Horler v Rubin & Ors

The Court of Appeal allowed the appellants' appeal and held that a creditor who had appointed a proxy to a creditors' meeting was bound by the proxy's vote unless the principal had expressly forbidden the proxy from voting on the matters in question. The court applied the Insolvency Rules 1986 (r. 8.1 and r. 8.3) to conclude that a proxy's authority includes discretion to vote on matters not specifically dealt with, and that such a proxy vote operates as the principal's vote. The court therefore held that, as against Mr Horler, there was nothing wrongful in the trustee in bankruptcy applying the realised Jamestown/ATG proceeds in accordance with the resolutions approved at the creditors' meeting and committee. The court endorsed subsidiary findings that the ATG shares were partnership property and that the trustee had acted honestly, and noted the judge's findings on negligence and the possible defence under section 304(3) of the Insolvency Act 1986.

Background and parties:

• Mr Daniel Horler (claimant/respondent) alleged that Mr David Rubin (trustee in bankruptcy of Mr Andrew Millar) misapplied proceeds from sale of shares in ATG which, on Mr Horler's case, were partnership assets and should have been applied first to partnership creditors and partners.
• Mr Rubin (defendant/appellant) maintained he believed the shares belonged to the bankrupt and in any event treated some proceeds as third party funds and sought to apply them for the benefit of the general body of creditors.

Procedural posture: This was an appeal from the Chancery Division (His Honour Judge Raynor QC), where the judge had found in part for Mr Horler on some issues but rejected complaints where Mr Horler had personally consented; the Court of Appeal heard the appeal and allowed it.

Nature of the claim and relief sought: Mr Horler sought to hold Mr Rubin personally liable for the application of the proceeds of sale of ATG shares, alleging misapplication of partnership assets by the trustee in bankruptcy.

Issues framed:

1. Whether the ATG shares were partnership assets and thus not vested in the trustee as personal assets of the bankrupt;
2. Whether the trustee misapplied the proceeds by applying them to the bankrupt's creditors and to his own fees;
3. Whether Mr Horler had consented to the application of the proceeds, either directly or via a proxy vote; and
4. The legal effect of a proxy under the Insolvency Rules 1986 and whether the proxy vote bound Mr Horler.

Court’s reasoning and conclusions: The court accepted the primary facts that the ATG shares were partnership assets and that the trustee honestly believed otherwise. The pivotal legal question concerned the effect of the proxy vote at the creditors' meeting and committee that approved resolutions sanctioning application of the Jamestown monies. Applying Insolvency Rules 1986 r. 8.1 and r. 8.3, the court held that a proxy has actual authority to vote at his discretion on matters not specifically directed by the principal and that, unless expressly forbidden, whatever the proxy did not have express instruction to refrain from doing was within his actual authority. The judge's factual findings—particularly that Mr Horler had appointed Mr Hogg as his proxy and had not complained for over a year—supported treating the proxy vote as binding. For that reason the application of the Jamestown proceeds, insofar as approved by the creditors and committee (and as to which Mr Horler was represented by a proxy), was not wrongful as against Mr Horler. The Court allowed the appeal on that basis.

Appeal allowed. The Court of Appeal held that under Insolvency Rules 1986 r. 8.1 and r. 8.3 a proxy has actual authority to vote at his discretion on matters not specifically dealt with and, unless expressly forbidden by the principal, a proxy's vote binds the principal. Because Mr Horler had appointed a proxy who voted in favour of the resolutions applying the Jamestown monies, Mr Horler could not complain about that application as against the trustee.

Appeal from the Chancery Division (His Honour Judge Raynor QC) HC06C02683. Hearing in the Court of Appeal 19 December 2011; judgment delivered 18 January 2012 ([2012] EWCA Civ 4).