Narandas-Girdhar and Anr v Bradstock
| Jurisdiction | England & Wales |
| Judge | Lord Justice Briggs,Lady Justice Black,Lord Justice Ryder |
| Judgment Date | 16 February 2016 |
| Neutral Citation | [2016] EWCA Civ 88 |
| Docket Number | Case No: A3/2014/1682/CHANF |
| Court | Court of Appeal (Civil Division) |
| Date | 16 February 2016 |
[2016] EWCA Civ 88
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
MR JONATHAN KLEIN (sitting as a Deputy Judge in the Chancery Division)
[2014] EWHC 1321 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Black
Lord Justice Ryder
Lord Justice Briggs
Case No: A3/2014/1682/CHANF
Mr Clive Wolman (instructed under the Public Access Scheme) for the Appellant
Mr Christopher Brougham QC (instructed by Sylvester Amiel Lewin & Horne LLP) for the Respondent
Hearing dates: Wednesday 27 and 28 January 2016
Introduction
This appeal from the Order of Mr Jonathan Klein sitting as a Deputy Judge of the Chancery Division on 9 May 2014 raises three issues arising from the attempt (unsuccessful thus far) of the Appellant and second Claimant in the proceedings, Mr Atulkumar Parekh, to have set aside an Individual Involuntary Arrangement ("IVA") purportedly approved by the acceptance of his modified proposal by the requisite majority of his creditors, at a creditors' meeting held as long ago as 15 December 1999, by proceedings for a declaration to that effect issued on 20 August 2010.
The judge dismissed all the grounds upon which Mr Parekh sought to set aside his IVA. Mr Parekh pursues two of those grounds on this appeal, namely:
i) That his modified proposal was conditional upon the acceptance of a simultaneous IVA proposal for his wife Mrs Parekh, which was in the event rejected by her creditors, also on 15 December 1999.
ii) That the approval of his modified proposal by the requisite 75% majority depended upon the vote in support apparently cast for one of his main creditors, HMRC, by their proxy at the meeting, Mr Wootton, contrary to the terms of HMRC's authority, which did not permit their vote to be cast in support of some of the modifications which, by then, had formed part of the modified proposal.
The judge found that, as to (i) above, the modified proposal was not conditional upon Mrs Parekh's IVA being approved by her creditors. That raises a question of construction of the modified proposal. As to (ii) above, the judge found that, although Mr Wootton had not indeed been authorised to cast HMRC's vote in favour of the modified proposal, HMRC had subsequently ratified that vote. Further, the judge found that Mr Parekh's challenge based upon Mr Wootton's want of authority was, at most, a material irregularity at or in relation to the creditors' meeting, so that his challenge to the validity of the meeting was time-barred by s.262(3) of the Insolvency Act 1986 ("the Act"), and otherwise prohibited by s.262(8) which provides that:
"except in pursuance of the preceding provisions of this section, an approval given at a creditors' meeting summoned under section 252(7) is not invalidated by any irregularity at or in relation to the meeting."
I shall refer to the two issues which arise under Mr Parekh's ground (ii) as "the ratification issue" and "the material irregularity issue".
The Facts
Being both in debt and under pressure from their creditors, Mr and Mrs Parekh both approached the Respondent and Defendant in these proceedings, Mr Alan Bradstock, a licenced insolvency practitioner and partner in Langley & Partners, for advice and assistance in mid 1999. On 10 November 1999 the court made interim orders under section 252 of the Act imposing moratoria on creditors' proceedings against either of them.
In due course Mr Bradstock circulated proposals for each of Mr and Mrs Parekh. Like the judge I shall refer to the proposal circulated for Mr Parekh as "the Proposal".
The main operative provision in the Proposal was to be found in paragraph 4.3, in the following terms:
"4.3 The acceptance of my Individual Voluntary Arrangement is conditional upon the acceptance of the Arrangement for my wife/husband, following acceptance the estates shall be combined for dividend purposes and treated as one.
I propose that, during the term of Arrangement the Supervisor will be paid a combined contribution for the benefit of the creditors not less than:-
£250 per month for the first year
—£3,000 year total
£300 per month for the second year
—£3,600 year total
£350 per month for the third year
—£4,200 year total
£400 per month for the fourth year
—£4,800 year total
£400 per month for the fifth year
—£4,800 year total
Total contributions
—£20,400 total
My monthly contributions are to begin no later than 28 days from my Proposal being accepted. If any voluntary contribution falls 60 days in arrears or falls below the amount specified in the proposals accepted by creditors, this shall be taken as a failure of the arrangement and the Supervisor will petition for bankruptcy. The Supervisor will set aside sufficient funds for this purpose."
