Sundeep Kanji Bhundia v Sanjai Dhar (Re Five Delta Limited)

On an appeal concerning voting rights in a creditors’ voluntary liquidation, the court must form its own view on whether each claimed debt is established on the balance of probabilities. The legal burden remains on the creditor, although a respectable prima facie case may shift the evidential burden. A chair who is genuinely in doubt should admit the claim, mark it as objected to and permit voting subject to later invalidation.

An adjudication award under the statutory construction adjudication scheme is provisional and does not itself engage merger or res judicata. Those doctrines arise only after enforcement by summary judgment, and any alleged cause-of-action estoppel must be proved by the party asserting it. A meeting notice may retain a discretion to admit a late proof where its wording permits that construction.

Five Delta Limited entered creditors’ voluntary liquidation. The Applicant, a creditor, appealed the Respondent’s decisions as chair of the creditors’ meeting concerning the amount admitted on his proof and the admission of proofs lodged by the Respondent, Reliable Housing Ltd and Kajaine Accountants Limited.

The Applicant relied principally on an adjudication award, an alleged overpayment on an open-book construction project, payments for furniture and appliances not supplied to the project, and snagging costs. The Respondent argued, among other things, that the adjudication award barred the remaining claims by merger, res judicata or the Henderson principle. The central issues were whether the debts were proved for voting purposes, whether the late proof was admissible, and what order should follow from any material irregularity.

1. Applicable approach. The court conducted its own assessment rather than merely reviewing the chair’s decision, applying the balance-of-probabilities test. The creditor bore the legal burden of proving the debt. Where a claim was in doubt, rule 15.33 required admission subject to objection and possible later invalidation.
2. Applicant’s proof. The Applicant established an overpayment of £110,643.36. He also established claims of £5,940 for Camerich furniture and £4,277.71 for Gaggenau appliances paid for from project funds but used elsewhere. The £6,750.50 snagging claim was unsupported and was rejected. The Applicant’s proof should therefore have been admitted in £225,287.26.
3. Other proofs. The Respondent failed to prove his director’s loan claim of £16,434.95, which should not have been admitted. Reliable Housing proved its claim of £113,760 through the timesheets and payment evidence. Kajaine Accountants proved its £11,700 claim. The proof was lodged late, but paragraph 15 of the Notice of Virtual Meeting retained a discretion to admit it. The discretion was properly exercised in the exceptional circumstances.
4. Merger and res judicata. Adjudication under section 108 of the Housing Grants, Construction and Regeneration Act 1996 and the Scheme for Construction Contracts is a rapid, temporary procedure. The adjudicator’s decision remains binding only until final determination and is not final. Merger is therefore not engaged merely by making the award. The Respondent also failed to prove that the adjudication determined the causes of action underlying the remaining claims or that the Henderson principle applied.
5. Outcome. The incorrect admission and rejection of proofs constituted a material irregularity. The Applicant would have secured more than 50% of the votes. The court was to hear further submissions on whether to direct another decision procedure or make another just order, with costs reserved.

First-instance appeal under rule 15.35 of the Insolvency Rules 2016 against decisions made by the chair of a creditors’ meeting. The court directed that further submissions be heard on the appropriate consequential order.