Standing to challenge Isle of Man liquidator’s conduct: test revisited in Montpelier

Standing to apply to challenge Isle of Man liquidator’s conduct: test revisited in Montpelier

In the latest decision in the long-running FSA v Montpelier (Trust and Corporate) Services Ltd (in liquidation) (CHP 20/0005) (23.06.26), Deemster Corlett (at § 26) has again applied the two-stage test for standing to apply to Court to challenge a liquidator’s conduct.

The Montpelier decision follows Deemster Corlett’s earlier decision in Re Broadsheet LLC (in liquidation) (CHP 21/038) (09.04.26) where, also at § 26, he cited the applicable test from Deloitte & Touche AG v Johnson [1999] 1 WLR 1605:

“… two different kinds of case must be distinguished when considering the question of a party’s standing to make an application to the court. The first occurs when the court is asked to exercise a power conferred on it by statute. In such a case the court must examine the statute to see whether it identifies the category of person who may make the application. This goes to the jurisdiction of the court, for the court has no jurisdiction to exercise a statutory power except on the application of a person qualified by the statute to make it. The second is more general. Where the  court is asked to exercise a statutory power or its inherent jurisdiction, it will only act on the application of a party with a sufficient interest to make it. This is not a matter of jurisdiction. It is a matter of judicial restraint. Where the court is asked to exercise a statutory power, therefore, the applicant must show that he is a person qualified to make the application. But this does not conclude the question. He must also show that he is a proper person to make the application. This does not mean, as the plaintiff submits, that he “has an interest in making the application or may be affected by its outcome”. It means that he has a legitimate interest in the relief sought”.

At § 27 of Montpelier, Deemster Corlett also adopted the principle in Brake v The Chedington Court Estate Ltd [2023] 1WLR 3035, a bankruptcy decision. In Brake, at § 7, the Supreme Court (Lord Richards, with whom the other Justices agreed) had held that its reasoning on standing applied equally to corporate insolvency:

“Both section 303(1) and section 168(5) of the IA 1986 express in very broad terms the persons who may apply to challenge a trustee or liquidator…. The express terms are not, however to be given a literal reading. On both principle and authority, there are limitations on the persons who have standing to apply under these provisions”.”

(As to other insolvency / company law decisions by Lord Richards, see Manhattan Coffee: JCPC clarifies who may bring derivative claim on behalf of company in liquidation – Coren Law).

Deemster Corlett held (at § 28) that the principle in Brake was equally applicable to a challenge under s 189(1) of the Companies Act 1931*. Only if the applicant has “the necessary status” would the court engage with allegations of impropriety by liquidators. In support, he also cited Lord Millet in Deloitte, above (at p. 1610 D-F):

“the court has consistently regarded the creditors (in the case of an insolvent liquidation) and the contributories (in the case of a solvent liquidation) as the proper persons to make the application, being the only persons interested in the liquidation”.

On the facts, the applicant, Mr Gittins, was held (at § 31) not to be a “creditor”, but a substantial debtor, with no economic interest, as a creditor, in the liquidation; and, at § 41, to have no interest as a “contributory” either, on the basis that there was “no prospect of any return to the contributories”. The Court therefore concluded that he lacked standing.

However, the Court indicated that if it was wrong on standing, the applicant’s complaints lacked merit, in any event. For example, Mr Gittins’ complaint that a proof of debt had been improperly ignored was found (at § 40) to be “without substance”.

Previous guidance by Deemster Corlett on standing under s 189(1), in the context of an application to remove a liquidator, may also be found in In the matter of Broadsheet LLC (in liquidation) (CHP 21/038) (31.01.22) (§ 35).

And in Nectrus Ltd v Joint Liquidators of UCP PLC (in liquidation) (CHP 26/0001) (13.01.26), Deemster Corlett at § 4 cited Registrar Briggs in Kean v Lucas [2017] BCC 311 (at § 13) on standing to apply to Court generally in liquidations:

“… this court does not have a general supervisory jurisdiction over liquidations. This is particularly the case in voluntary windings up, where the matter is essentially one for the creditors and the contributories and not the court. The court only has those powers which Tynwald has granted it under the Companies Act 1931″.

___________________________________________________________________________________

* “(1) The court shall take cognizance of the conduct of liquidators of companies which are being wound up by the court, and, if a liquidator does not faithfully perform his duties and duly observe all the requirements imposed on him by statute, rules, or otherwise with respect to the performance of his duties, or if any complaint is made to the court by any creditor or contributory in regard thereto, the court shall inquire into the matter, and take such action thereon as they may think expedient.”

Note for practitioners: Montpelier confirms the two-stage test for standing for challenging a liquidator’s conduct. The Court will focus on whether the applicant is a creditor or contributory.

Disclaimer: professional advice should be sought before applying any information in a given case.

For advice on litigation relating to Isle of Man insolvency, contact Coren Law.

See also Coren Law’s Isle of Man civil procedure portal: Click On | Coren Law.

Image credit: Almas Salakhov