The chairman of the creditors meeting had marked the proof of Petrus as objected to but had allowed Petrus to resulting in the appointment of the joint liquidators. The claimant now challenged this saying that had Petrus not been allowed tp vote he would have been appointed.
Held: Lewison J set out the scheme: ‘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) . . 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.’
Judges:
Lewison J
Citations:
[2008] EWHC 2607 (Ch), [2009] 1 BCLC 250, [2009] BPIR 141
Links:
Statutes:
Insolvency Act 1986 98, Insolvency Rules 1986 4.70
Cited by:
Cited – AB Agri Ltd v Curtis and Others Misc 22-Jul-2016
(Leeds County Court) The creditor sought to have a proof admitted for pounds 479k, but the chair admitted it only for pounds 1.00, and the IVA proposal was accepted again the wishes of the creditor. The creditor said that the IP had misunderstood . .
Lists of cited by and citing cases may be incomplete.
Insolvency
Updated: 19 July 2022; Ref: scu.277396