The two other provisions relevant to the construction issue are as follows: Appendix 5 of the Proposal set out a comparison between Mr Parekh's bankruptcy and his proposed IVA. It suggested that a bankruptcy would yield 4.35p in the pound, whereas the IVA would yield 32.9p in the pound, in each case for his unsecured creditors. At the foot of appendix 5 is the following provision in heavy type:
"A contribution will be made by Mrs Rekha Atulkumar Parekh in accordance with the terms of her proposal. On that basis it is estimated that our joint unsecured creditors will receive a dividend of 70.09p in the £ and my personal creditors will receive a dividend of 32.91p in the £."
The other provision consists of the last sentence of paragraph 4.14 of the Proposal, as follows:
"I anticipate that a dividend of approximately 32.91 pence in the pound will be paid to unsecured creditors in a Voluntary Arrangement compared to 4.35 pence in the pound in a Bankruptcy Administration. As indicated earlier, I believe the costs of a Voluntary Arrangement will also be less than the costs of a Bankruptcy Administration.
Joint Unsecured Creditors will receive a dividend of approximately 70.09 pence in the £ from myself and my wife."
I shall refer to those two provisions as "the appendix 5 provision" and "the paragraph 4.14 provision" respectively.
Various modifications to Mr Parekh's proposal were put forward prior to the creditors' meeting on 15 December 1999. For present purposes the only one of those modifications ("the Modification") which matters was to paragraph 4.3 (quoted above) in the following terms:
"Clause 4.3 is to be substituted with "I agree to pay the Supervisor for the benefit of the creditors not less than £230 per month for the duration of the Voluntary Arrangement."
It is common ground that, in its context, the Modification replaced the whole of clause 4.3 of the Proposal. In the documents presented at the 15 December meeting the modifications, including the Modification, were set out in a separate document from the Proposal, headed "Atulkumar Parekh – Modifications". The Modification was the third of thirteen.
Mr Wootton was a member of Mr Bradstock's staff and had the conduct of the creditors' meetings on his behalf. Neither Mr Parekh, Mrs Parekh nor any of the creditors attended the meetings in relation to the two proposed IVAs personally. Mr Wootton cast all the votes by the exercise of proxies for the creditors. Although HMRC themselves proposed some of the modifications, the judge's decision that Mr Wootton did not have HMRC's authority to vote in favour of the modified proposal, ie. incorporating all the modifications, is not challenged by Mr Bradstock on this appeal.
The facts relevant to ratification by HMRC are as follows. On 24 November 1999 Mrs Bishop of HMRC's enforcement office wrote to Mr Bradstock thanking him for notice of the creditors' meeting, enclosing a proxy form in favour of the chairman of the meeting and concluding:
"Please ensure that a copy of the report of the meeting is sent urgently to this office."
The attached proxy set out in detail the modifications which, if included, HMRC would support, and in the absence of which the chairman was to vote against the proposal. As I have said, although those small modifications were eventually included, the proxy did not authorise the casting of HMRC's vote in favour of the proposal with the modifications actually included. On 15 December, Mr Wootton as chairman cast HMRC's vote in favour of the modified proposal. That vote was necessary for the proposal to achieve a 75.82% majority of the votes (by value) cast, so that it was approved.
By contrast Mrs Parekh's proposal was rejected by her creditors.
On 21 December 1999 Ms Linda Trimmer of the HMRC enforcement office sent Mr Bradstock a fax, referring to the HMRC's fax dated 14 December, and asking him to fax by return a copy of the chairman's report of an earlier meeting of creditors held on 2 December 1999, which had been adjourned.
The trial bundle contains an office copy of a letter from Mr Wootton to all known creditors dated 20 December 1999. It referred to the 15 December creditors' meeting, included a schedule of proxies showing that HMRC had voted in favour of the modified proposal by Mr Wootton as proxy holder, and included a full list of the modifications which had been approved at the meeting. The judge inferred that, (albeit probably in the post at the time of HMRC's 21 December fax), a copy of Mr Wootton's report as described above was received by HMRC.
At paragraph 83 of his judgment, the judge said:
"… to my mind however it would have been clear, from the report to Mr Parekh's creditors, that, save in the case of National Westminster Bank, the votes of...
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