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Re a Debtor (No 2021 of 1995) Re a Debtor (No 2021 of 1995), ex parte Inland Revenue Commissioners, The Debtor; Re a Debtor (No 2022 of 1995), ex parte Inland Revenue Commissioners, the Debtor

Court: Chancery Division

Date: 20 November 1995

Coram: Mr Justice Laddie

References: [1996] 2 All ER 345

1. This is an appeal from a decision of District Judge White whereby he dismissed the Inland Revenue's applications to revoke approval given at a creditors' meeting in relation to individual voluntary arrangements (IVAs) to be entered into pursuant to Pt VIII of the Insolvency Act 1986 under s 262(1)(b) of the Act, and r 5.17 of the Insolvency Rules 1986, SI 1986/1925. The background facts are as follows. Mr White was chairman of the meeting on the afternoon of Monday, 12 June 1995, pursuant to s 257 of the Act, at which the debtors' creditors were due to vote on their proposals for voluntary arrangements. On Friday, 9 June the commissioners sent by first class post a completed form of proxy directing Mr White to cast their votes against the debtors' proposals. The form should have arrived in normal course of post in good time for the Monday meeting. It is not in dispute that it actually arrived on the Tuesday morning. However, on the morning of the creditors' meeting the commissioners transmitted to Mr White's office by fax the completed form of proxy. On receipt Mr White apparently telephoned the Inland Revenue to attempt to verify the contents of the fax. Having been unable to speak to the relevant officer prior to the meeting, he declined to act on the faxed voting instructions. In so doing he believed himself to be acting in accordance with guidance issued by the Department of Trade and Industry. On 7 July the commissioners issued the originating applications herein seeking reversal of Mr White's decision to refuse to admit their debt for voting purposes, revocation of the approvals of the debtors' arrangements, and an order for costs against Mr White.
2. The sole issue before me is the validity of a faxed proxy in the context of creditors' meetings under the relevant insolvency rules. The questions this gives rise to can be conveniently stated as follows. (1) Should the faxed proxy of the Inland Revenue have been accepted? (2) If so, what consequences should now follow? The decision of the learned district judge was, first, that a faxed proxy was not 'signed' as required by the 1986 rules and particularly r 8.2(3). Secondly, that the original proxy had to be available at the meeting and a copy would not do. The applicant submits that the faxed proxy was signed within the meaning of the rules and, further or alternatively, that a copy of such a signed proxy available at the meeting meets the requirements of the 1986 rules.
3. Before me Mr Davis-White appeared for the commissioners. Mr White was represented by Mr Gledhill. He made it clear to me that Mr White did not consider it appropriate for him to support or resist the relief sought by the commissioners against the debtors. That was also the stance he had adopted before the district judge. He said that he is, however, entitled on this appeal, as at first instance, to protect his own interests and specifically to explain and justify to the court his decision to decline to act in accordance with the fax sent to him by the commissioners, to resist any application for costs against him, and to give the court such other assistance as it may require in disposing of these proceedings. In fact before me Mr Gledhill argued firmly in support of the district judge's judgment, and he was entitled so to do.
4. The debtors were represented before me by Mr Counsell, but he took no part in these proceedings, his interest only being to address me on the question of relief in the event of the appeal being successful.
5. The parties agreed that there was virtually no direct authority on the point raised in this appeal. In Re Cranley Mansions Ltd [1994] 1 WLR 1610 Ferris J referred to the arguments presented to him on the point, but came to the view that it was neither necessary nor wise for him to express a view given his conclusion on other matters. There have apparently been at least two decisions at county court level where faxed proxies have been ruled to be in order. The first was Re Sheehan (25 May 1994, unreported) a decision of Judge Griffiths in the Swansea County Court. The second was Re Phillipson (13 September 1993, unreported) a decision of Judge Hunt in the Harrogate County Court. A brief note of these cases is set out in an article by Adam Goodison and John Briggs `The validity of faxed proxies' (1994) 7 Insolvency Intelligence 57, reflected in the current edition of Muir Hunter on Personal Insolvency pp 7022/ 1, para 7-028, the commentary on r 5.14. The parties agreed that the matter must therefore be approached as one of principle and construction of the Act and rules.
6. First I deal with the scheme of the 1986 legislation. It is as follows. Sections 252 to 255 of the Act deal with interim orders, which in effect provide a breathing a space for a debtor while his proposals for voluntary arrangement are under consideration. Interim orders were! made in this case. Once an interim order is made, the nominee is to report to the court on the debtor's proposals (s 256) and this also was done in this case. Where the nominee has recommended the convening of a creditors' meeting, he shall convene the same as proposed in his, report unless the court otherwise orders, and that is according to s 257 of the Act.
7. In this case the notice was dated 25 May 1995. The proposals are then put to a meeting of creditors, who may, subject to certain limits, approve the same as originally put forward, or with modifications (s 258). At such a meeting, the resolution approving the proposal or modification must be passed by a majority in excess of three-quarters in value of those creditors present in person or proxy and voting on the resolution. Those voting against must not include more than half in value of the creditors. For these purposes a special definition of `creditors' is adopted.
8. If approved, the proposals as approved take effect as if made at the meeting and by persons who had notice of the meeting and were entitled to vote as if he were a party to the arrangement (s 260). They can have the effect of restricting and extinguishing in part the debts owed to the creditors. Certain persons, including creditors, are given locus to apply to the court on the grounds that the arrangements as approved unfairly prejudice the interests of a creditor or there has been some material irregularity at the meeting. If the court., upholds the complaint, it can revoke or suspend approval and/or give a direction for a further meeting to reconsider the original proposal or consider any revised proposals (see s262).
9. Part 8 of the 1986 rules deals with the question of proxies which may be used at creditors' meetings. It should be noted that those provisions apply not just to creditors' meetings for IVAs but also to company voluntary arrangements, f administration, administrative receivers, liquidations and bankruptcy. The relevant rules are as follows:

