Roberts v Pinnacle Entertainment Ltd.

For voting at a creditors’ meeting concerning an individual voluntary arrangement, a creditor’s written proxy may itself constitute written notice of the creditor’s claim under rule 5.23(3)(a) of the Insolvency Rules 1986. The creditor must nevertheless provide, or enable the chairman to ascertain, the amount of the debt for which the vote is cast. The chairman’s duty under rule 5.22(1) requires an evidential assessment of the voting entitlement. A vote should not be excluded merely because the proxy does not separately state the claim where reliable evidence already establishes the amount. Excluding a controlling creditor’s vote in those circumstances may amount to a material irregularity justifying revocation of approval under section 262 of the Insolvency Act 1986.

This was an appeal by Phillip A. Roberts, the nominee for an individual voluntary arrangement proposed by a bankrupt, against an order of Deputy District Judge Taylor in the Newport (Isle of Wight) County Court. The judge had revoked the creditors’ approval of the arrangement under section 262 of the Insolvency Act 1986 and ordered a fresh meeting.

The respondent, Pinnacle Entertainment Ltd., had submitted a proxy directing rejection of the arrangement but had not separately stated the amount or composition of its claim. The issue was whether the proxy was sufficient written notice under rule 5.23(3)(a) of the Insolvency Rules 1986, and whether the chairman was nevertheless required to admit the vote where the amount of the debt was otherwise evidenced.

1. The appeal was dismissed and the order revoking approval of the individual voluntary arrangement stood.

2. Rule 5.23(3)(a) of the Insolvency Rules 1986 should be read as requiring written notice from the creditor seeking to vote. A written proxy submitted by that creditor is itself written notice that the creditor claims against the debtor’s estate and wishes to vote in respect of it.

3. That conclusion does not remove the chairman’s obligation under rule 5.22(1) to ascertain the creditor’s entitlement and the amount for which the vote may be cast. A proxy that gives no information enabling the amount of the debt to be established would ordinarily be insufficient. The creditor must state, to the best of its ability, the total amount owing. The principle stated in Re K.G. Hoare 1997 BBIR 683 was applied.

4. Here, the chairman knew from the bankrupt’s proposals and the available evidence that the respondent’s admitted debt was £135,290. That evidence enabled him to determine the respondent’s voting entitlement. Rule 5.23(3)(a) therefore did not require the vote to be left out of account.

5. The exclusion of the respondent’s vote was consequently a material irregularity in the conduct of the creditors’ meeting. The lower court was entitled to revoke the purported approval under section 262 of the Insolvency Act 1986 and require a fresh meeting.

• High Court (Chancery Division): appeal dismissed; the order of Deputy District Judge Taylor stood.
• Newport (Isle of Wight) County Court: approval of the individual voluntary arrangement revoked under section 262 of the Insolvency Act 1986; fresh creditors’ meeting ordered.