Key Takeaways
- After a winding-up order, you need the court’s leave to sue a company in liquidation under section 130(2) of the Insolvency Act 1986 before starting or continuing proceedings.
- For an ordinary contractual debt, submit a proof of debt. The court is unlikely to grant leave where the liquidation’s proof process can resolve the claim.
- A genuinely arguable retention of title, constructive trust or tracing claim gives you a far stronger case for permission to sue a company in liquidation.
- Glencore v Prax confirms that rescission for fraudulent misrepresentation may justify leave where it would produce trust and tracing rights over goods or their proceeds.
- The court asks whether your claim is genuinely arguable and raises a sufficiently serious or substantial question to be tried. It does not hold a mini-trial.
- Reserve your rights promptly and unequivocally. Agreeing to asset sales or continuing to perform can be used to argue that you affirmed the contract.
- Our solicitors can assess your evidence, distinguish a proprietary claim from a provable debt, and prepare a focused application for leave.
- Go Legal is rated Excellent with over 300 five-star reviews and 5/5 on Trustpilot and Google, placing our solicitors among the best-reviewed litigation lawyers in England and Wales.
If this decision affects you or your business, book a free consultation with one of our solicitors or call 0207 459 4037 today.
Can You Get Leave to Sue a Company in Liquidation?
Yes, but only with the court’s permission, and only where your claim is genuinely arguable and cannot fairly be dealt with through the liquidation itself. Under section 130(2) of the Insolvency Act 1986, once a winding-up order has been made, no action or proceeding may be commenced or continued against the company or its property except with leave of the court and subject to any terms the court imposes.
The stay does not decide whether your claim is valid. It controls how you pursue it. Whether you obtain leave depends largely on what you are actually seeking:
- Payment of an unpaid invoice or damages is usually a provable debt, dealt with by submitting a proof in the liquidation.
- Return of identified goods, or their value, may involve a proprietary claim, such as retention of title.
- Sale proceeds or substitute assets, or a declaration of a constructive or resulting trust, may require a tracing claim.
- Rescission for fraudulent misrepresentation may produce proprietary consequences if the court unwinds the transaction.
A proprietary claim asserts that particular assets, or their traceable proceeds, belong to you and should not be shared among the general body of creditors. That distinction sits at the heart of the High Court’s decision in Glencore Energy UK Ltd v Prax Lindsey Oil Refinery Ltd (in liquidation) [2026] EWHC 2394 (Ch), which gives important guidance on proprietary claims in liquidation, rescission for fraud and tracing remedies.
If you are unsure whether your claim seeks a dividend or rights to identifiable property, call 0207 459 4037 or book a free consultation with our commercial litigation and insolvency solicitors.
What Was the Commercial Background to the Leave to Sue Application?
Glencore supplied crude oil worth more than US$230 million to Prax Lindsey Oil Refinery Limited (PLOR) shortly before the Prax group collapsed, and was left with a claim of over US$236 million that a later deal with the liquidator did not cover.
How Did the Supplier’s Trading and Security Arrangements Work?
PLOR owned and operated the refinery at North Killingholme in North Lincolnshire. At the time it was one of six major United Kingdom refineries and provided about 10% of the country’s petrochemical supply. Glencore was its exclusive crude oil supplier.
Supplies were governed by a Framework Agreement dated 5 July 2024 and related Transaction Documents. Title to the oil moved back and forth:
- Title passed to PLOR through a DAP Sale on delivery to the Immingham oil terminal.
- Glencore repurchased the oil through an Into-Tank Sale when it reached segregated crude storage tanks at the refinery.
- PLOR bought the oil back through an Ex Tank Sale when it needed it for refining.
- The oil was then mixed with other products during refining.
Glencore also held a floating charge over PLOR’s rights to refined product held in product storage tanks.
Under Schedule 5 to the Framework Agreement, PLOR repeated representations on the first day of every month. They covered its compliance with material contracts and the absence of defaults, its solvency and ability to pay debts, the truth and accuracy of information given to Glencore, the fair presentation of its financial statements, and compliance with its undertakings.
PLOR formed part of the Prax group, which operated a £738 million securitisation facility arranged by HSBC Bank Plc. Receivables, including PLOR’s, were sold to an Irish special purpose vehicle outside the group.