`8.1-(1) For the purposes of the Rules, a proxy is an authority given by a person ("the principal") to another person ("the proxy-holder") to attend a meeting and speak and vote as his representative ...

8.2 ... (2) No form of proxy shall be used at any meeting except that which is sent out with the notice summoning the meeting, or a substantially similar form.

(3) A form of proxy shall be signed by the principal, or by some person authorised by him (either generally or with reference to a particular meeting). If the form is signed by a person other than the principal, the nature of the person's authority shall be stated ...

8.4--(1) Subject as follows, proxies used for voting at any meeting shall be retained by the chairman of the meeting.

(2) The chairman shall deliver the proxies, forthwith after the meeting, to the responsible insolvency practitioner (where that is someone other than himself).'

10. Mr Gledhill submitted that it is necessarily implicit in r 8.4 that for the purposes of the rules at least the presence of a signed proxy form is a prerequisite for voting. This is consistent with r 8.5, which provides that creditors and others in attendance have an entitlement to inspect proxies and associated documents at the meeting. It is not permissible for a proxy holder to be admitted to vote at a a meeting subject to subsequent production of documentation he ought to have brought with him or previously lodged with the chairman. Creditors' meetings are the sovereign body of voluntary arrangements. Their outcome and the substance of debtor's proposal is often significantly moulded by individual creditors' perceptions at the meeting of whether or not their vote is capable of being decisive. Amendment to the debtor's proposals may be tabled. However, this does not resolve the question which I have to address, namely whether the faxed document received by Mr White was, in the words of r 8.2(3), a form of proxy `signed by the principal'.
11. Mr Davis-White presented me with an illuminating history of the use of proxies by creditors under the Bankruptcy Act 1914, the Companies Act 1929 and the Companies Act 1948. He said that the development of this legislation showed a progressive move away from strict formalities. No doubt this is so but I think it is necessary to look at the 1986 Act and rules as an entirely new code. The policy underlying this new code is that referred to in the report of the review committee on Insolvency Law and Practice (Cmnd 8558 (1982), chairman Sir Kenneth Cork) para 917, where the following was said:
12. `We consider it unsatisfactory that creditors, whose experience would be invaluable to the liquidator or trustee, are discouraged from participating in the administration of an insolvent estate. We are in no doubt that the machinery should be such as to allow, and indeed encourage, those creditors who have a genuine interest to involve themselves in all types of insolvent administration.'
13. However, that also is of no assistance in resolving the issue here. It is clear that compliance with some formality is required. In particular the formality of signing the proxy has not been removed even if the other formalities have.
14. There being no direct authority on the point, I must approach this issue from first principles. Although the rules stipulate that the form of proxy must be signed, it was, I believe, common ground that `signing' in the context could not be restricted to the narrow concept of marking a substrate manually by direct use of a pen or similar writing instrument. It was conceded that a proxy form could be `signed' by use (by the creditor or his agent) of a stamp. Similarly, if a form had a signature impressed on it by a printing machine in the way that share dividend cheques frequently are signed by company secretaries, the form can be said to be `signed'.
15. This approach has been followed in other fields. Mr Davis-White drew my attention to Jenkins v Gaisford, Re Jenkins (decd)'s goods (1863) 3 Sw & Tr 93, 164 ER 1208. That case concerned the validity of a codicil to a will. Section 9 of the Wills Act 1837 in force at the time of that decision required the will or any codicil to be signed at the end by the testator. Towards the end of his life the testator became infirm and had difficulty in writing or signing his name. He had an engraving of his signature made and this was used under his direction by his agent, Mr Atkins, to sign documents, including the codicil in issue. In coming to the conclusion that the codicil was duly executed, the court said (3 Sw & Tr 93 at 96, 164 ER 1208 at 1209):

