Tanner v Everitt
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mann |
| Judgment Date | 14 May 2004 |
| Neutral Citation | [2004] EWHC 1130 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: 237 and 238 IO 2000 |
| Date | 14 May 2004 |
[2004] EWHC 1130 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Mann
Case No: 237 and 238 IO 2000
Susan Brown (instructed by Bolt Burdon) for the Claimants
Adam Deacock (instructed by Hammonds) and Andrew Thornton (instructed by Beachcroft Wansbroughs) for the Defendants
Hearing dates: 11–13, 16–19 February 2004
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
There are before me four applications in respect of two Individual Voluntary Arrangements ("IVA's"). The debtors under those arrangements (whose validity, I should say at this stage, is contested) are Mr Philip Tanner and Mrs Christine Tanner. Questions have arisen as to the effect and effectiveness of those arrangements, and they have been raised in applications in each arrangement by Mr Clive Everitt, who claims to be the supervisor in relation to each arrangement, and by applications by each of the Tanners in their respective arrangements. That is how we arrive at four applications. In fact the applications made in each arrangement are identical and raise identical questions, which simplifies the matter somewhat.
The Background and The Facts
As at the beginning of 1990, Mr and Mrs Tanner owned and ran three businesses between them. Mrs Tanner by herself ran a retail business known as Tanners Coffee, which as its name suggests supplied Tea, Coffee and Dairy Products. Mr Tanner owned and ran a pub called the Cross Keys, and together in Partnership they ran a restaurant known as Tanner's Bistro. A coffee shop business was also carried on there. All three businesses were carried on in Witney, Oxfordshire. In Spring 1990 they got themselves into financial difficulties, and in order to help resolve them they went to see Mr Anthony Harris, an Accountant practicing in Witney in the firm of Peter Edwards and Co. He was a licensed insolvency practitioner. The Tanners say that his instructions originated when they were called into the bank and were told of odd transfers between accounts which required investigation. They made it sound as though they went to him about that and ended up with insolvency advice instead. I do not accept that explanation. They were pressed financially, and there is no explanation for why they went to an insolvency practitioner other than to get insolvency advice. Mr Harris took various details from them and explained that an IVA might be appropriate for them. There is a dispute as to the extent to which he explained what a IVA was, and perhaps as to the extent to which bankruptcy was discussed as an alternative. Mrs Tanner's evidence is that she was very distressed at this time, and the evidence of both Mr and Mrs Tanner is that they did not have an IVA explained to them properly. I find that while Mrs Tanner may well have been distressed as a result of the predicament in which they suddenly found themselves, Mr Harris explained the concept of an IVA in terms sufficient to enable Mr and Mrs Tanner to understand it. Having taken instructions from the Tanners, Mr Harris set about preparing the proposals for an IVA, and in this respect he instructed solicitors, Messrs Cole & Cole who apparently did the drafting of the proposals. Under the proposed IVA, Mr Harris was to be the nominee and, if approved by the creditors, the supervisor. In order to consider the financial position of the Tanners' and in order to consider the terms which would be appropriate to an IVA, Mr Harris retrieved the Tanners' business books and papers from a Mr Haire, who had been performing a book-keeping function for the Tanners. On 1 st June 1990, Mr and Mrs Tanner each signed their respective proposals, a copy of a notice of a proposal for an IVA given to Mr Harris and asking him to indicate his willingness to act as nominee, and an affidavit in support of an application for an interim order under Section 253 of the Insolvency Act 1986, that application to be heard on Tuesday 5 th June 1990. On the same date, Mr Harris signed a Nominee's Report on each voluntary arrangement stating that he had seen each voluntary arrangement, that the statement of affairs exhibited displayed a fair reflection of the Tanners' respective assets and liabilities and that in his opinion it would be in the interests of the creditors for the affairs of the Tanners to be dealt with on the basis of the proposals. Interim orders were made in respect of each proposal on 5 th June 1990 and a meeting of creditors was summoned for 26 th June 1990 in respect of each proposal. The two meetings took place on that date, one after the other, and each of the proposals was approved by the requisite majority of creditors with an amendment proposed by HM Customs and Excise to ensure that VAT obligations were and continued to be complied with in respect of the trade which it was anticipated would be continued. Mr Harris was appointed to be the supervisor under each arrangement.
