Gold Fields Mining LLC v Tucker & Anor

A creditor cannot be treated as being in wilful default or lacking reasonable diligence in lodging a claim under a CVA unless it knew, or with reasonable diligence would have known, both of the underlying claim and of the opportunity or need to lodge a claim form. Reasonable diligence does not require periodic monitoring of a website without circumstances indicating that monitoring is necessary. The court must assess the evidence as a whole and does not need to resolve the burden of proof where the facts permit a clear conclusion. The court’s supervisory jurisdiction under section 7(3) of the Insolvency Act 1986 does not enable it to rewrite the CVA or override its time bar.

Energy Holdings (No.3) Ltd was subject to a creditors’ voluntary arrangement containing a time limit for lodging claims. Gold Fields Mining LLC claimed by assignment from Peabody Energy under an environmental indemnity. No notice of the creditors’ meeting had been given to Peabody, although the CVA bound it.

The claim was lodged after the contractual claims date. The supervisors rejected it as out of time. Gold Fields applied under the CVA dispute-resolution procedure for a declaration that its claim could rank for distributions. The issues included the construction of paragraph 23.5 of the CVA and whether the delay resulted from wilful default or lack of reasonable diligence.

1. Application succeeded. The claim form lodged on 9 July 2007 was capable of ranking for distributions under the CVA, and the supervisors were directed to adjudicate it. Permission to appeal was refused.
2. Paragraph 23.5 of the CVA was construed so that its first alternative applied to all proofs lodged after the defined claims date. The remaining question was whether the late lodging resulted from wilful default or lack of reasonable diligence.
3. The relevant inquiry begins only when the creditor knows, or with reasonable diligence would know, both of the underlying claim and of the opportunity or need to lodge a claim form in order to receive distributions. The period before the EH3 CVA existed could not therefore establish wilful default or lack of diligence.
4. Although Peabody was bound by the CVA under section 5(2)(b)(ii) of the Insolvency Act 1986, it had not received notice of the creditors’ meeting. The evidence did not justify inferring that responsible officials should have identified advertisements or appreciated that they gave an opportunity to claim. Reasonable diligence did not require periodic visits to the TXU website in the absence of circumstances indicating the need to do so.
5. The evidence showed continuing activity in investigating, particularising and quantifying the claim between its discovery and lodging. The possibility that greater effort might have saved a few days or weeks did not satisfy the standard of reasonable diligence. No wilful default or lack of reasonable diligence was demonstrated, either individually or collectively, in the periods relied upon.
6. The court did not decide the alternative issue under section 7(3). The Chancellor nevertheless indicated that the provision could not be used to rewrite the CVA where the creditor’s dissatisfaction was with the contractual time bar rather than an act, omission or decision of the supervisors. The appropriate challenge would have been under section 6, but that application was out of time.

The judgment describes earlier proceedings in which applications by bond holders to set aside the relevant CVAs under section 6 of the Insolvency Act 1986 were dismissed by Warren J on 28 October 2005. The present application was determined at first instance by the High Court (Chancery Division). Permission to appeal was refused.