`It has been decided that a testator sufficiently signs by making his mark, and I think it was rightly contended that the word "signed" in that section must have the same meaning whether the signature is made by the testator himself, or by some other person in his presence or by his direction, and therefore a mark made by some other person under such circumstances must suffice. Now, whether the mark is made by a pen or by some other instrument cannot make any difference, neither can it in reason make a difference that a fac-simile of the whole name was impressed on the will instead of ,a mere mark or X. The mark made by the instrument or stamp used was intended to stand for and represent the signature of the testator. In the case where it was held that sealing was not signing, the seals were not affixed by way of signature.'
16. My attention was also drawn to Goodman v J Eban Ltd [ 1954] 1 All ER 763, [1954] 1 QB 550 in which the Court of Appeal had to consider whether a bill on the bottom of which a solicitor had placed a copy of his signature by use of a rubber stamp had been signed in accordance with the provisions of s 65 of the Solicitors Act 1932. By a majority (Denning LJ dissenting) the court held that it had. Evershed MR stated ([1954] 1 All ER 763 at 765, [1954] 1 QB 550 at 555):

`I confess that, if the matter were res integra I should be disposed to think, as a matter of common sense and of the ordinary use of language, that when Parliament required that the bill or letter should be "signed" by the solicitor, it was intended that the solicitor should personally "sign" the bill or letter in the ordinary way by writing his name (or, where appropriate, the name of his firm) in his own hand with a pen or pencil.'
17. However, Evershed MR then referred to a number of cases dealing with a variety of situations in which signing was required by statute, including Jenkins v Gaisford, and continued ([1954] 1 All ER 763 at 766, [1954] 1 QB 550 at 557):

`In my judgment, therefore, it must be taken as established that where an Act of Parliament requires that a document be "signed" by a person, prima facie the requirement of the Act is satisfied if the person himself places on the document an engraved representation of his signature by means of a rubber stamp. Indeed, if reference is made to the SHORTER OXFORD ENGLISH DICTIONARY ... it will be found that the primary meaning of the verb "to sign" is not confined to actual writing with a pen or pencil, but appears to have related to marking with the sign of the cross. The later meanings include: "(ii) To place some distinguishing mark upon (a thing or person) ... (iv) to attest or confirm by adding one's signature; to affix one's name to (a document, etc.).' It follows, I think, that the essential requirement of signing is the affixing, either by writing with a pen or pencil or by otherwise impressing on the document one's name or "signature" so as personally to authenticate the document. If this view be right, then, since the formula used in the Solicitors Act, 1932, does not differ from that in the Wills Act, 1837, s. 9, and the Statute of Frauds, s. 4, there seems no reason why a different requirement is imposed from that in the other cases-which is no more than the personal authentication of the individual "signing".'
18. Romer LJ also expressed some initial reservations but, having considered the function which a signature was to perform, agreed with the views of Evershed MR. In particular he cited with approval the following definition from Stroud's Judicial Dictionary:

