Insurer wins battle over liquidated funds
Court backs 'senior creditor' in funds dispute
Insurer AIG has won a court battle with the parent company of liquidated fuel
retailer Save Group allowing it access to the company’s remaining funds.
The Save Group of Companies went into liquidation in 2002 leaving £40m
available to creditors in the hands of Save Service Station Ltd’s liquidators.
AIG wanted its debt of £10m paid before the parent company could claim some
of the £127m it was owed, and the court of appeal supported AIG’s contention
The case revolved around whether the ‘senior creditor’, in this case AIG, and
the ‘junior creditor’, Save Group, should take priority when funds from a
liquidated company are distributed.
David Grant, partner in the corporate recovery group at law firm Halliwells
LLP, which advised AIG, said: ‘Scores of banking, finance and general commercial
deals are structured on the premise that such contractual subordination
arrangements are effective. The decision is therefore welcome news for those
structuring deals in the City.’