Rochay Productions Ltd, Re

In an appeal against the admission of a proof of debt for voting purposes, the court may order the chair or convenor personally to pay costs only in special circumstances. These include self-interest, irrationality, unreasonableness or another sufficiently good reason. Mere negligence is insufficient.

The chair’s task under the Insolvency Rules 2016 is summary. A claim should be admitted if plainly good, rejected if plainly bad, and otherwise admitted subject to objection. A creditor who submits an indefensible proof and persists in contesting an appeal may be ordered to pay costs on the indemnity basis.

Opus Art Limited appealed under rule 15.35 of the Insolvency Rules 2016 against the admission of Rochay Elite Limited’s proof of debt for voting purposes at a creditors’ meeting. The substantive appeal became unopposed, leaving costs as the principal issue.

The court considered whether the proof was substantiated, whether the chair of the meeting should bear personal costs, and whether the creditor that submitted and defended the proof should pay the applicant’s costs.

1. The appeal against the proof was allowed. The evidence showed that the bank statements did not support the claimed debt, the purported loan agreements did not establish the claim, and the surrounding company accounts were inconsistent with it. The chair’s decision to admit the proof was set aside, the proof was struck out, and the liquidator was directed to convene a fresh creditors’ meeting.

2. The court adopted the approach in Nimat Halal Food v Patel [2020] EWHC 734 (Ch) and Fielding v Hunt [2017] EWHC 406 (Ch). The protection afforded to office-holders against personal costs orders on proof appeals applied equally to a chair or convenor who was not an office-holder.

3. Under rule 15.33 of the Insolvency Rules 2016, deciding a proof for voting purposes is a summary exercise. As explained in Re a Debtor (No 222 of 1990) Ex p Bank of Ireland [1992] BCLC 137, a plainly good claim is admitted, a plainly bad claim rejected, and a claim giving rise to doubt admitted but marked as objected to. The chair was not required to conduct an extensive investigation, and mere failure adequately to interrogate the proof would not constitute a special circumstance or good reason for personal costs.

4. The application for costs against the chair was dismissed. The untested circumstantial evidence did not provide the cogent basis required for findings of bias, collusion, conscious impropriety or bad faith.

5. The creditor was ordered to pay the applicant’s costs on the indemnity basis. Its proof was unsupported and indefensible, and it continued to oppose the application despite early warning and without a plausible explanation for withdrawing its opposition shortly before the hearing.