'Signed; signature. (1) Speaking generally, a signature is the writing, or otherwise affixing, a person's name, or a mark to represent his name, by himself or by his authority with the intention of authenticating a document as being that of, or as binding on, the person whose name or mark is so written or affixed.'
19. The concession made by Mr Gledhill as to signing by stamp or printing machine was, I believe, correct. Furthermore, it was not in dispute that the stamp or printing machine could be operated by an agent (see in particular r.8.2(3)). The requirement of signing in r 8.2(3) is to provide some measure of authentication of the proxy form. Of course even if the rule were strictly limited to signature by direct manual marking of the form, the authentication is not perfect. Signatures are not difficult to forge. Furthermore, in the overwhelming majority of cases in which the chairman of a creditors' meeting receives a proxy form, the form will bear a signature which he does not recognise and may well be illegible. Authenticity could only be enhanced if the creditor carrying suitable identification signed the form in person in the presence of the chairman. Even there the possibility of deception exists.
20. It seems to me that the function of the signature is to indicate, but not necessarily prove, that the document has been considered personally by the creditor and is approved of by him. It may be said that a qualifying proxy form consists of two ingredients. First, it contains the information required to identify the creditor and his voting instructions and, secondly, the signature performing the function set out above. When the chairman receives a proxy form bearing what purports to be a signature, he is entitled to treat it as authentic unless there are surrounding circumstances which indicate otherwise. Once it is accepted that the close physical linkage of hand, pen and paper is not necessary for the form to be signed, it is difficult to see why some forms of non-human agency for impressing the mark on the paper should be acceptable while others are not. For example, it is possible to instruct a printing machine to print a signature by electronic signal sent over a network or via a modem. Similarly, it is now possible with standard personal computer equipment and readily available popular word processing software to compose, say, a letter on a computer screen, incorporate within it the author's signature which has been scanned into the computer and is stored in electronic form, and to send the whole document including the signature by fax modem to a remote fax. The fax received at the remote station may well be the only hard copy of the document. It seems to me that such a document has been `signed' by the author.
21. With these considerations in mind, I have come to the conclusion that a proxy form is signed for the purposes of r 8.2(3) if it bears upon it some distinctive or personal marking which has been placed there by, or with the authority of, the creditor. When a creditor faxes a proxy form to the chairman of a creditors' meeting he transmits two things at the same time, the contents of the form and the signature applied to it. The receiving fax is in effect instructed by the transmitting creditor to reproduce his signature on the proxy form which is itself being created at the receiving station. It follows that, in my view, the received fax is a proxy form signed by the principal or by someone authorised by him. The view which I have reached appears to me to be consistent with the realities of modern technology. If it is legitimate to send by post a proxy form signed with a rubber stamp, why should it not be at least as authentic to send the form by fax?
22. The facts of the present case illustrates the point well. Here the proxy form was sent both by post and by fax. Such being the nature of postal delivery, the creditor could not be certain whether his proxy was received at all or on time. On the other hand, when the fax is transmitted he knows that it has been received because, first, he obtains an answerback code and, secondly, an activity report is normally printed out. From the chairman's point of view, there is nothing about a received fax which puts him in a worse position to detect forgeries than when he receives through the post or by hand delivery a document signed by hand by a person whose signature he has never seen before or one signed by stamping. The reality is that fax transmission is likely to be a more reliable and certainly is a more speedy method of communication than post. It would be a pity if r 8.3(3) required creditors to convey their views to the chairman by the older, slower and less reliable form of communication.
23. Finally, there are three matters I should mention. First, Mr Gledhill argued that if the Inland Revenue was correct in its view, at least two signed proxy forms would exist, namely one fed into the fax by the creditor and the one received by the chairman of the meeting. He says that that is not possible because r 8.1(3) stipulates that `only one proxy may be given by a person for any one meeting'. I do not accept this argument. What the rule is referring to is the `proxy', referred to in r 8.1(1) ie the authority given by the creditor to the proxy holder. Only one authority may be given for the meeting. The proxy form evidences or confirms that authority. Whether there is more than one form is irrelevant.
24. Secondly, both counsel invited me to make clear, as I now do, that the views I express as to whether a fax document bearing a fax signature is `signed' has only been considered in this case in relation to Pt 8 of the Insolvency Rules 1986. Different considerations may apply to faxed documents in relation to other legislation.
25. Thirdly, I have only been concerned here with an IVA. Part 8 of the rules applies to proxies used in other creditors' meetings as well. Mr Davis-White submitted that it was possible that r 8.2(3) might mean different things for different proceedings. There is no need for me to express a view on that.
26. Appeal allowed.

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