What Happened When the Refinery Entered Liquidation?
On 27 June 2025, Glencore was told PLOR’s liquidation was imminent. Over the next two days it suspended performance, demanded immediate payment of about US$53 million, crystallised its floating charge and withdrew PLOR’s permission to deal with oil and product without consent.
On 30 June 2025, a winding-up order was made against PLOR on a petition presented by its sole director, Mr Winston Soosaipillai. The Official Receiver became liquidator, assisted by special managers from FTI Consulting LLP.
Glencore alleged that its exposure included:
- US$267 million for unpaid Ex Tank Sales;
- US$177 million for its own crude oil in the storage tanks; and
- US$64 million for VGO sold to PLOR but unpaid.
To avoid an emergency shutdown of an infrastructure asset of national importance, the special managers agreed on 3 July 2025 that PLOR would buy the crude oil and VGO at the refinery for US$314 million, plus a one-off US$40 million processing fee. Under the Term Sheet, Glencore permitted the sale of refined product at market value and revoked its crystallisation notice.
The Term Sheet was silent on the unpaid Ex Tank oil. Glencore alleged that US$236,158,785.56 remained outstanding for oil delivered under five sales confirmations dated between 1 April and 7 May 2025, for deliveries between 8 May and 4 June 2025 (the Relevant Sales Confirmations).
The stakes for other creditors were high. Public funding from the Department for Energy Security and Net Zero (DESNZ) had paid for the wind-down. If Glencore succeeds, DESNZ faces a very significant shortfall and HMRC, a preferential creditor, loses any prospect of a return.
How Did the Alleged Fraud Come to Light?
On 11 July 2025, other Prax companies sued Mr Soosaipillai and obtained a freezing order, alleging he had caused fictitious invoices to be sold into the HSBC facility. The fictitious invoices were alleged to total at least £334 million as at 13 June 2025. He was also alleged to have concealed the group’s true financial position from lenders and counterparties, including Glencore.
Glencore learned of the proceedings in mid-July and received redacted documents on 28 August 2025.
What Did Glencore Claim?
On 22 October 2025, Glencore’s solicitors asserted that the Relevant Sales Confirmations were induced by fraudulent misrepresentations. Glencore alleged that Mr Soosaipillai knew the Schedule 5 representations were false, that his knowledge was attributable to PLOR, and that PLOR’s solvency and compliance with its financing were crucial because Glencore was extending significant credit.
Glencore sought:
- Equitable rescission of the five Relevant Sales Confirmations only, not the wider Transaction Documents;
- A declaration that the unpaid oil and its traceable proceeds, including refined product and sale proceeds, were held on constructive or resulting trust;
- An account of profits; and
- Consequential orders for delivery up.
On 19 December 2025, Glencore applied under section 130(2) for leave to commence and proceed with the claim.
What Issues Did the Court Have to Decide About Leave to Sue?
The court had to decide whether Glencore’s claim was serious enough, and different enough from an ordinary debt, to be litigated outside the liquidation.
Was the Rescission Claim Sufficiently Serious and Substantial?
PLOR opposed leave on four merits grounds:
- Could a fraud-based rescission claim continue after liquidation? PLOR argued that Glencore held only an unexercised personal right when PLOR entered liquidation, and its assets had become subject to the statutory insolvency scheme. Glencore argued that the right to rescind was an inherent limitation on PLOR’s title which survived liquidation.
- Was this impermissible partial rescission? PLOR said the five confirmations were interdependent with the umbrella agreements. Glencore said each confirmation was a separate, severable cargo sale.
- Had Glencore affirmed the contracts or delayed too long? PLOR relied on the Term Sheet, Glencore’s consent to continued refining and sales, and the time before the application. Glencore said it lacked sufficient knowledge of the fraud until 28 August 2025 and then acted promptly.
- Could the oil be traced? PLOR relied on the continuous, chemically transformative refining process and the mixing of proceeds. Glencore argued that tracing follows value, not physical molecules, and proposed allocating a percentage of product value and proceeds to the unpaid oil.
Should Rescission for Fraud Be Treated Like a Proprietary Claim?
