IN THE MATTER OF STEPHEN JOHN CURTIS
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Leeds LS1 3BG
B e f o r e :
| AB AGRI LIMITED
|- and -
|(1) STEPHEN JOHN CURTIS
(2) ROBERT ALEXANDER HENRY MAXWELL
(3) ROB SADLER
Mr Curtis appeared in person
The Second Respondent acted in person
The Third Respondent did not appear.
Hearing dates: 19 – 22 July 2016
Crown Copyright ©
"T I from Bob Maxwell - asserts his client has no recollection of signing the PG in favour of [ABAL] …"
…before entering into the personal guarantee relied upon by your client, he was told in no uncertain terms that the personal guarantee would not be enforced/relied upon by your client if [ACMC] underwent a refinancing (which it subsequently did).
|For||Rebuilding Society Ltd||52,024|
|Eric Arthur Broock||166,000|
|AB Agri Ltd||1|
It was agreed that I would provide a personal guarantee [PG] guaranteeing the debts of [ACMC] to [ABAL]. It was represented to me prior to signing the PG that should [ACMC's] cash flow improve, such that it was within normal trading terms, [ABAL] would not rely on the PG and it would be dispensed with. I cannot recall who it was I spoke to at the time but it would have been [ABAL's] sales representative at that time or their accounts department. Such a commitment … was important … to me …because we were looking for a short term supplier until we were in a position to renegotiate when [ACMC's] cash flow improved. Without that representation [ACMC] would not have placed its orders for supply with [ABAL] nor would I have provided the PG.
I recall having a conversation with the Petitioning Creditor. I cannot recall if it was a telephone conversation or not.
The conversation was with reference to the Personal Guarantee and with us getting our trade account in order. The conversation made the point that I would expect the PG to be revoked. I am 99% certain that it was with a representative from ABN who would have said to me it is not in my jurisdiction to make such a decision and he would go back and talk to the powers that be.
Could have been telephone or office. I cannot remember the identity of the rep at the time
There was only one conversation.
"unless your father signs the guarantee we won't do business with you".
"implied to me by Matthew – I had no reason to doubt it".
The meeting on 26 April 2012
Mr Maxwell's evidence
Having considered the contents of the petition and [Mr Curtis's] witness statement I also formed the view that the claim and therefore the petition was clearly disputed on substantial grounds that were likely to succeed. However given the existence of the bankruptcy petition, in my professional view the appropriate course of action was to note [ABAL] in the proposal for a nominal sum of £1 to ensure that [ABAL] had every opportunity to respond to the IVA proposal and/or to provide further evidence or proof of the Claim.
S 262 of the 1986 Act
262(1) [Application to Court] Subject to this section, an application to the court may be made, by any of the persons specified below, on one or both of the following grounds, namely-
(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.
262(4) [Court's powers] Where on an application under this section the court is satisfied as to either of the grounds mentioned in subsection (1), it may do one or both of the following, namely-
(a) revoke or suspend any approval given by the meeting;
(b) give a direction to any person for the summoning of a further meeting of the debtor's creditors to consider any revised proposal he may make or, in a case falling within subsection (1)(b), to reconsider his original proposal.
Rules 5.21 and 5.22 of the 1986 Rules
5.21(1)[Entitlement] Subject as follows, every creditor who has notice of the creditors' meeting is entitled to vote at the meeting or any adjournment of it.
5.21(2)[Calculation of votes] A creditor's entitlement to vote is calculated as follows—
(a) where the debtor is not an undischarged bankrupt and an interim order is in force, by reference to the amount of the debt owed to him as at the date of the interim order;
(b) where the debtor is not an undischarged bankrupt and an interim order is not in force, by reference to the amount of the debt owed to him at the date of the meeting; and
(c) where the debtor is an undischarged bankrupt, by reference to the amount of the debt owed to him as at the date of the bankruptcy order.
5.21(3)[Limitation on voting] A creditor may vote in respect of a debt for an unliquidated amount or any debt whose value is not ascertained, and for the purposes of voting (but not otherwise) his debt shall be valued at £1 unless the chairman agrees to put a higher value on it.
5.22(1)[Procedure at creditors' meeting] Subject as follows, at the creditors' meeting the chairman shall ascertain the entitlement of persons wishing to vote and shall admit or reject their claims accordingly.
5.22(2)[Chairman's discretion] The chairman may admit or reject a claim in whole or in part.
5.22(3)[Appeal from chairman's decision] The chairman's decision on any matter under this Rule or under paragraph (3) of Rule 5.21 is subject to appeal to the court by any creditor or by the debtor.
5.22(4)[Voting subject to objection] If the chairman is in doubt whether a claim should be admitted or rejected, he shall mark it as objected to and allow votes to be cast in respect of it, subject to such votes being subsequently declared invalid if the objection to the claim is sustained.
5.22(5)[When chairman's decision reversed etc.] If on an appeal the chairman's decision is reversed or varied, or votes are declared invalid, the court may order another meeting to be summoned, or make such order as it thinks just. The court's power to make an order under this paragraph is exercisable only if it considers that the circumstances giving rise to the appeal are such as give rise to unfair prejudice or material irregularity.
