Leighton Contracting (Qatar) WLL v Simms & Ors

In deciding whether to permit amendment of a challenge to a creditors’ voluntary arrangement, the court must assess the application fairly and pragmatically, having regard to the overriding objective and the real prospect of the proposed case succeeding. A meeting chairman’s duty of neutrality does not require passivity. Where a claim is treated as unliquidated, it may be arguable that the chairman should consider whether the material advanced supports a value above £1 for voting purposes, particularly where the valuation could determine the outcome. The court distinguished the stricter approach to late amendments in Claire Swain-Mason v Mills & Reeve [2011] EWCA Civ 14.

Leighton applied to amend its challenge to the approval of Rooflite Ltd’s creditors’ voluntary arrangement. The original challenge alleged a material irregularity under section 6(1)(b) of the Insolvency Act 1986, because the chairman had valued Leighton’s disputed contractual claim at £1 and had not admitted it for voting purposes subject to objection.

The proposed amendment advanced an alternative case: if the claim was unliquidated or its value was unascertained, it should nevertheless have been assigned a value substantially above £1. The court considered whether the amendment had a real prospect of success, whether it caused prejudice or delay, and whether the chairman’s neutrality prevented him from considering a higher valuation.

1. Permission granted. The application to amend the existing challenge was allowed. The court did not determine at this stage whether a material irregularity had in fact occurred.
2. The court’s power under rule 1.17A(5) of the Insolvency Rules 1986 is not confined to defects in convening or conducting the meeting. The question is whether the circumstances relied upon arguably justify a fresh consideration of the creditor’s voting position.
3. Neutrality does not require abstention from discussion or a passive approach. A chairman may evaluate the arguments advanced and consider whether an articulated case for a quantified claim bears upon the valuation of an unliquidated debt. That does not necessarily require the chairman to second-guess every alternative case a creditor might have advanced.
4. There was a real prospect that the proposed case could succeed. The chairman had apparently decided that the claim was unliquidated, but had not considered whether the material presented supported a valuation above £1. That issue was particularly material because a higher valuation might have carried the vote.
5. The case was distinguishable from Claire Swain-Mason v Mills & Reeve [2011] EWCA Civ 14. The proposed amendment did not involve the same combination of delay, prejudice and wasted resources. The court therefore considered that permitting it was consistent with the overriding objective.
6. The court noted that the substantive challenge would involve a fresh hearing, at which the judge would form an independent view from the evidence and arguments placed before the court, rather than merely reviewing the chairman’s decision, following Her Majesty’s Revenue & Customs v Maxwell [2010] EWCA Civ 1379.