Glencore argued that a rescission claim should be treated by analogy to proprietary claims when the court exercises its section 130(2) discretion.
Could a Proof of Debt Resolve the Dispute More Conveniently?
PLOR argued that the liabilities could be proved in the liquidation. Glencore said the claim required rescission and tracing, which a liquidator deciding a proof could not determine.
Were the Purposes of the Stay Engaged?
The court had to consider whether protecting the estate from expensive litigation and channelling creditors into the proof process justified refusing leave where Glencore asserted rights to trace into assets.
Why Did the Court Grant Leave to Commence and Proceed With the Claim?
The High Court granted leave because Glencore’s claim was genuinely arguable, proprietary in substance and unsuitable for determination through a proof of debt.
The Test for Leave Under Section 130(2)
The overriding purpose of the stay, identified in Gardner v Lemma [2016] EWCA Civ 484, is to preserve the company’s limited assets from being dissipated by expensive litigation and to oblige creditors to prove in the liquidation, so assets are distributed pari passu (equally among creditors of the same class).
The court does not investigate the merits beyond deciding whether the claim is genuinely arguable and gives rise to a sufficiently serious or substantial question to be tried. If it is not arguable, leave is refused. Even if it is arguable, leave is unlikely where the claim is a provable debt that can more conveniently be resolved through the proof process, with a right of appeal to the court. This is why unsecured creditors pursuing ordinary contractual debts are usually refused.
Proprietary claims are different. Under Re Aro [1980] Ch 196, a creditor asserting rights in assets held by the company is enforcing a right to its own property, independently of the liquidation, so leave is normally granted. The same reasoning applies to equitable proprietary interests, including tracing claims and specific performance claims, where the claimant is treated as equitable owner from the contract date (Re Coregrange [1984] BCLC 453).
Why Rescission Can Be Proprietary in Substance
The court drew a careful distinction:
“Unlike a claimant with a right to specific performance, a person with a claim to rescind for fraudulent misrepresentation is not treated as the owner in equity until such time as rescission takes effect.”
Equitable rescission takes effect through the court’s order, so Glencore held no beneficial interest in the oil when PLOR entered liquidation. However, rescission is not simply a claim for money. If successful, it unwinds the contract and may give rise to a resulting or constructive trust and tracing rights. Where the disputed rights include more than a right to prove for a dividend, an action outside the winding-up may be the only appropriate way to decide them.
The Merits: Seriously Arguable on Every Ground
Survival after liquidation. The court held it seriously arguable that the right to rescind for fraud survives liquidation, because it is capable of being an inherent limitation on the company’s title:
“The equity is binding on the property transferred, it is transferable to a person who is able to fulfil the conditions necessary to enforce it and it is an inherent limitation of the interest that has been acquired.”
Partial rescission. Separate pricing, individual scheduling and repeated references to individual “Cargo” sales supported Glencore’s case:
“I consider it to be seriously arguable that each of the Relevant Sales Confirmations reflected a severable contract for the sale and purchase of separate shipments of crude oil.”
Affirmation. PLOR had a potentially substantial case, and the evidence at trial might show affirmation or excessive delay. But the issue was highly fact-sensitive. All the unpaid oil had apparently been refined by 9 August 2025, before Glencore says it knew enough about the fraud on 28 August 2025. Summary determination against Glencore was inappropriate.
Tracing. Despite substantial evidential difficulty, the court held:
“Glencore has done enough to demonstrate that it has a seriously arguable case that it will be able to trace into some at least of the property which is still in the hands of the OR.”
Why the Proof Process Was Not Enough
The court described the essence of the dispute as follows:
“Its essence is that of a proprietary claim in which Glencore seeks to establish an entitlement to trace into property which it says represents property that will have revested in it on rescission.”
That could not appropriately be decided by the Official Receiver adjudicating a proof. Because the merits were sufficiently arguable, the dispute had to be determined “by some means or other so that the estate can be fully wound up”. Applying Re David Lloyd & Co (1877) 6 ChD 339, it was normally right and fair to grant leave. No reason connected to the efficient administration of the estate was suggested, nor any procedural advantage in an application for directions. The Gardner v Lemma purposes were not engaged, because Glencore was asserting rights to what it said was its own property rather than enforcing a provable debt.
