Davis & Anor v Price & Anor

Where an individual voluntary arrangement is reconsidered at a further creditors’ meeting convened under the Insolvency Act 1986, the creditors entitled to vote are determined by the express terms of rule 5.21 of the Insolvency Rules 1986. The statutory scheme contains no implied restriction limiting the further meeting to creditors entitled to vote at the original meeting.

Suspension of approval does not mean that an approved arrangement continues to bind creditors under section 260(2). The court may continue or renew an interim order under section 262(6), and that order may affect the date by reference to which voting entitlement is calculated. Supplemental directions under section 262(7) must remain consistent with the Act and Rules.

Richard and Dilys Price appealed against orders of the Brighton County Court setting aside statutory demands served on Stuart and Karen Davis. The demands claimed costs awarded in earlier proceedings concerning the debtors’ individual voluntary arrangements.

The costs liability arose after the original IVA proposals had been approved, but before revised proposals were considered at further creditors’ meetings. The Prices argued that the revised IVAs could bind only creditors and liabilities covered by the original proposals. The central issue was whether the costs debt was subject to the revised IVAs under the statutory voting scheme.

1. The appeals were dismissed. The costs liability was subject to the IVAs approved at the further meetings, so the Prices were not entitled to serve statutory demands for that liability.
2. Section 260(2) provides that an approved arrangement binds every person entitled to vote at the meeting, or who would have been entitled to vote if given notice. Neither the Insolvency Act 1986 nor the Insolvency Rules 1986 distinguishes, for this purpose, between an original meeting and a further meeting convened under section 262(4) or rule 5.22(5).
3. Under rule 5.21, every creditor with notice of the meeting is entitled to vote, with the amount calculated according to the applicable date in rule 5.21(2). Here, no interim order was in force, so rule 5.21(2)(b) applied. The Prices’ entitlement was therefore calculated by reference to the debts owed at the date of the further meetings, including the costs.
4. The distinction between suspension and revocation of approval does not determine which creditors may be bound by an IVA considered at a further meeting. Once approval is suspended, there is no approved arrangement within section 260(2). Section 262(6) allows the court to continue or renew an interim order, and that may affect voting entitlement under rule 5.21(2)(a).
5. The statutory scheme contains no provision restricting a revised proposal to creditors entitled to vote at the first meeting. Such a restriction could not be implied. Nor could supplemental directions under section 262(7) replace the voting scheme established by rule 5.21.

• High Court (Chancery Division): Appeals from the Brighton County Court were dismissed. The orders setting aside the statutory demands were upheld.
• Brighton County Court: Deputy District Judge Winslett set aside the statutory demands by orders dated 23 April 2012.