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		BAILII Citation Number: [2016] EW Misc B18 (CC)
		Case No: IVA 79 of 2015

IN THE COUNTY COURT AT LEEDS
IN BANKRUPTCY
IN THE MATTER OF STEPHEN JOHN CURTIS
AND IN THE MATTER OF THE INSOLVENCY ACT 1986

The Court House
Oxford Row
Leeds LS1 3BG

22/07/2016

B e f o r e :

His Honour Judge Behrens
____________________

Between:

	AB AGRI LIMITED	Applicant
	- and -
	(1) STEPHEN JOHN CURTIS (2) ROBERT ALEXANDER HENRY MAXWELL (3) ROB SADLER	Respondents

____________________

Reuben Comiskey (instructed by Blaser Mills LLP) for the Applicant
Mr Curtis appeared in person
The Second Respondent acted in person
The Third Respondent did not appear.
Hearing dates: 19 – 22 July 2016
____________________

HTML VERSION OF JUDGMENT
____________________

Judge Behrens:

1 Introduction

At a meeting of creditors on 15 October 2015 which was chaired by an insolvency practitioner, Mr Maxwell it was resolved that a proposal by Stephen Curtis ("Mr Curtis") for an Individual Voluntary Arrangement ("IVA") be approved.

The application for an IVA followed a bankruptcy petition presented by AB Agri Limited ("ABAL") against Mr Curtis in respect of a liability under a personal guarantee signed by Mr Curtis in 2007.

ABAL had submitted to the creditors meeting a claim form in the sum of £479,835.77 and a proxy form with instructions to vote against the IVA proposal. Mr Maxwell admitted the claim with a value of only £1. It is not in dispute that this decision was critical to the approval of the IVA.

In this application ABAL challenge the approval under s 262 of the Insolvency Act 1986 ("the 1986 Act") on the grounds that there has been a material irregularity by Mr Maxwell as Chairman and seek an order under s 262(4)(a) of the 1986 Act that the approval be revoked.

ABAL contends that Mr Maxwell misunderstood rules 5.21 and 5.22 of the Insolvency Rules 1986 ("the 1986 Rules"). As this was a liquidated claim there was no power to value it at £1 under r 5.21(3). The relevant procedure was that prescribed by r 5.22(2) and (4). Mr Maxwell should either have admitted the claim, rejected it in whole or part or marked it as objected to and allowed a vote. In the circumstances of this case it would have been wrong for Mr Maxwell to have rejected the claim.

Mr Maxwell does not accept this analysis. He does not accept that he confused his powers under rules 5.21 and 5.22 of the 1986 Rules. He took the view that he was entitled to reject the claim altogether but valued it at £1 "as a practical measure" to keep ABAL in the loop regarding the IVA. He reviewed the evidence and Mr Curtis's response to the bankruptcy petition and formed the view that the petition debt was disputed on substantial grounds and that the petition was likely to fail.

Mr Curtis's position is summarised in three witness statements he has put before the Court. He asserts that the guarantee is unenforceable either because it was induced by misrepresentation, undue influence or coercion, or because there was a promise to release the guarantee in 2010.

2 The facts

Many of the facts are uncontroversial. I propose to set out the uncontroversial chronology before looking at the areas where there are disputes.

Uncontroversial Chronology

At all material times Mr Curtis was a director of Agricultural Contract and Marketing Ltd ("ACMC") whose business included the rearing of pigs.

ABAL supplied of pig food to ACMC between September 2007 and April 2015. On 14 September 2007 Mr Curtis signed a guarantee of ACMC's liabilities to ABAL.

ACMC is insolvent and entered administration on 27 April 2015. Mr Maxwell was one of the Administrators. As at that date ACMC owed ABAL £476,042.81 in respect of pig food supplied between 12 January 2015 and 6 May 2015. There is also a comparatively small claim for contractual and statutory interest/compensation.

On 7 May 2015 ABAL's solicitors signed a statutory demand against Mr Curtis in the sum of £479,835.77 being the sum of £476,042.81 referred to above together with contractual interest claimed at £3,692.96 and statutory compensation claimed at £100. The statutory demand was served on Mr Curtis on 12 May 2015. No application was made to set aside the statutory demand.

