Doorbar v Alltime Securities Ltd (No 1)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE PETER GIBSON,MR JUSTICE FORBES,LORD JUSTICE HIRST |
| Judgment Date | 30 November 1995 |
| Judgment citation (vLex) | [1995] EWCA Civ J1130-9 |
| Docket Number | CHBKF 94/1545/C |
| Court | Court of Appeal (Civil Division) |
| Date | 30 November 1995 |
[1995] EWCA Civ J1130-9
(Mr Justice Knox)
Before: Lord Justice Hirst Lord Justice Peter Gibson Mr Justice Forbes
CHBKF 94/1545/C
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COURT OF JUSTICE
(CHANCERY DIVISION)
MS A TIPPLES (Instructed by Tinklin Springall, Beckenham, Kent BR3 1JB) appeared on behalf of the Appellant, Alltime Securities Ltd.
MR A ZACAROLI (Instructed by Charles Marlowe, Brighton, East Sussex BN1 2PA) appeared on behalf of the Respondent, Doorbar.
Thursday, 30th November 1995
Among the innovations introduced by the Insolvency Act 1986 were provisions in Part VIII of the Act enabling an individual debtor to make a proposal to his creditors for a composition in satisfaction of his debts or a scheme of arrangement of his affairs (in either case called a voluntary arrangement), and for carrying that voluntary arrangement into effect. There were corresponding provisions for corporate debtors in Part I of the Act. These appeals raise questions as to the meaning of the statutory provisions and rules relating to individual voluntary arrangements and their effect in the particular circumstances of this case.
It is convenient to commence by summarising the statutory scheme for individual voluntary arrangements. The debtor who intends to propose a voluntary arrangement is required to apply to the court for an interim order under s.253. His proposal must provide for some person ("the nominee") to act in relation to the voluntary arrangement as trustee or otherwise for the purpose of supervising its implementation. The matters to be dealt with in the proposal include his assets and their estimated values, any property, other than the assets of the debtor himself, which is to be included in the voluntary arrangement, the nature and amount of his liabilities, the duration of the voluntary arrangement, and the functions which are to be undertaken by the supervisor of the voluntary arrangement (r.5.3 Insolvency Rules 1986). Both the nominee and the supervisor have to be insolvency practitioners (s.255(1)(d) and r.5.3(p)). If the court makes an interim order, no bankruptcy petition may be presented or proceeded with and no other proceedings and no execution or other legal process may be commenced or continued against the debtor without leave (s.252). The order ceases to have effect after 14 days and before it does the nominee must submit a report to the court, stating whether a creditors' meeting should be summoned to consider the debtor's proposal (ss.255(6) and 256(1)). The debtor is required to submit to the nominee a statement of his affairs (s.256(2)). If the court is satisfied that there should be a creditors' meeting, the interim order is extended until the meeting (s.256(5)) and the nominee summons every creditor to the meeting (s.257). The creditors' meeting decides whether to approve the proposed voluntary arrangement and may do so with modifications to which the debtor consents (s.258(1) and (2)). But the meeting shall not approve any proposal or modification which affects the right of a secured creditor to enforce his security, except with the creditor's concurrence (s.258(4)).
The nominee, if able to attend, is the chairman of the meeting ( r.5.15(1)). Voting rights are dealt with in r.5.17:
"(1) Subject as follows, every creditor who was given notice of the creditors' meeting is entitled to vote at the meeting or any adjournment of it.
(2) ….[V]otes are calculated …. in Case 2 [relating to a case where the debtor is other than an undischarged bankrupt] according to the amount of the debt as at the date of the meeting.
(3) A creditor shall not vote in respect of a debt for an unliquidated amount, or any debt whose value is not ascertained, except where the chairman agrees to put upon the debt an estimated minimum value for the purpose of entitlement to vote.
(4) The chairman has power to admit or reject a creditor's claim for the purpose of his entitlement to vote, and the power is exercisable with respect to the whole or any part of the claim.
(5) The chairman's decision on entitlement to vote is subject to appeal to the court by any creditor, or by the debtor.
(6) If the chairman is in doubt whether a claim should be admitted or rejected, he shall mark it as objected to and allow the creditor to vote, subject to his vote being subsequently declared invalid if the objection to the claim is sustained.
