Masters & Anor v Furber

An individual voluntary arrangement approved by creditors creates a statutory contract which its supervisors must implement and supervise. Contractual undertakings given by the debtor, including undertakings contained in a power of attorney, may be enforced by the supervisors. In deciding whether to compel compliance, the court must consider the interests of the arrangement creditors as well as those of the debtor. Compliance may be ordered where delay risks the loss of transactions, repayment claims and further liabilities prejudicial to the arrangement.

Joint supervisors applied for enforcement of an individual voluntary arrangement concerning an elderly debtor. The arrangement included vehicles valued at £30,000 and a power of attorney under which the debtor undertook to act promptly as the supervisors directed concerning rights over his assets. The vehicles were sold at online auction, but the debtor refused to permit successful bidders to collect them, alleging pressure and undervalue. The issue was whether the court should require compliance with the arrangement and the power of attorney in order to protect creditors and complete the realisations.

1. The application was granted. The respondent was required to comply with his obligations under the individual voluntary arrangement and the power of attorney, including allowing the successful bidders to collect the vehicles.

2. Under section 260 of the Insolvency Act 1986, the arrangement approved by the creditors constituted a statutory contract which the supervisors were required to implement and supervise. The same principle was recognised in Re Britannia Heat [2007] BCC 470.

3. The power of attorney contained a direct contractual undertaking, executed by deed, requiring the respondent to act promptly as the supervisors directed in relation to rights exercisable over his assets. The reference to registered assets did not remove the wider undertaking arising from the schedule, which included vehicles and all other property.

4. The court was required to have regard to the respondent’s interests and to those of the creditors. Continued refusal to release the vehicles risked withdrawal of bids, repayment claims, damages claims and delay in realisations. Requiring compliance was therefore in the general interests of the creditors and maintained the authority of the supervisors, who were effectively, though not legally, officers of the court.

5. The respondent was warned that disobedience of the order could have serious consequences, including committal for contempt of court.

Not stated in the judgment.