Dewji v Banwaitt

When an interim order under Insolvency Act 1986, s 252 is in force, leave to continue execution remains a judicial discretion. The court should normally have regard to the pari passu policy underlying insolvency procedures, but an interim order is not equivalent to a completed statutory scheme. The discretion remains fact-sensitive.

Leave may properly be granted where the relevant asset is excluded from the proposed individual voluntary arrangement, where the arrangement is unlikely to succeed, or where other circumstances make it unfair to prevent the judgment creditor recovering. On an appeal by way of review, permission should be refused unless the first-instance judge exceeded the generous ambit of reasonable disagreement or erred in principle.

Dr Dewji sought permission to appeal against Master Cook’s decision to permit Mr Banwaitt to continue execution of a judgment debt of nearly US$2 million despite an interim order under Insolvency Act 1986, s 252. The Master also made final charging orders over three properties.

The proposed individual voluntary arrangement treated different classes of creditors differently and expressly excluded the three properties. Dr Dewji argued that the interim order required the charging applications to be adjourned or dismissed so that the proposed arrangement could be considered. The central issue was whether the Master had exercised his discretion under s 252(2)(b) on proper principles and within the permissible range.

1. Permission to appeal refused. The application was treated as challenging both the grant of leave under Insolvency Act 1986, s 252(2)(b), and the consequential final charging orders. The two decisions were inextricably linked.
2. The applicable review test was that stated in Tanfern Ltd v Cameron McDonald [2000] 1 WLR 1311. The court could intervene only if the Master exceeded the generous ambit within which reasonable disagreement was possible, or erred in principle by taking account of irrelevant matters, omitting relevant matters, or failing to give competing factors appropriate weight.
3. An interim order under s 252 creates a moratorium to facilitate consideration of an IVA, but it is not identical to a bankruptcy or winding-up scheme. The court should normally approach the discretion in a similar way where the proposed arrangement genuinely seeks pari passu treatment, but each case turns on its facts. Parliament’s express provision for leave means that some cases justify permitting execution despite the interim order.
4. The policy against one creditor gaining priority is strongest where assets are available for distribution among the general body of creditors. It is materially weaker where the asset is excluded from the IVA, or where the proposal treats one class of creditors more generously than others. The court may also consider whether the IVA is likely to fail and whether allowing the judgment creditor to proceed would be unfair in the particular circumstances.
5. The Master was entitled to regard all three properties as excluded from the IVA. Hilltops and Whitworth Lane were irrelevant to the proposal, and Dale Street was to be used principally to fund recovery proceedings in Cambodia rather than to provide equal distribution among creditors. The proposal was also unusual because it favoured the Investor creditors and appeared capable of being a tactical attempt to frustrate execution. The Master’s decision was within the range of reasonable decisions and was not based on any material misapprehension.
6. There was no operative stay of execution when the Master acted. The pending application for a stay did not require an adjournment. Permission to appeal was therefore refused.

This was an application for permission to appeal from orders made by Master Cook. The application for permission was refused by the High Court.