Price & Anor v Davis & Anor

In the statutory scheme for individual voluntary arrangements, creditors entitled to notice of a further creditors’ meeting summoned after a successful challenge are identified when that further meeting is summoned. The ordinary voting rules apply, including the rule based on debts owed at the meeting where no interim order is in force.

The statutory binding in section 260 of the Insolvency Act 1986 applies to approvals at further meetings. The reference in section 262(4)(b) to a further meeting means a further meeting under section 257. A literal reading confined the statutory binding to the original meeting and created incoherent or absurd results. A varied arrangement therefore binds creditors entitled to vote at the further meeting.

Mr and Mrs Price were creditors of Mr and Mrs Davis under individual voluntary arrangements. After the original meetings approved the arrangements, the Prices successfully challenged the valuation of their claims for voting purposes. The Brighton County Court suspended approval of the arrangements and directed further meetings at which revised proposals were approved.

Between the meetings, the Prices acquired a further claim for the costs of their successful challenge. They received notice of the further meetings but did not vote in respect of those costs. They served statutory demands, contending that the varied arrangements did not bind them in respect of the costs. DJ Winslett set aside the demands, and David Richards J dismissed the Prices’ appeals. The issue before the Court of Appeal was whether the varied arrangements bound the Prices in respect of the later costs claim.

The Court of Appeal unanimously dismissed the appeal and upheld the setting aside of the statutory demands.

1. Notice and voting. The creditors entitled to notice of, and to vote at, further meetings summoned under section 262(4)(b) were those whose claims and addresses were known to the nominee when the further meetings were summoned. The order directing the meetings, read as a whole, did not restrict participation to creditors existing at the original meetings. The application of chapters 5 and 6 of the Insolvency Rules confirmed that conclusion.
2. Voting entitlement. IR 5.21(2)(b) applied because no interim order was in force at the further meetings. Voting entitlement was therefore calculated by reference to the debt owed at the date of those meetings. The Prices’ costs claim was consequently relevant for voting purposes.
3. Suspension and revocation. Suspension defers an approval, whereas revocation ends it. The distinction is not determinative in every context. Here, if the revised proposals were approved, the varied arrangements would replace the original arrangements. The fact that the original approvals had been suspended rather than revoked did not limit the class of creditors bound by the varied arrangements.
4. Statutory binding. A literal reading of section 260 would mean that the statutory binding applied only to the original meeting under section 257. That interpretation would produce incoherent or absurd results, including leaving either the original or varied arrangement binding in an unintended form, or leaving neither arrangement binding. The reference in section 262(4)(b) to a further meeting was therefore construed, where the nominee was directed to summon it, as a further meeting under section 257. Section 260 consequently applied to the approvals at the further meetings.
5. The Prices were bound by the varied IVAs in respect of their costs, and the statutory demands were properly set aside. The court left open whether an order under section 262(7) could limit the class of creditors, but provisionally agreed that it could not displace mandatory provisions of the Rules.

Court of Appeal (Civil Division): On 21 January 2014, unanimously dismissed the appeal and upheld the setting aside of the statutory demands.

High Court of Justice, Chancery Division: David Richards J dismissed the Prices’ appeals from DJ Winslett’s orders setting aside the statutory demands.

Brighton County Court: DJ Gamba allowed the challenge to the valuation of the Prices’ claims, suspended approval of the original IVAs and directed further meetings. DJ Winslett subsequently set aside the statutory demands.