Monecor (London) Ltd v Ahmed & others [2008] BPIR 458
Tradition (UK) Ltd v Ahmed & others [2008] EWHC 2946
Challenges to Individual Voluntary Arrangements
Jonathan Lopian acted for the Applicant (T) in its successful challenge against the first Respondent's (S) IVA. T was a financial spread betting company. S became a Client of T in May 2003; he subsequently incurred substantial losses and by June 2006 owed T £4.27M. In July 2006, T served a statutory demand which S unsuccessfully applied to set aside. In January 2007, T presented a bankruptcy petition against S. A applied for an interim order pursuant to S.252 Insolvency Act 1986, the effect of which was to impose a moratorium on proceeding with any bankruptcy petition pending the approval or rejection of an IVA proposal at a creditors' meeting. The second Respondent (A) was named as nominee for the purposes of supervising the implementation of the IVA. The creditors' meeting was held on March 2007. T opposed the IVA proposal and voted against it at the meeting but it was approved by a 77.94% majority of creditors by value which narrowly exceeded the 75% majority required by R.5.23 of the Insolvency Rules 1986. The majority would not have been achieved without votes in favour being cast by the 3rd to 8th Respondents (who were the brother, mother, wife, family company and another company respectively), who all claimed to be loan creditors of the Debtor. T applied pursuant to S.262(1)(b) of the Insolvency Act to set aside the decision at the creditors' meeting. It submitted that it had been the victim of ‘vote rigging' on the basis that the purported debts claimed by the 3rd to 8th Respondents, who were members of S's family or close associates of his had been fabricated or at least inflated. It also submitted that A had failed to meet the standard expected of a reasonably competent insolvency practitioner. Following a High Court trial lasting 16 days (against leading and junior counsel), the Court found that having regard to each of the claims of the 3rd to 8th Respondents, if they had been admitted to vote in the correct amounts, or the claims had been rejected as appropriate, the voting figures at the creditors' meeting would have changed and the majority in favour of the IVA would have been 73.52%. This meant that the IVA proposal would have been rejected. T had therefore established that there had been a material irregularity at the meeting and the approval of the IVA would be revoked. The Court also found that A had failed to meet the standard to be expected of a reasonably competent insolvency practitioner both in preparing his nominee's report and in his conduct during the proceedings.
There are only a handful of reported cases on challenges to IVAs under S.262 Insolvency Act and R 5.22 Insolvency Rules. This case clarifies the law in certain respects and makes some important findings as regards the standards expected of insolvency practitioners.