Lockston Group Inc v Nicholas Stewart Wood [2015] EWHC 2962 (Ch)

This case is a landmark decision as it explains how the value of creditors claims should be determined when quantifying claims for distributions from insolvent estates.


The chairman must decide the amount for which creditors are to be allowed to vote, and must have regard to the provisions of the Rules. Two creditors of the insolvent estate of Boris Berezovsky (‘The Applicants’) challenged the decision of the chairman to admit interest on debts only up to the date of Mr Berezovsky’s death. The Chairman also converted foreign currencies into Sterling at the exchange rate as at the death of Mr Berezovsky.

The Applicants challenged that the relevant date for the calculation of interest and foreign currency exchange was the date on which the Insolvency Administration Order (the ‘IAO’) was made. The High Court dismissed the application.


In January 2015, an IAO was made and trustees were appointed at the first meeting of creditors which immediately followed the making of the IAO. The chairman calculated votes of creditors on the basis that interest on debts was to be calculated up to the date of Mr Berezovsky’s death; and non-Sterling debts were to be converted into Sterling at the applicable exchange rate as at the same date.

Almost two years had passed since Mr Berezovsky had died and the date on which the IAO was made in January 2015. If interest accrued up to the date of the IAO, it would have had a substantial impact upon the value of the creditors’ respective claims.

Many of the debts of the Estate were denominated in Russian Roubles, which had significantly devalued since the date of Mr Berezovsky’s death and the date of the IAO. If the date of the IAO was taken as the relevant date for foreign currency exchange, the value of these Rouble denominated proofs would have substantially diminished.


The Applicants applied for an order declaring that the votes had been miscalculated as the proper date for the calculation of interest and the rate of exchange was as at the date of the IAO.

They sought an order declaring that the Trustees had not been appointed as such at the first meeting of creditors, and instead the Applicants’ own nominees for the trusteeship had been appointed.

The basis was that the difference in dates for the calculation of votes would have had a substantial impact on the value of the respective creditors’ claims for voting purposes, in particular the two creditors whose debts were in Russian Roubles.

The Applicants contended that had their own claims increased by virtue of the longer period for the calculation of interest, along with the diminution of the Russian creditors’ claims due to the later date of exchange from Roubles into Sterling. The effect was that their own nominees for the trusteeship would have been appointed at the first meeting, rather than the Trustees.


The Judge rejected the application. The challenge was inconsistent with the fundamental principle of insolvency law that there is a single date for the identification and quantification of debts.

Part II of Schedule I to the Administration of Insolvent Estates of Deceased Persons Order (‘The Order’) 1986 provides that the identification of debts is to be at the date of death. Debts, including interest and foreign exchange, must also be as at the date of death. The use of one date (i.e the date of death) produces a consistent regime.

The Trustees’ construction was also consistent with the law and practice under the Bankruptcy Act 1914.

The Judge considered that the Trustees’ construction was supported by commentary in relevant authorities. In Re Palmer [1994] Ch 316, Balcombe LJ held that the effect of the Order was to “draw a line at the moment of the death”.


The Judgment gives certainty in calculating creditors’ claims in an insolvent estate of a deceased person. When there is such a long period between death and the date of the IAO, there can be a significant impact upon the valuation of creditors’ claims which are in foreign currencies or carry high rates of interest. That impact can affect the proportion of any distributions and administration of the insolvent estate by changing the respective voting powers between creditors.

If you would like to discuss any issues raised further please contact Helen Freely or Rachel Diedrich.

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