Booth v Mond

Arrears accrued under an income payments agreement are a provable bankruptcy debt of the payer. They are not excluded merely because the agreement may be varied. The trustee may compromise accrued arrears through an individual voluntary arrangement without extending the period for which the income payments agreement operates. An IVA may bind all creditors falling within its terms, whether or not they were identified in the statement of affairs, unless its language provides otherwise.

The supervisor of an individual voluntary arrangement sought directions concerning arrears owed under an income payments agreement made during the debtor’s earlier bankruptcy. The arrears had not been disclosed in the IVA proposal, and the trustee in bankruptcy sought inclusion for voting and dividend purposes.

The issues were whether the arrears were a provable bankruptcy debt, whether the trustee could compromise them within the IVA, and whether the trustee was a creditor bound by and entitled to benefit from the arrangement.

1. The arrears under the income payments agreement were a debt and a bankruptcy debt for the purposes of the later IVA, although they were not a bankruptcy debt in the earlier bankruptcy because they arose after that bankruptcy commenced.

2. The arrears were provable under insolvency rule 12.3. The exclusion for obligations arising under orders in family proceedings did not apply. The relevant principle in cases concerning variable foreign maintenance orders was uncertainty and lack of finality, not simply the possibility of review. Accrued arrears under an income payments agreement or order were sufficiently certain and final to be provable.

3. Section 310A(6) permitted variation of an income payments agreement by written agreement between the parties, subject to the statutory limit. Including accrued arrears in the IVA did not extend the agreement beyond the permitted three-year period. It changed only the method by which an existing liability was satisfied and did not require the debtor to pay additional income after that period.

4. On the true construction of the IVA, “creditors” comprehensively included secured, preferential and unsecured creditors. The provisions stating that all creditors, whether present or future, certain or contingent, should participate were not confined by the omission of a creditor from the statement of affairs. The trustee was therefore entitled to be included for voting and dividend purposes. The court rejected the supervisor’s contrary construction.

First-instance directions application. No appellate history was stated in the judgment.