Insolvency Team ' Recent Insolvency Case Update

• Published date: 27 December 2021
• Subject Matter: Corporate/Commercial Law, Insolvency/Bankruptcy/Re-structuring, Corporate and Company Law, Directors and Officers, Insolvency/Bankruptcy
• Law Firm: Gatehouse Chambers
• Author: Alaric Watson, Aileen McErlean, Simon Kerry, Ryan Hocking and Rob Hammond

These case summaries first appeared in LexisNexis' Insolvency Case Alerter. They represent some of the more interesting insolvency decisions to have been published recently.

This summary covers:

1. Richmondshire District Council v (1) Dealmaster Ltd (2) Penn [2021] EWHC 2892 (Ch)
2. Edwards v Tailby [2021] EWHC 2819 (Ch)
3. Re CGL Realisations Ltd [2021] EWHC 2395 (Ch)
4. Edwards v Tailby [2021] EWHC 2819 (Ch)
5. Serene Construction Ltd v Salata and Associates Ltd (formerly Salata & Co) [2021] EWHC 2433 (Ch)
6. Re CGL Realisations Ltd [2021] EWHC 2395 (Ch)
7. Mitchell v Al Jaber [2021] EWCA Civ 1190

Richmondshire District Council v (1) Dealmaster Ltd (2) Penn [2021] EWHC 2892 (Ch)

Facts

The First Respondent ('R1') entered a company voluntary arrangement (CVA). The Second Respondent ('R2') was nominee and chairman of the qualifying decision procedure of creditors to approve the CVA. The Applicant ('A') applied under s 6 of the Insolvency Act 1986 and/or r 15.35 of the Insolvency (England and Wales) Rules 2016 to revoke or suspend approval of the CVA. R1's parent company ('Sterling') borrowed from a bank, which had cross-guarantees from R1 secured by charges. Sterling repaid the loan, then invoiced R1.

A alleged that:

• The CVA unfairly prejudiced it, or that there was material irregularity in its approval.
• R2 should not have admitted a significant creditor of R1 ('Hightide') to vote because its debt was not sufficiently proved.
• The CVA would not have been approved without the vote of that creditor, which was not a party to the application.
• The proposal wrongly stated the dividend in the CVA would be higher than in liquidation:
• R1's real property, which was excluded from the proposal was undervalued in the proposal.
• R1's debt to Sterling was inflated and it was unfair for Sterling not to be bound by the CVA.

Held

Application dismissed.

'Unfair prejudice' concerns the effect of the CVA on relevant creditor(s); 'material irregularity' concerns the procedure for the CVA's approval.

The debt to Hightide (which ought to have been a party) was adequately evidenced. A's challenge was a 'fishing expedition'. Hightide being admitted to vote was not a material irregularity. Expert evidence valued the real property more highly. There was no unfair prejudice because valuations are inherently uncertain, the valuation in the proposal was genuine and not improper or negligent, the creditors were all treated as one class for this purpose, and a reasonable and honest person in A's position might have approved the CVA. There was therefore also no material irregularity.

R1's indebtedness to Sterling was adequately evidenced, and there was no...