(with festive apologies to Blair and Tony)

Lex non curat de minimis This means that the law does not care about small things.  That may seem harsh at times but, as with diminutive judges, these little things are sent to try us.  The reason for the rule of course is that we do not want our nice tidy courts jammed up with litigants trying to establish points of principle over trifling sums.  But one man's trifle may be another woman's schwarzwälder kirschtorte and this was borne out in the recent opinion of Lord Docherty in Castlebridge Plant Limited (In Administration).

The background law

Where an insolvency practitioner ("Santa") has funds ("Presents") to distribute ("Deliver") from the realisation of the assets subject to a floating charge, Santa must keep back a proportion of the Presents for the benefit of those ordinary unsecured creditors who have been "good" during the year.  The staff at Santa's insolvency firm will have a list of those creditors whose claims have been adjudicated at nil ("the Naughty List") and those whose claims have been accepted ("the Nice List").  Santa has a duty (under Section 176A of the Insolvency Act 1986) to Deliver the Presents to those on the Nice List.

In this case Santa had approximately £96,000 to distribute to those on the Nice List.  However the total amount claimed by creditors ("Letters to Santa") amounted to £13.9m. In short, Santa would be delivering only 0.7% of the gifts that had been requested (oh Santa!).  However, Santa wasn't finished there.   Santa asked the court for a dispensation under Section 176A(5). If granted, that would have meant that there would have been no distribution of the £96,000 whatsoever.

The law recognises that if:-

  • Santa only has a very small amount to give out compared to the number of deserving children; and
  • the costs of employing the elves to draw up the lists, package the Presents and Deliver them would outweigh the joy on the faces of the blessed little ones;

then,  a court may agree to let Santa and the elves have the night off. (That is the "lex non curat de minimis" bit here).

And of course that makes perfect sense and is perfectly reasonable.  It is a balancing act.  In the past, other Santas (but clearly not the real one), have been allowed to do just that where relatively small amounts had been involved and where there had been large numbers of creditors.

In this instance however the court refused to grant the application and decided that the adjudication of claims, calculation of dividend and distribution of realisations must proceed.  The court thought that the gross sum available to creditors was sufficiently large that, while each individual creditor would get a relatively small sum, the exercise could not really be described as "a trifle". Although not specifically referenced in Castlebridge, we believe that the court must have been influenced by the well-known case of In re Kris Kringle (sub nom Miracle on 34th Street) 1947, 20th Century Fox Law Reports).

The court did however make it clear that there are no hard and fast rules.  Each insolvency practitioner will have to take into account the total amount to be distributed, the number of recipients, the amount that each recipient may receive and must afford a relative weighting to each of these elements.

It is of course incumbent upon Santa and his elves to act at all times in the best interests of the persons who have taken the trouble to send him letters. It is earnestly to be hoped that it will only be in rare cases that Santa will ever be permitted to refuse to deliver presents.

© MacRoberts 2015

Disclaimer

The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.