Chittenden & Ors v Pepper & Ors

For voting at a creditors’ meeting, a claim cannot be treated as both unliquidated or unascertained and merely disputed. Where the claim is unliquidated or unascertained, the applicable rule governs and permits voting at £1 unless the chairman agrees to put a higher value on it.

The chairman must examine the evidence supplied by the creditor and any relevant evidence from other creditors or the debtor. He must not speculate or conduct an investigation. A higher value is justified only where the evidence safely supports a minimum value above £1. The absence of evidence supporting such a minimum value does not create a material irregularity.

The applicants, as landlords and personal representatives of the deceased landlord, appealed against the chairman’s valuation of their claims at £1 for voting purposes at two creditors’ meetings concerning the administration of Newlands (Seaford) Educational Trust.

The claims comprised future rent and alleged dilapidations under two leases. The first appeal concerned the approval of the administrators’ proposals under Insolvency Rule 2.39(4). The second concerned approval of a company voluntary arrangement under section 6(1)(b) of the Insolvency Act 1986 and Insolvency Rule 1.17A(3). The central issues were whether the claims were disputed or unliquidated and unascertained, and whether the chairman should have assigned them a value above £1.

1. First meeting. The appeal under Insolvency Rule 2.39(4) was dismissed. Even if the landlords had been permitted to vote for the full amount claimed, the resolution approving the administrators’ proposals would still have passed.
2. Character of the claims. Both elements of the landlords’ claim were unliquidated and unascertained. Future rent was, by definition, unliquidated and unascertained. The dilapidations claim had that character whether advanced as a debt for the cost of repairs under the lease or as damages for breach of covenant, since damages remained unquantified until judgment.
3. A debt could not, for the purposes of the voting rules, be both unliquidated or unascertained and disputed. Insolvency Rule 1.17(3), rather than Insolvency Rule 1.17A(4), therefore applied to the landlords’ claim.
4. Under Insolvency Rule 1.17(3), the chairman’s initial question was whether he was prepared to put a value higher than £1 on the claim. He was required to examine the evidence supplied by the creditor and any relevant evidence from the debtor or other creditors. He was not required to speculate or investigate the claim independently.
5. The evidence did not enable the chairman safely to attribute any minimum value above £1. The future-rent claim depended on contingencies which could not be valued. The dilapidations schedule did not quantify individual items and did not establish either repair costs actually incurred or diminution in the value of the reversion under section 18 of the Landlord and Tenant Act 1927.
6. The chairman therefore had no alternative but to value the claim at £1. No material irregularity arose, and the appeal against approval of the CVA under section 6(1)(b) of the Insolvency Act 1986 and Insolvency Rule 1.17A(3) was dismissed.

The judgment determined appeals against the chairman’s valuation of the landlords’ claims at creditors’ meetings held during the company’s administration. Both appeals were dismissed.