On 28 May 2015 the Administrators circulated their proposals. The Notes to the Directors Statement of Affairs made express reference to the guarantee in favour of ABAL without suggesting it was invalid.

On 25 June 2015 ABAL presented a bankruptcy petition against Mr Curtis. The petition was served on 9 July 2015 and listed for hearing on 25 August 2015.

Between 8 July 2015 and 22 July 2015 there were telephone conversations and email exchanges between Mr Maxwell (who had been consulted by Mr Curtis) and Mr King, an insolvency practitioner instructed by ABAL. In summary:

On 8 July 2015 Mr Maxwell telephoned Mr King stating that Mr Curtis was proposing an IVA and suggested a meeting.

On 9 July 2015 Mr King responded by rejecting a meeting and asking for an estimated outcome statement. ABAL was not prepared to consider the position without one. Mr Maxwell responded by making a further request for a meeting and indicated that the paperwork would be ready shortly.

On 15 July 2015 Mr Maxwell sent the draft IVA proposal to Mr King. In paragraph 5.6 of the draft proposal there is reference to the guarantee in favour of ABAL and no suggestion that it is challenged.

On 22 July Mr King informed Mr Maxwell that ABAL would not support an IVA and repeated that it could see no reason for a meeting.

On 6 August 2015 there was a telephone conversation between Mr Maxwell and Mr Braathen (the legal executive acting for ABAL). Mr Braathen's file note includes:

"T I from Bob Maxwell - asserts his client has no recollection of signing the PG in favour of [ABAL] …"

According to Mr Braathen there was no suggestion at that time that the guarantee was challenged on any other basis. If there had been he would have noted it in the file note.

On the same day, the 6 August 2015 Mr Curtis made an application under s 252(1) of the 1986 Act for an interim order on the ground that he intended to make a proposal for an IVA. Mr Curtis's witness statement exhibited the draft proposal.

On 20 August 2015 Gosschalks, the solicitors then acting for Mr Curtis wrote to Blaser Mills who were acting for ABAL enclosing a copy of application for the interim order. The letter alleged that there was a dispute between the parties because:

…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).

On 25 August 2015 D J Wildsmith made an interim order for a period of 6 weeks.

On 7 September 2015 Mr Curtis sent a long letter to Mr Yiend, the CEO of ABAL. In the letter Mr Curtis described the circumstances in which he entered into the personal guarantee without mentioning the conversation in 2007. Instead he suggested that after the refinancing in 2010 he requested that the personal guarantee be rescinded and was assured that it would be.

The actual proposal for the IVA was signed by Mr Curtis on 25 September 2015 and sent to creditors shortly afterwards. There are a number of differences between the draft proposal and the actual proposal. For present purposes it is only necessary to refer to three:

Paragraph 5.6 which sets out the guarantees signed by Mr Curtis no longer mentions the guarantee in favour of ABAL.

Paragraph 6.6 which refers to the level of unsecured creditors refers to ABAL's claim as "disputed by [Mr Curtis] and is included at £1 for the purposes of the estimated outcome statement.

The estimated Statement of Affairs which values the guarantee in favour of ABAL at £1.

On 28 September 2015 Mr Maxwell submitted a report to the Court under s 256A(3) the 1986 Act. In it he described the proposal as "a worthwhile proposal as an alternative to bankruptcy".

On 30 September 2015 Mr Curtis filed a witness statement in opposition to the bankruptcy petition in which he sought to challenge the validity of the guarantee. It will be necessary to refer to this in more detail later in this judgment.

On 9 October 2015 DJ Neave extended the interim order until 9 December in order to enable the creditors to consider Mr Curtis's IVA proposal.

On 14 October 2015 ABAL filed its evidence in Reply to the witness statement filed by Mr Curtis on 30 September 2015. Mr Maxwell read these statements before the time of the meeting of creditors the following day. Witness statements were filed by Mr Anderson, Mr King, Mr Braathen and Mr Sketcher. It is not necessary to refer to them in detail but it is plain they challenged a number of fundamental matters raised by Mr Curtis in his evidence. Amongst the points taken:

There was a challenge to the assertion that there was any agreement that the personal guarantee would be rescinded [Anderson paragraphs 8 and 21]

There was an assertion that Mr Curtis referred to the guarantee at the meeting on 26 April 2012 [Anderson paragraph 21, Sketcher paragraph 8]

Attention was drawn to the fact there was no challenge to ABAL's claim until the letter of 20 August 2015 and that in the draft proposal it had not been challenged.

