Facts
- JE Cade & Son Ltd encountered financial problems.
- A creditor whose debt was contingent—meaning payable only upon the occurrence of a future event—sought to petition for the company's winding-up.
- The company argued that the contingent nature of the debt meant the creditor lacked sufficient interest (locus standi) to initiate insolvency proceedings.
Issues
- Whether a contingent creditor possesses locus standi to petition for the winding-up of a company whose debt is not immediately payable.
- Whether the contingency and potential value of the claim affect a contingent creditor’s right to petition under the Insolvency Act 1986.
Decision
- The High Court determined that a contingent creditor can have sufficient standing to petition for winding-up.
- It was held that the contingent nature of the debt did not by itself disqualify a creditor’s interest.
- The court emphasized that the probability of the contingency occurring and the materiality of the debt were essential considerations.
- Where the contingency was likely to occur and the debt was significant, the petition should be allowed.
Legal Principles
- Section 124(1)(a) of the Insolvency Act 1986 was interpreted to include contingent creditors, provided they meet the court’s criteria.
- The term “creditor” in the statutory provision includes those with contingent claims if there is a real prospect of the contingency occurring and a meaningful debt at stake.
- Practical assessment of contingent debts is required by insolvency practitioners in analyzing a company’s financial state.
- The principles established influenced subsequent case law and remain guiding authority on creditor standing in insolvency.
Conclusion
Re JE Cade & Son Ltd [1992] BCLC 213 clarified that contingent creditors may petition for winding-up when contingencies are probable and the debts substantial, thereby broadening access under s 124(1)(a) and shaping ongoing approaches to creditor standing in corporate insolvency law.