A generalised outline of those proposals will suffice at this point. Under the combined effect of both the arrangements, the Bistro business was to be closed down. Mrs Tanner was to give up the retail premises from which she conducted her tea and coffee operation, and move the wholesale side into the Cross Keys Pub. Mr Tanner would continue to run that pub. It is from those two businesses (that is to say the pub and the tea and coffee operation) that the voluntary arrangements were to be funded. In the case of Mr Tanner's arrangements, his proposal stated that he attached a cash-flow projection for his continued trading "showing contributions of £2,500.00 per month into the voluntary arrangement." It also provided that he proposed that "any cash surplus above the monthly contribution should be paid into the voluntary arrangement as payments on account towards the purchase of the business assets". Continued trading was to be monitored "closely" by the supervisor. The arrangement was to continue in operation until such time as unsecured creditors (totalling £115,000) had been paid £65,000. The supervisor was to be paid reasonable professional remuneration on a time cost basis. In the case of Mrs Tanner's proposals, she claimed to put forward a cash-flow projection "showing that a contribution to the voluntary arrangement of £12,900.00 should be achieved in the first year". There was no provision for the payment of any excess profit into the arrangement. The arrangement was to continue until her unsecured creditors (totalling £75,000) had been paid a total of £30, 000 or 3 years, whichever was the longer. Both arrangements contained a provision stating that they should be administered jointly and concurrently if both were accepted by the creditors.
Matters went smoothly for a short while, but at the end of 1991 the arrangements began to run into difficulties, at least from Mr Harris's point of view. The funds received by him began to fall short of what he perceived should be paid under each of the arrangements, and he discovered what he claimed to be a failure on the part of Mr Tanner to disclose certain creditors in his IVA. There was a dispute as to whether he was right about that which I do not have to resolve, but it clearly generated a lot of heat between him and the Tanners. He also took the view that Mr Tanner had failed to comply with an obligation imposed by the IVA that expenditure over £100.00 should have the approval of the supervisor. In the case of Mrs Tanner, he again complained that the trading surplus contemplated by the IVA was not sufficient to fund the IVA as originally contemplated, and that she too had not disclosed certain unsecured creditors (again generating heat). He had no confidence in the continued viability of the IVA's and was minded to propose, and indeed did ultimately propose, that he should petition to bankrupt both of them. In due course he wrote to creditors seeking authority for that. He instructed his own solicitors (Messrs Cole & Cole) and the Tanners instructed Messrs Darbys. There was correspondence between the solicitors. The Tanners proposed something different. They had lost confidence in Mr Harris, and they proposed that he be substituted by Mr Everitt. Mr Everitt was prepared to take on the job, but not on the terms of the original IVA's. He thought there should be amendments, and he proposed them.
Thus the creditors meeting of 1 st May 1992 came about. On 15 th April 1992 Mr Harris convened that meeting in a letter which set out his views. The meeting had the benefit of counter proposals from Mr Everitt, in the form of a letter signed by him and addressed to all Creditors. Those proposals, and the decisions taken on them, were as follows:
Mrs Tanners IVA:
i) To receive and adopt a report from the supervisor concerning the administration of the voluntary arrangement. Result – passed by 55.2% of creditors by value.
ii) To include additional creditors in the sum of £15,581.00 in the IVA and to allow them to share in the dividend on an equal basis with other creditors – passed by 93.5% of creditors by value.
iii) To consider the supervisor's recommendation that he should petition for bankruptcy. Result – rejected by 91.1% of the creditors by value.
iv) If resolution (iii) was rejected, to consider whether the new variations as proposed by the debtor should be rejected. Result – rejected by 94.6% of the creditors by value. This has been taken to be the equivalent of a positive adoption of the variations.
...v) If resolution (iis accepted, to consider the resignation of Anthony Harris as supervisor and the appointment of Clive Everitt in his place. Result – passed by 97.6% of creditors by value.
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