Not So Fast! Liquidator Of F1 Team Correct To Reject Proof Of Debt

• Published date: 09 July 2021
• Subject Matter: Finance and Banking, Financial Services
• Law Firm: Mills & Reeve
• Author: Mr Jacob Walker

The Court of Appeal agreed with the judge's decision to uphold a liquidator's rejection of part of its proof of debt, in the liquidation of a Formula One racing team.

The appellant 'BWT' had entered into a sponsorship agreement and became the team's principal sponsor for the 2018 racing season. Sponsorship payments amounted to around '15 million per year, most of which were paid early in the racing season.

If BWT terminated the contract for convenience, a clause stated that the payments already made could be retained by the team. However, if termination occurred in other circumstances, the payments made would be pro-rated to the termination date, with a repayment obligation on the team.

The team encountered financial difficulties in February 2018. BWT continued to provide financial support, and the parties executed a deed of variation in May, with new repayment obligations if certain eventualities occurred. In July 2018 BWT terminated the sponsorship agreement under the termination for convenience provision.

The team went into administration and then liquidation. The liquidators rejected most of the appellant's proof of...