary assessment carried out by Mr Murphy, who had attributed a zero value to the Applicants' claim outside the Insolvency Rules' adjudication framework and after the 12‑month period; that approach was unlawful and unreliable.

Conclusions and directions:

• The judge concluded NCL was insolvent for the purposes of sections 89 and 95 as it could not pay its debts in full within the relevant period. The MVL was directed to be converted into a CVL. The court directed that Mr Horton, already appointed as an additional liquidator by the court, take the necessary steps to convert the MVL into a CVL and remain as liquidator in the CVL.

First instance: the court directed that the members' voluntary liquidation be converted into a creditors' voluntary liquidation pursuant to sections 95 and 96 Insolvency Act 1986, because NCL could not pay its debts in full with interest within the 12‑month period specified in its section 89 declaration. The court held the correct test under sections 89 and 95 is whether debts can be paid within the specified period (not a balance‑sheet test), that contingent and disputed claims are provable under the Insolvency Rules and must be treated under the statutory adjudication/estimation regime, and that a liquidator may not exclude provable debts by a non‑statutory summary valuation. On that basis the MVL must be converted and the court directed Mr Horton to effect the conversion; Mr Murphy’s summary valuation at zero was rejected as outside the statutory scheme.

Preliminary issues were directed for hearing by Chief ICC Judge Briggs on 15 November 2024. The court appointed an additional liquidator, Mr Robert Horton, on 3 December 2024. This judgment is a first instance determination by ICC Judge Agnello KC resolving the preliminary issues (hearing dates: 11-14 February 2025 and 3 April 2025).