5.22(6)[Time for appeal] An application to the court by way of appeal against the chairman's decision shall not be made after the end of the period of 28 days beginning with the first day on which—
(a) where the creditors' meeting was summoned under section 257 pursuant to a report to the debtor's creditors under section 256A(3), the notice of the result of the meeting required by section 259(1)(a) has been given; or
(b) where the creditors' meeting was summoned under section 257 pursuant to a report to a court under section 256(1)(aa), the report required by section 259(1)(b) is made to the court.
5.22(7)[Costs of appeal] The chairman is not personally liable for any costs incurred by any person in respect of an appeal under this Rule.
"In my judgment the scheme of the meeting rules in r 5.17 is quite plainly a simple one. As one would expect the meeting is not the place to go into lengthy debates as to the exact status of a debt, nor is it the time to consider such matters as this court, sitting as the Companies Court, frequently has to consider as such whether a debt is bona fide disputed upon substantial grounds, an issue which leads to a great deal of litigation and frequently takes a day or so to decide. None of that could possibly be a suitable process to be embarked upon at a creditors' meeting.
The scheme is quite clear. The chairman has power to admit or reject; his decision is subject to appeal; and if in doubt he shall mark the vote as objected to and allow the creditor to vote. That is easily carried out upon the basis advanced by Mr Moss QC, Mr Mann and Mr Trace. It provides a simple clear rule for the chairman, not a lawyer, faced at a large meeting with speedy decisions necessary to be made to enable the meeting to reach a decision. On that basis the chairman must look at the claim; if it is plain or obvious that it is good he admits it, if it is plain or obvious that it is bad he rejects it, if there is a question, a doubt, he shall admit it but mark it as objected."
"In my view, the task of the court, on an appeal under r 4.70(4) of the Insolvency Rules 1986, is simply to examine the evidence placed before it on the matter and come to a conclusion whether, on balance, the claim against the company is established and, if so, in what amount. I would only add that, in considering the matter, the court is not confined to the evidence that was before the chairman at the time that he made his decision but is entitled to consider whatever admissible evidence on the issue the parties to the appeal choose to place before the court."
"I accept that a court can, on an appeal under r.4.70(4), look at all the evidence put before it, and is not confined to the evidence that was before the chairman of the meeting: see per Blackburne J in Re a company (No 004539 of 1993)  1 BCLC 459 at 466 and per Neuberger J in Re Philip Alexander Securities & Futures Ltd  1 BCLC 124 at 128. However, in both of those cases the court received evidence which showed what the position was, in fact, at the time of the meeting: in the first case that, as at the date of the meeting, the particular creditor's claim had been abandoned; in the second case, that, likewise, as at the date of the meeting, certain proxies had been lodged with the authority of certain creditors. In the present case, on the contrary, the evidence that subsequently a judgment was obtained clearly does not demonstrate that the claim was a liquidated claim at the time of the meeting."
An irregularity is the proper description of a wrong decision at a meeting to exclude or to prohibit a vote.
The matters before me do not, prima facie, arise simply out of the report but says Mr Moss QC, and counsel for the other creditors who have succeeded before me, the report leading to the meeting and the acts of Mr Singla as chairman of the meeting, were causative directly of these proceedings. Although I have decided the matter on the basis that the chairman's decision was a material irregularity under s 262(1)(b) and under r 5.17 it was also, to my mind, such that if it had been necessary to decide separately, I would have decided caused unfair prejudice to these creditors.
Mr Singla is, of course, a professional man and, prima facie, one would not expect a professional man, acting in the course of his professional duties, to be personally charged with costs arising out of that exercise. However, this is a thoroughly exceptional case and as Hoffmann J observed in Re Naeem (a bankrupt) (No 18 of 1988)  1 WLR 48 at 51:
'If there had been some personal conduct on the part of the nominee which would justify an order for costs against him, that could be done.'
It seems to me that Hoffmann J in Naeem when he referred to the nominee acting simply as an agent of the bankrupt, was entirely accurate in his use of that word in the context of that case, but was not directing his mind at all to the position of the nominee when he has a duty to report to the court his own opinion upon the debtor's proposals. That cannot be an opinion given as agent for anybody. Further, the nominee's duties as chairman of the meeting are plainly not to act merely as agent of the debtor, but to perform his duties under the 1986 rules in an independent fashion acting with regard to the rules and his duties and nothing else. The instructions of his principal, if he were a mere agent, could not possibly override those duties.
As it seems to me, in this case, Mr Singla has fallen so far below the proper standard of duty required of a professional licensed insolvency practitioner in this jurisdiction, that it would be right to visit some part of the costs upon him. There is, however, one odd factor. Rule 5.17(9) provides expressly that:
'The chairman is not liable for any costs incurred by any person in respect of an appeal under this Rule.'
The Meeting of Creditors on 15 October 2015.