Green v Wright

On successful completion of an individual voluntary arrangement, a completion certificate releasing the debtor from all debts subject to the arrangement brings the arrangement to an end for its purposes. The former creditors are no longer creditors entitled to dividends, and the trusts over arrangement assets cease. A supervisor may pay a dividend already declared but unpaid, because the supervisor’s continuing powers preserve that existing obligation. Future claims or recoveries can remain available to creditors only if the debtor and supervisor make specific provision before completion, or the supervisor withholds the completion certificate.

James Green, the former supervisor of James Patrick Wright’s individual voluntary arrangement, appealed against a County Court decision directing him to pay approximately £24,500 of payment protection insurance compensation to Mr Wright. The IVA had been completed, and a certificate of due completion had been issued after Mr Wright complied with its terms. The compensation was received about nine months later. The central issue was whether the completion certificate released Mr Wright from the debts subject to the IVA and ended the trusts over arrangement assets, or whether the supervisor remained obliged to distribute the compensation to the former creditors.

1. Appeal and permission. The court extended time for appealing insofar as necessary, granted permission to appeal, and dismissed the appeal. The County Court had reached the correct conclusion.
2. Effect of completion. The issue turned on the meaning and effect of paragraph 9(2) of the modified Standard Conditions. Release from all debts subject to the arrangement meant that the former creditors were no longer to be treated as creditors for the purposes of the arrangement. They could no longer receive a dividend under paragraph 49(1).
3. Trusts and existing dividends. The release applied for all purposes of the arrangement and brought an end to the trusts affecting arrangement assets. Paragraph 14(1) continued the supervisor’s powers, duties and functions sufficiently to pay a dividend already declared but unpaid. It did not preserve the power to declare a new dividend after completion, when there were no longer any creditors entitled to it.
4. After-acquired assets. Paragraph 27(3), which continued the debtor’s obligations until issue of a completion certificate, had no direct application after completion. It nevertheless pointed in the same direction by indicating that the debtor had no continuing obligations after the certificate. The decision did not depend on that provision.
5. Future claims. If the supervisor wished to retain power over possible payment protection insurance claims after completion, the supervisor should obtain a specific agreement with the debtor before issuing the certificate. Alternatively, the supervisor could withhold the certificate. The arrangement was therefore concluded and the compensation was payable to the former debtor.
6. The decision in Re NT Gallagher & Son Ltd [2002] EWCA Civ 404; [2002] 1 WLR 2380 provided no assistance. It concerned the effect of liquidation and failure of a voluntary arrangement, rather than its successful completion without breach.

1. High Court (Chancery Division): The appeal from the decision of Deputy District Judge Langley was dismissed. The court also granted permission to appeal and extended time for appealing insofar as necessary.
2. County Court at Burnley: The former supervisor’s application for directions was determined in favour of the former debtor, with the compensation ordered to be paid to him and no order as to costs.