The meeting of creditors took place on 15 October 2015. The only persons present were Mr Maxwell, Mr Lockwood (an employee of Begbies Traynor) and Mr Curtis. ABAL submitted a proxy and claim form signed by Mr Anderson. The Claim was in the sum of £479,835.77 and was said to be evidenced by the Bankruptcy Petition. The Voting Instruction was to vote against approval of the IVA.

Mr Maxwell valued the claim at £1 and recorded the voting figures as follows:

	Creditor	Amount
For	Rebuilding Society Ltd	52,024
	Eric Arthur Broock	166,000
Against	Ratesetter	48,495
	AB Agri Ltd	1

In the result the IVA was approved.

As already noted ABAL challenges the approval and invite the Court to revoke it.

The Guarantee

It is not in dispute that ABAL commenced trading with ACMC in 2007. It is equally not in dispute that at that time ACMC was experiencing cash flow problems and unable to negotiate further credit with its bankers.

In paragraph 6 of his witness statement of 30 September 2015 Mr Curtis said:

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.

In paragraph 7 Mr Curtis said that ACMC renegotiated its banking in 2010 and improved its liquidity.

In paragraph 8 he said that he telephoned ABAL's offices and requested that, as per the agreement the PG would be rescinded and not be relied on in the future. He was assured that it would be rescinded and not be relied on in the future. He could not remember who he spoke to.

In his second witness statement dated 8 March 2016 Mr Curtis repeated much of the material in his first witness statement. He also suggested in paragraph 21 that there might be a defence on the basis of economic duress or undue influence given the pressure on him at the time of giving the guarantee.

It is to be noted that terms alleged by Mr Curtis are inconsistent with the terms of the guarantee itself. In particular clause 2.1 provides that the guarantee is not discharged by time or other indulgence waiver or any other concession by ABAL. Clause 2.2.2 provides that it is a continuing guarantee and remains in full force until the indebtedness of ACMC is discharged in full.

When he gave oral evidence Mr Curtis changed his position from that stated in his witness statements. He started by amending paragraph 8 of his witness statement (which had referred to the agreement to rescind the guarantee). My note of his revised evidence reads:

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^[1] 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.

When I sought to clarify this in the course of his cross-examination Mr Curtis confirmed that this was the only conversation and that the "powers that be" never got back to him to confirm that the guarantee had been revoked.

He also modified his evidence relating to the signing of the guarantee in 2007. He said that he had no real recollection of signing the guarantee. He said that he had no conversation with anyone from ABAL. He was sent the guarantee either in the post or by email. He said that there was a conversation between a representative of ABAL and his son Matthew Curtis. Matthew Curtis was told that

"unless your father signs the guarantee we won't do business with you".

He signed the guarantee as otherwise he would not have received animal food the following week.

He agreed that he understood what the guarantee was. He was a relatively experienced businessman, being the controlling director of ACMC and having invested in excess of £5 million into it.

He assumed that when ACMC refinanced its liabilities and the trading account with ABAL returned to normal limits the guarantee would be released. He said that this was

"implied to me by Matthew – I had no reason to doubt it".

The Account

It is ABAL's case that the ACMC's trading position was always precarious. Reference to the accounts shows that it was loss making in 2007, 2010 and 2011. ABAL's trading terms required payment of invoices within 35 days. This was not adhered to and there were numerous request to pay by instalments.

Mr Curtis did not dispute that for most of the period of trading ACMC did not pay ABAL on the due date and there accumulated substantial arrears. He also accepted that at the meeting in April 2012 there were arrears of at least £½ million. He accepted that the time came when ABAL ceased to extend further credit and ACMC paid for each delivery when it arrived.

