Vol 10 (2013) - Issue 6

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Ricoh Europe Holdings BV and others v Spratt and another, Compromising Contingent Creditors

Introduction
On 19 February 2013 judgment was handed down in Ricoh Europe Holdings BV and others v Spratt and another. Lord Justice Patten (who gave the leading judgment), Lord Justice Mummery and Lord Justice Treacy, sitting in the Court of Appeal, (the 'Court of Appeal'), rejected an appeal by a contingent creditor to force a liquidator, in a solvent liquidation, to make full provision for the creditor’s claim (so that the claim would be paid in full when it crystallised) rather than a lower current value being attributed to the contingent claim by the liquidator under the Insolvency Rules 1986 (as amended) ('IR 1986').

The Court held that there was a comprehensive mechanism contained in the IR 1986 to resolve contingent claims and the Court would not interfere with a liquidator that had applied the procedure in the IR 1986 correctly in respect of the valuation of contingent claims.

The determination of contingent claims
A contingent claim is a claim that, at the time a company entered into liquidation, was not certain. In the Ricoh case it was a claim under an indemnity in respect of tax liabilities which needed to be investigated and audited before a final value could be given to each liability.
A proof of debt for a claim in a liquidation must set out the value of a claim as at the point in time at which the company in question went into liquidation. In the current case it was difficult for the claimant to insert a value in the proof of debt because the claim was contingent upon the occurrence of the tax audits and investigations.
As such, a contingent claim shall be valued pursuant to Rule 4.86 of the IR 1986. Rule 4.86 states that, '… a liquidator shall estimate the value of any debt which, by reason of its being subject to any contingency or for any other reason, does not bear certain value …'. This gives a liquidator the power to estimate the final value of a creditor’s claim and inform the creditor of that valuation. The liquidator may also revise his estimate at any time during the liquidation process. This estimated value then becomes the value of the creditor’s claim for the purposes of receiving a distribution in the liquidation.

Ricoh Europe Holdings BV – the facts
The Ricoh group of companies ('Ricoh') acquired the Infotec group ('Infotec') from Danka Business Systems Plc ('Danka') in 2007. As part of the acquisition of Infotec, Danka agreed to indemnify Ricoh, in full, against a number of pre-completion tax liabilities of the Infotec companies in Germany, France, Italy and Spain.
In February 2009 Danka commenced a member’s voluntary liquidation ('MVL') under section 91 of the Insolvency Act 1986 (as amended) ('IA 1986'). At the point of liquidation, Ricoh had both certain and contingent claims under the tax indemnities given by Danka in respect of the acquisition of Infotec. In certain jurisdictions, such as Italy, the quantification of the claim depended on the outcome of a tax audit or, an investigation by the relevant Italian revenue authority.
In March 2009 the liquidators of Danka issued a notice to creditors pursuant to Rule 4.182A, IR 1986 informing them that they proposed to make a final distribution to creditors and required that all proofs of debt were submitted by 28 April 2009. Ricoh responded by letter setting out the tax liabilities and its estimate of the maximum possible value of its contingent claims.