Leave is permission to proceed, not a finding that Glencore will win. Rescission, affirmation and tracing remain for trial.
How Does Leave to Sue a Company in Liquidation Affect Creditors and Liquidators?
Glencore v Prax extends the claims likely to receive leave to include fraud-based rescission with proprietary consequences, while leaving ordinary debt claims firmly within the liquidation.
Creditors With Proprietary Claims
Creditors with genuinely arguable retention of title, tracing or constructive trust claims have a strong prospect of obtaining leave, because they are enforcing rights to their own property. Act early. Glencore crystallised its charge and asserted its rights before the winding-up order. Consider retention of title, tracing and, where assets are at risk before liquidation, freezing injunctions.
Unsecured Trade Creditors
If you are owed an ordinary contractual debt, expect leave to be refused. You cannot sidestep the proof process by re-labelling a debt as proprietary. Submit a proof promptly and challenge any rejection through the court.
Suppliers Misled About Solvency or Financing
A supplier induced to contract by false statements about solvency or compliance with financing arrangements may have more than an unsecured proof. It may be able to rescind and trace into goods or proceeds. It must still overcome affirmation, delay, severability and tracing. Contracts for repeated deliveries should state clearly whether each order is a separate transaction, because severability may decide whether individual sales can be unwound.
Secured Creditors
Keep your security rights distinct from any rescission or proprietary rights. Relying on security documents or accepting benefits under a post-insolvency deal may be used to argue that you affirmed the contract or must give credit for what you received, as the US$40 million processing fee showed.
Liquidators and Insolvency Practitioners
Do not assume every claim belongs in the proof process. Identify proprietary, rescission and tracing claims early, preserve actual production, inventory, sales and cash-pool records, and record expressly whether counterparties to operational agreements reserve or waive those claims. Weigh the impact on other creditors, as the DESNZ and HMRC position illustrates. High-value, fact-intensive disputes may justify early engagement or mediation.
Directors and Businesses in Group Insolvencies
A director’s knowledge of fraud may be attributed to the company, exposing it to rescission and tracing claims rather than just damages or proofs. Groups using securitisation, factoring or cash pools should keep auditable records of receivables, representations and cash movements.
How Should Creditors Preserve a Rescission and Tracing Claim?
Classify the claim, secure the evidence and avoid conduct that could be treated as affirmation before applying for leave.
How Do You Decide Between a Proof of Debt and a Leave Application?
- Identify the remedy: payment, return of goods, sale proceeds, a declaration of trust or rescission.
- Review contracts, sales confirmations, title clauses, security documents and the representations relied on.
- Identify the goods, substitute assets or proceeds said to represent your property.
- Gather evidence of fraud, reliance and the movement of value.
- Ask whether the liquidator could fairly decide the dispute on a proof.
- If not, explain why separate proceedings are needed, for example because the dispute requires a proprietary determination or tracing into mixed assets.
If your dispute also involves wider commercial disputes, early advice helps prevent an ordinary debt claim from obscuring a potentially valuable proprietary remedy.
What Evidence Should Support a Leave Application?
- Supply contracts and sales confirmations;
- Retention-of-title and security documents;
- Invoices, payment records and correspondence;
- Stock, custody and inventory records;
- Production, processing and blending records;
- Sales records and details of where proceeds were paid; and
- Bank records showing the movement of funds.
Separate established facts from allegations, and explain why each representation mattered when you entered the transaction.
Frequently Asked Questions
Get Help With Leave to Sue a Company in Liquidation
The deciding question is whether your claim is an ordinary debt or a genuinely arguable proprietary claim. If you hold rights over identifiable goods, a tracing or constructive trust claim, or grounds to rescind for fraudulent misrepresentation, you should not assume your only option is a dividend. Delay risks lost records, dissipated assets and an argument that you affirmed the contract.
Our solicitors advise creditors and businesses across England and Wales on section 130(2) applications, proprietary claims in liquidation and related commercial disputes. We can review your contracts and evidence, advise whether to prove or seek permission to sue, and prepare a focused application. Call 0207 459 4037 or book a free consultation with our team.