Mr Curtis, however, asserted that ACMC refinanced its obligations to its bankers in 2010. Following that refinance he suggested that there was a period of time when ACMC paid ABAL at least substantially in accordance with its trading terms. Mr Anderson the Group Credit Manager for ABAL did not accept this. He suggested that ACMC were always in arrears. He also said that he would not have agreed to discharge the guarantee. He would have taken into account the poor payment record between 2007 and 2010 and would have insisted that guarantee remained in place.

The meeting on 26 April 2012

It is not in dispute that there was a meeting in April 2012 attended by a number of personnel from both ABAL and ACMC to discuss the outstanding account.

There is a dispute as to whether Mr Curtis's guarantee was mentioned at the meeting. In the witness statements representatives present from ABAL suggested that Mr Curtis referred to the guarantee whereas representatives from ACMC suggest it was not mentioned. The only file note of the meeting makes no reference to the guarantee. It does however confirm that [ABAL] want £43k by Monday.

In oral evidence this dispute was in fact much narrower than appeared from the witness statements.

Mr Anderson said that he opened the meeting by saying that they were there to discuss the overdue debt. Although ACMC had been paying cash with order for some time there had been no attempt to reduce the overdue balance. Mr Curtis's response was that ACMC was committed to reducing the debt over a period of time dependent on market conditions. ABAL could take some comfort in the fact that he had put his personal assets on the line as he had already committed a personal guarantee.

Mr Curtis accepted that the meeting started in that way. He suggested that the only reference to his personal liability was in respect of future debts. He said that collectively there were assets that would cover the debt. He expressly referred to future debt.

Mr Hodgson (ACMC's Company Secretary) agreed that Mr Curtis gave details of his assets. It was his view that they were to cover the current balance and the trading going forward. He did not think the word "guarantee" was mentioned.

Mr Maxwell's evidence

I have summarised Mr Maxwell's position in the Introduction. His evidence is contained in a witness statement dated 1 December 2015. In paragraph 14 he says that he exercised his discretion to reject the claim but admitted it for £1 for the practical reasons he set out.

In paragraphs 17 – 19 he summarised the allegations in Mr Curtis's first witness statement and asserted that Mr Curtis had told him that he was of the view that ABAL had no genuine claim against him and proposed that ABAL should not be included in the list of anticipated creditors.

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.

In paragraph 21 he said that the evidence filed in the petition on 14 October 2015 made no difference to his view.

In paragraphs 22 to 24 Mr Maxwell said that he was well aware of the difference between rules 5.21 and 5.22 of the 1986 Rules. He said that his decision based on the evidence available was that "the Proof ought to be rejected as I did not doubt that the petition would be dismissed and the claim would fail"

He used his discretion under rule 5.22(1) and (2) to allow the claim for £1 simply as a practical measure to keep ABAL in the loop regarding the IVA.

In cross-examination Mr Maxwell repeated much of this evidence. He said that Mr Curtis had always made it clear that he challenged the liability under the guarantee. He said that he had been aware that ABAL would oppose the IVA before Mr King had told him that the IVA would be opposed before the email of 22 July 2015. He also suggested that in the phone call of 6 August 2015 he told Mr Braathen that Mr Curtis alleged that the guarantee had been withdrawn and/or was unenforceable. He did not accept a suggestion that the challenge to the guarantee only arose shortly before the letter of 20 August 2015. He accepted, however, that he did not have his own file note of the conversation.

3 The law

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

Rule 5.21

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.

Rule 5.22

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.

Authorities

The rules

The effect of these provisions has been the subject of a number of judicial decisions. To my mind the most useful review is in the decision of Lewison J in Power v Petrus Estates [2008] EWHC 2607 (Ch). The relevant part of the judgment is paragraphs 11 – 17. As both Mr Maxwell and Mr Curtis are acting as litigants in person I propose to set them out in full.

The general scheme underlying the operation of this rule is the same as that underlying rule 5.22 in relation to personal insolvency (formerly rule 5.17). In relation to that rule Harman J said in Re a Debtor (No 222 of 1990) ex p the Bank of Ireland [1992] BCLC 137, 144:

"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."

