'The rule in Cherry v Boultbee' in an insolvency context

In late 2011, the United Kingdom Supreme Court delivered a judgment which explored the application of the 'rule in Cherry v Boultbee' in relation to insolvent companies. In Re Kaupthing Singer and Friedlander Ltd, [2011] UKSC 48, the Court dealt with the question of whether the 'rule in Cherry v Boultbee', which prevents a party proving against a company for a debt until they have first repaid any debts that they owe the company, applies to insolvent companies or whether the rule is excluded by the rule against double proof.


The Court held that the 'rule in Cherry v Boultbee' did not apply in the context of insolvent companies because it was excluded by the rule against double proof.
This decision clarifies the scope of a party's right to set off a debt owed to them by a third party against another debt which they owe to that party. The Court's exclusion of the rule in Cherry v Boultbee provides greater certainty in relation to the debts that are provable in the insolvency of a company.

This decision also provides a clear example of the application of the rule against double proof where an insolvent company has provided a guarantee of another company's debt, which is also insolvent.