Zelouf v Khanna & Anor

Permission to amend proceedings challenging an individual voluntary arrangement under Insolvency Act 1986 is construed in the context of the application, the parties’ submissions and the order made. A reference to particular matters does not enlarge the legal grounds of the amendment beyond the statutory challenge permitted. Statements by an IVA supervisor that he would not unreasonably contest a later challenge do not ordinarily create a free-standing cause of action in contract, misrepresentation or estoppel, nor do they modify the IVA without compliance with section 258(2). An appellate court should be slow to interfere with a lower court’s discretionary costs order or case-management order where it falls within the generous ambit of discretion.

Michael Zelouf appealed decisions of District Judge Bishop concerning the scope of an amendment to his application to set aside an individual voluntary arrangement approved for Vipin Khanna. The first decision permitted amendment, but the resulting order confined the grounds to a challenge under section 262 of the Insolvency Act 1986. The second decision maintained that order, awarded costs against Mr Zelouf and required payment of those costs before further applications could be made. The appeals concerned the proper construction of the first order, whether the supervisor’s statements supported a separate claim outside section 262, and whether the consequential discretionary orders should be disturbed.

The appeals were dismissed.

1. Scope of amendment. The order permitting amendment was to be read in the context of the procedural history, correspondence and the parties’ skeleton arguments. Those materials showed that the amendment was directed only to a challenge under section 262 of the Insolvency Act 1986, namely unfair prejudice or material irregularity. The reference to matters in the appellant’s skeleton argument concerned particularisation of those grounds and did not authorise a claim on a different legal basis.
2. No free-standing claim. The supervisor’s statements that he would not unreasonably contest a later application did not create a separate cause of action founded on breach of contract, misrepresentation or estoppel. Nor did those statements amount to a modification of the IVA in accordance with section 258(2) of the Insolvency Act 1986.
3. Consequential orders. Since the order maintaining the permitted scope of amendment was correctly made, there was no basis for interfering with the costs order. The amount of costs was within the District Judge’s broad discretion, and was reasonable and proportionate.
4. The order debarring further applications until payment of those costs also fell within the generous ambit of the District Judge’s discretion. It did not prevent pursuit of the section 262 application.

• High Court (Chancery Division): Appeals against the orders of District Judge Bishop dated 17 December 2014 and 30 June 2015 were dismissed.