Price & Anor v Davis & Anor

This appeal concerned whether creditors whose claims arose after an original creditors' meeting but before a court‑directed "further meeting" under section 262 of the Insolvency Act 1986 are bound by an individual voluntary arrangement (IVA) approved at that further meeting. The court held that where a court directs the nominee to summon a further meeting under section 262(4)(b) it must be treated as a further meeting under section 257 for the relevant purposes, so that the Insolvency Rules (in particular IR 5.21(2)) determine who is entitled to vote. Consequently the statutory binding in section 260 applies to approvals at such further meetings and creditors known to the nominee at the date of the further meetings (including those who became creditors after the original meetings) may be bound.

Key statutory provisions considered were Part VIII and sections 252–262 (notably sections 257, 260 and 262) of the Insolvency Act 1986, and Insolvency Rules 5.21 and 5.17. The court rejected the argument that the court's use of the word "suspend" rather than "revoke" in its earlier order meant that only the class of creditors at the original meeting could be bound; suspension did not make the distinction determinative. The appeal was dismissed because the varied IVAs approved at the further meetings bound the appellants in respect of their costs and the statutory demands had been correctly set aside.

Background and parties:

• The respondents, Mr and Mrs Davis, proposed individual voluntary arrangements (IVAs) under Part VIII of the Insolvency Act 1986. The nominees summoned original creditors' meetings which approved the IVAs.
• Mr and Mrs Price, creditors of the Davises, successfully challenged in the Brighton County Court (DJ Gamba) the chairman's valuation of their claim for voting purposes under section 262, leading the court to suspend the approvals and to direct the nominee to summon further meetings under section 262(4)(b). The Prices obtained an order for costs against the Davises between the two meetings, giving rise to an additional claim.
• The further meetings were convened, notice having been given to the Prices; the varied IVAs were approved at those meetings. The Prices did not vote on their post‑meeting costs claim at the further meetings; had they done so the approvals would have been defeated.

Procedural posture and relief sought:

• When the Prices served statutory demands on the Davises for the unpaid costs, the Davises applied for orders setting aside those demands. DJ Winslett granted those orders. The Prices appealed to the High Court where David Richards J dismissed their appeals (CH2012/0260 & 0262). The Prices then appealed to the Court of Appeal.

Issues framed by the court:

1. Whether creditors whose claims arise after an original meeting but before a court‑directed further meeting are entitled to notice of and to vote at the further meeting.
2. Whether approvals at further meetings summoned under section 262 attract the statutory binding effect of section 260.
3. Whether the court's suspension rather than revocation of the original approvals meant that only the original class of creditors could be bound.

Court's reasoning and disposition:

• The Court of Appeal held that Insolvency Rule 5.21(2) governs entitlement to vote at the further meetings and that the nominee must give notice to creditors of whom he or she is aware at the date the further meetings are summoned (IR 5.17). Thus creditors whose claims arose after the original meetings but before the further meetings may be entitled to vote.
• The court construed section 262(4)(b)'s reference to a "further meeting" as, in the case of a court direction to the nominee, referring to a further meeting under section 257. This construction prevents incoherent or absurd outcomes that would follow if section 260's statutory binding applied only to original meetings. Consequently section 260 applies to such further meetings and approvals given there can bind creditors entitled to vote under the Insolvency Rules.
• The distinction between suspension and revocation was held not to be determinative: suspension merely postpones effect and the original IVA had no legal existence once the varied IVA approved at the further meeting came into force.
• Accordingly the varied IVAs bound the Prices in respect of the costs claim, the statutory demands were properly set aside, and the appeal was dismissed.

Wider context:

The court emphasised the need for a coherent operation of Part VIII and the Insolvency Rules, and noted that treating further meetings as outside the statutory binding regime would create practical and anomalous results contrary to the statutory scheme.

Appeal dismissed. The court held that where the court directs the nominee to summon further meetings under section 262(4)(b) those meetings should be treated as meetings under section 257 for the relevant purposes; Insolvency Rule 5.21(2) determines who is entitled to vote and section 260's statutory binding applies to approvals at such further meetings. The distinction between suspension and revocation of earlier approvals did not prevent creditors who became known to the nominee after the original meeting from being bound by the varied IVAs approved at the further meetings.

Initial challenge under section 262 was brought in the Brighton County Court (DJ Gamba) which suspended the approvals and directed further meetings. The Davises applied to set aside statutory demands; DJ Winslett granted the orders. The Prices appealed to the High Court (David Richards J, CH2012/0260 & 0262) where their appeals were dismissed. The Prices then appealed to the Court of Appeal ([2014] EWCA Civ 26), which dismissed the appeal.