The mysterious pari passu principle

We know that Lord Justice Snowden’s landmark judgment for a unanimous Court of Appeal in Adler earlier this year¹ emphasised the presumptive importance of the pari passu principle. But what does this principle amount to? What does it require? The term “pari passu” is used in judicial and textbook writings to refer to no fewer than four different principles. Regrettably this is a reliable recipe for confusion. Three of these principles relate to distribution of value from the insolvency estate but are very different from each other while the fourth is a principle of conservation rather than distribution. The undifferentiated and unreflective use of the term “pari passu” for one or other of these four principles leads to mistakes of both analysis and decision. This article explains the four principles outlines the ways in which they differ highlights the confusion resulting from not distinguishing amongst them...