(7) If on an appeal the chairman's decision is reversed or varied, or a creditor's vote is declared invalid, the court may order another meeting to be summoned, or make such other order as it thinks just.
The court's power to make an order under this paragraph is exercisable only if it considers that the matter is such as to give rise to unfair prejudice or a material irregularity.
(8) An application to the court by way of appeal under this Rule against the chairman's decision shall not be made after the end of the period of 28 days beginning with the day on which the chairman's report to the court is made under section 259."
By r.5.18(1) for any resolution to pass approving any
proposal or modification there must be a majority in excess of three-quarters in value of the creditors present in person or by proxy and voting on the resolution.
The effect of the approval is stated in s.260. By subsection (2):
"The approved arrangement-
(a) takes effect as if made by the debtor at the meeting, and
(b) binds every person who in accordance with the rules had notice of, and was entitled to vote at, the meeting (whether or not he was present or represented at it) as if he were a party to the arrangement."
S.262 provides for challenges of the meeting's decision, allowing, amongst others, a person entitled to vote at the meeting to apply to the court on one or both of the following grounds:
"(a) that a voluntary arrangement approved by a creditors' meeting summoned under section 257 unfairly prejudices the interests of a creditor of the debtor;
(b) that there has been some material irregularity at or in relation to such a meeting" (s.262(1)).
The court if satisfied on either of those grounds may revoke or suspend any approval given by the meeting and may direct a further meeting to be summoned.
Where a voluntary arrangement takes effect, the supervisor performs the functions allotted to him by that arrangement. If the debtor or any creditor or other person is dissatisfied with any act, omission or decision of the supervisor, he may apply to the court under s.263(3).
By s.264(1)(c) the supervisor or any person (other than the debtor) who is for the time being bound by an approved voluntary arrangement may present a bankruptcy petition against the debtor, but a bankruptcy order will not be made on such petition unless the court is satisfied of a default by the debtor in connection with the voluntary arrangement (s.276(1)). In contrast, any creditor who is not bound by the approved arrangement may present a petition relying on his debt (s.264(1)(a)).
I turn to the facts. On 3 April 1981 the Appellant, Alltime Securities Ltd. ("Alltime"), as the landlord granted a Lease of business premises, 343 Eden Park Avenue, Bromley, to Menage Graphic Productions as the tenant for a term of 20 years at £7,500 per annum subject to 5-year rent reviews and an additional annual rent for insurance. From 29 September 1990 the annual rent was increased to £13,830. The tenant is in fact the Respondent debtor, Mr. Doorbar, by his trade name. There was provision in clause 4 for reentry by the landlord in usual form on the failure to pay the rent thereby reserved for 21 days after becoming payable or if the tenant should become bankrupt or enter into any composition with his creditors. Also named as parties to the Lease were Mr. Doorbar and his then wife, who were called in the Lease "the Sureties". By clause 5:
"If the Tenant shall go into liquidation and the liquidator shall disclaim this lease or if the Tenant shall be wound up or cease to exist (or if the Tenant for the time being shall be an individual and shall become bankrupt and the trustee in bankruptcy shall disclaim this Lease) and if the Landlord shall within three months after such disclaimer or other event putting an end to the effect of this Lease as aforesaid so far as concerns the Tenant by notice in writing require the Surety to accept a lease of the premises for a term commensurate with the residue which if there had been no disclaimer or if this Lease had continued to have had effect as aforesaid would have remained of the term hereby granted at the same rent and subject to the like covenants and conditions as are reserved by and contained in this Lease (with the exception of this clause) the said new lease and the rights and liabilities thereunder to take effect as from the date of the said disclaimer or of this Lease ceasing to have effect as aforesaid then and in such case the Surety shall pay the costs of and accept such new lease accordingly and will execute and deliver to the Landlord a counterpart thereof".
Although that clause only refers to "the Surety" in the singular, Mr. Zacaroli for Mr. Doorbar does not dispute that if the conditions for the operation of clause 5 are satisfied, Alltime may require Mrs. Doorbar to take a lease for the remainder of the term. It is to be noted that those conditions are more limited than the conditions for forfeiture in clause 4, in particular in that they do not include the condition if the tenant should enter into any composition with his...
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