If the chairman decides to mark the claim as "objected to", he must allow the alleged creditor to vote, but the vote is subject to being subsequently declared invalid if the objection to the proof is sustained. This is expressly provided for in rule 4. 70 (3) itself. It is not exactly as Harman J suggested; namely that the claim is admitted but marked as objected to. Rather the claim is objected to but the creditor is allowed to vote. This gives rise to a slight mismatch between the chairman's powers and the right of appeal. What is contemplated is a quick decision by the chairman, with the possibility of a more leisurely examination of the objection to the proof by the court. Yet the only right of appeal is that contained in rule 4.70 (2) which allows an appeal against the chairman's decision. Even if the objection to the proof is subsequently sustained, with the result that that creditor's vote is invalidated, the chairman's decision may have been entirely correct. It is an oddity if an appeal succeeds against an entirely correct decision, but that seems to be inherent in the way that the rule is framed. Mr Thompson, appearing for Petrus, says that rule 4.70 (2) can be read as eliminating any mismatch. The chairman only makes a decision if he decides to admit or reject a proof under rule 4.70 (1). If he acts under rule 4.70 (3) he does not decide anything: he merely records an objection and doubt. That is why rule 4.70 (4) is itself split into two parts: the first part dealing with the reversal or variation of the chairman's decision (corresponding to a decision under rule 4.70 (1)); and the second dealing with invalidating a creditor's vote (corresponding with action under rule 4.70 (3)). There is undoubtedly force in this submission, although rule 4.70 (2) only permits an appeal against the chairman's decision. If his decision does not encompass action under rule 4.70 (3), it is difficult to see how an appeal can be mounted at all. No one argued for that conclusion.

Be that as it may, rule 4.70 (2) is the mechanism by which an objection to a proof may be tested. It is important to emphasise, however, that what is in issue at this stage is the validity of the proof for the purposes of voting; not the validity of the proof for the purposes of participating in a dividend. A subsequent meeting (or the liquidator) may take a different view of the validity of a proof.

Rule 4.70 (4) contemplates that on an appeal, the chairman's decision may be reversed or varied; or that a creditor's vote may be declared invalid. It is inherent in the scheme of the rule, as described by Harman J, that a creditor's vote may be declared invalid subsequent to the meeting without impugning the correctness of the chairman's decision at the time. This is what happened in Re a company (No 004539 of 1993) [1995] 1 BCLC 459 ("the Chelsea FC case") in which Blackburne J disallowed a creditor's vote while saying that in allowing the vote but marking the proof as objected to the chairman had acted "perfectly correctly". I think, therefore, that with all respect Gloster J was in error in Re Shruth Ltd [2006] 1 BCLC 294, 302 when she suggested that the question on appeal was whether the exercise of the chairman's discretion "was so flawed as to entitle this court to set aside his discretionary decision."

The fact that the court undertakes a more leisurely scrutiny of the claim of a creditor than is possible for the chairman in the course of a meeting also explains why, on an appeal against the chairman's decision, the court is not confined to the material that was before the chairman. As Blackburne J put it in the Chelsea FC case at 466:

"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."

In an appropriate case resolution of the issue may depend upon oral evidence and cross-examination: Re Assico Engineering Ltd [2002] BCC 481. It is, however, important to be clear on what "the issue" is. As Blackburne J pointed out, the issue is whether, on balance, the claim against the company is established, and, if so, in what amount. Necessarily, the question whether the claim against the company is established will be judged as at the date of the meeting at which the chairman made the impugned decision. Thus in Re Shruth Ltd [2006] 1 BCLC 294, 302 Gloster J was, in my respectful opinion, quite right in saying:

"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) [1995] 1 BCLC 459 at 466 and per Neuberger J in Re Philip Alexander Securities & Futures Ltd [1999] 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."

In my judgment therefore, events subsequent to the meeting will not lead to an appeal against the chairman's decision being allowed.

Material Irregularity

As noted above Lewison J referred with approval to the decision of Harman J in Re a Debtor (No 222 of 1990). At p145 f- j Harman J examined the relationship between s 262(1) and what is now r 5.22. He held that

An irregularity is the proper description of a wrong decision at a meeting to exclude or to prohibit a vote.

Costs

In Re a Debtor (No 222 of 1990) No 2 [1993] BCLC 233 Harman J set out the principles in relation to a claim for costs against the nominee in this way:

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) [1990] 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: