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Does a contract of indemnity sound in damages, or in debt?
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There are two contradictory lines of Court of Appeal authority as to the nature of a claim under a contract of indemnity: one treats an indemnity as sounding in unliquidated damages (McGuinness v Norwich and Peterborough Building Society [2011] EWCA Civ 1286); the other as sounding in debt (Royscot Commercial Leasing Ltd v Ismail (unreported) 29 April 1993). The issue is of particular importance in insolvency, because it would follow from the analysis in McGuinness that an indemnity cannot give rise to a liquidated debt capable of giving rise to a bankruptcy petition. This article argues that such a conclusion is not justified: whether an indemnity can give rise to a liquidated debt should be a question of construction of the indemnity in question.
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