The court was asked: ‘whether or not the appellants were released from their obligation under a covenant to indemnify the respondents against claims arising under a lease by reason of the terms of an individual voluntary arrangement made under part VIII of the Insolvency Act 1986 by a co-obligee who was liable, jointly with the appellants, under the same covenant.’
Held: There is no rule of law that one joint debtor (not joint and several) may not be released from debt by the individual voluntary arrangement of another.
Chadwick LJ observed that: ‘The statutory hypothesis is that the person who had notice of and was entitled to vote at the meeting is party to an arrangement to which he has given his consent . . Unlike the earlier legislation, section 260(2) of the Act of 1986 does not purport, directly, to impose the arrangement on a dissenting creditor whether or not he has agreed to its terms; rather, he is bound by the arrangements as the result of a statutory hypothesis. The statutory hypothesis requires him to be treated as if he had consented to the arrangement.’ Accordingly, questions as to the effect of the arrangement on sureties . . were to be answered by treating the arrangement as consensual; that is to say, by construing its terms as if they were the terms of a consensual agreement between the debtor and all those creditors who, under the statutory hypothesis, must be treated as being consenting parties.’
Chadwick, Kennedy, Ward LJJ
Times 31-Mar-1998, Gazette 13-May-1998,  Ch 117,  EWCA Civ 483,  2 All ER 649
Insolvency Act 1986 260(2)
England and Wales
Cited – Deanplan Limited v Mahmoud 1992
The court considered whether a release of one of joint contractors released the other contractors. He said: ‘An original lessee or intermediate assignee of the lease who had given a direct covenant to pay rent and observe the covenant is released . .
Cited – RA Securities v Mercantile Credit 1995
The effect of an individual voluntary arrangement was not such as to release solvent co-debtors under the rule of law that the release of one of two or more joint debtors has the effect of releasing the other or others. . .
Applied – Watts v Aldington, Tolstoy v Aldington CA 15-Dec-1993
There had been a settlement of proceedings for libel brought by Lord Aldington against Mr Nigel Watts and Count Nikolai Tolstoy. Lord Aldington had obtained judgment for andpound;1.5 million in damages against both defendants following a trial. . .
Cited – Chelsea Building Society v Nash CA 19-Oct-2010
The defendant customer of the Society appealed against an order as to the sum due under a joint mortgage. She said that the ‘full and final settlement’ of the debt with Ms Nash’s former husband and joint mortgagor had the effect of releasing Ms Nash . .
Cited – Wright and Another (Liquidators of SHB Realisations Ltd) v The Prudential Assurance Company Ltd ChD 6-Mar-2018
IVA is a special form of contract
Liquidators asked the court whether sums sought by the insolvent company’s landlords were payable and or provable. Under an IVA, the copany had been paying reduced rents, but the arrangement document provided that the full rents would be restored on . .
These lists may be incomplete.
Updated: 15 March 2021; Ref: scu.443849