Tucker & Anor v Gold Fields Mining LLC

The Court of Appeal considered the construction of paragraph 23.5 of a creditors' voluntary arrangement (CVA) under Part 1 of the Insolvency Act 1986 concerning time limits for lodging Claim Forms and the scope of two exceptions to the primary "Claims Date" deadline. The court held that the word "earlier" in the paragraph should be read as referring to an earlier date than the date on which the Claim Form was actually lodged, and that the two exceptions operate as alternatives available to late-claim creditors rather than as mutually exclusive categories. As a result the Supervisors were not entitled to treat the claim as automatically barred without first determining, under the first exception, whether the lateness resulted from wilful default or lack of reasonable diligence.

This is an appeal from a Companies Court decision in which the Chancellor ordered the joint supervisors of a CVA to adjudicate a late claim lodged by Gold Fields Mining LLC (GFM). The Supervisors had rejected GFM's claim as time-barred under paragraph 23.5 of the CVA. The principal legal question was the meaning and scope of paragraph 23.5, which sets a primary deadline (the "Claims Date"), and then provides two alternative routes by which a claim lodged after that date may nevertheless rank for distributions: (i) a determination by the Supervisors or the court that the failure to lodge earlier did not result from wilful default or lack of reasonable diligence; or (ii) where the creditor did not have notice of the creditors' meeting, lodgement within 28 days of becoming aware that the meeting had taken place.

Nature of the application: GFM sought declaratory relief and an order that the Supervisors adjudicate its late $230m claim under the CVA.

Issues framed:

• How paragraph 23.5 should be construed: whether the two exceptions are mutually exclusive (so that the first exception applies only to creditors who had notice of the meeting) or whether they are alternative routes available to late claimants generally.
• Whether, on the facts, GFM's failure to lodge in time resulted from wilful default or lack of reasonable diligence (this was decided at first instance in GFM's favour; the appeal was confined to construction).

Court’s reasoning: The Court of Appeal read paragraph 23.5 in its commercial and statutory context, including the closely related explanatory paragraph 4.3 in Section 1 of the CVA proposals and the statutory framework (notably sections 5 and 6 of the Insolvency Act 1986). The court concluded that construing the paragraph as creating two mutually exclusive classes would produce arbitrary and unfair results and would be inconsistent with the natural meaning of "earlier" in the provision. Practical examples showed that the Supervisors' construction would treat creditors who lodged claims on the same day very differently depending on whether they had notice, a result the court found implausible. The court therefore agreed with the Chancellor that the first exception can apply to creditors whether or not they had notice and that the two exceptions are alternative means by which late claims may be admitted.

Appeal dismissed. The Court of Appeal agreed with the Chancellor that paragraph 23.5 should be read so that the first exception (a determination that the failure to lodge earlier was not due to wilful default or lack of reasonable diligence) applies by reference to the date on which the claim was actually lodged and is available to late-claim creditors generally; the two exceptions are alternatives and the Supervisors were wrong to treat the claim as absolutely barred without making that determination.

The Supervisors' decision to reject GFM's claim was challenged in the Companies Court (Chancellor, the Rt Hon Sir Andrew Morritt). On 10 July 2008 the Chancellor reversed the Supervisors' decision and ordered adjudication of the claim. The Chancellor refused permission to appeal; limited permission to appeal was later granted by Sir John Chadwick. The present appeal to the Court of Appeal resulted in dismissal ([2009] EWCA Civ 173).