© 2024 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Procedure.Tax
For additional search results use Google and enter:
site:procedure.tax [search term]
T6a. Voluntary arrangements
APPROVAL OF VOLUNTARY ARRANGEMENTS
​
Approval of CVA
"(1) This section applies where, under section 3—
(a) a meeting of the company is summoned to consider the proposed voluntary arrangement, and
(b) the company's creditors are asked to decide whether to approve the proposed voluntary arrangement.
(1A) The company and its creditors may approve the proposed voluntary arrangement with or without modifications." (IA 1986, s.4(1) - (1A))
​
"​(1) This section applies to a decision, under section 4, with respect to the approval of a proposed voluntary arrangement.
(2) The decision has effect if, in accordance with the rules—
(a) it has been taken by the meeting of the company summoned under section 3 and by the company's creditors pursuant to that section], or
(b) (subject to any order made under subsection (6) it has been taken by the company's creditors pursuant to that section.
(3) If the decision taken by the company's creditors differs from that taken by the company meeting, a member of the company may apply to the court.
(4) An application under subsection (3) shall not be made after the end of the period of 28 days beginning with—
(a) the day on which the decision was taken by the company's creditors, or
(b) where the decision of the company meeting was taken on a later day, that day.
...
(6) On an application under subsection (3), the court may—
(a) order the decision of the company meeting to have effect instead of the decision of the company's creditors, or
(b) make such other order as it thinks fit." (IA 1986, s.4A)
​
Proposal must respect preferential status of debts
"Subject as follows, neither the company nor its creditors may approve any proposal or modification under which—
(a) any preferential debt of the company is to be paid otherwise than in priority to such of its debts as are not preferential debts,
(aa)any ordinary preferential debt of the company is to be paid otherwise than in priority to any secondary preferential debts that it may have,
(b)a preferential creditor of the company is to be paid an amount in respect of an ordinary preferential debt that bears to that debt a smaller proportion than is borne to another ordinary preferential debt by the amount that is to be paid in respect of that other debt
(c)a preferential creditor of the company is to be paid an amount in respect of a secondary preferential debt that bears to that debt a smaller proportion than is borne to another secondary preferential debt by the amount that is to be paid in respect of that other debt or
(d)in the case of a company which is a relevant financial institution (see section 387A), any non-preferential debt is to be paid otherwise than in accordance with the rules in section 176AZA(2) or (3).
However, such a proposal or modification may be approved with the concurrence of the creditor concerned." (Insolvency Act 1986, s.4(4))
​
PAYE and VAT debts are preferential - see FA 2020, s.98
​
Creditor voting rights
​
"15.31.—(1) Votes are calculated according to the amount of each creditor’s claim—
[...]
(d) in a proposed CVA—
(i) at the date the company went into liquidation where the company is being wound up,
(ii) at the date the company entered into administration (less any payments made to the creditor after that date in respect of the claim) where it is in administration,
(iii) at the beginning of the moratorium where a moratorium has been obtained (less any payments made to the creditor after that date in respect of the claim), or
(iv) where (i) to (iii) do not apply, at the decision date;
(e) in a proposed IVA—
(i) where the debtor is not an undischarged bankrupt—
(aa) at the date of the interim order, where there is an interim order in force,
(bb) otherwise, at the decision date,
(ii) where the debtor is an undischarged bankrupt, at the date of the bankruptcy order." (Insolvency Rules 2016, §15.31)
​
See T4a. Administration
​
- Characterise and quantify debt at date of liquidation, administration etc.
"[52] Accordingly, I am of the view that both the quantification and characterisation of any debt for the purposes of Rules 2.38(4) and (5) and 2.39(1) and (3) are to be effected as at the date the company concerned went into administration rather than the date of the meeting. However, in many cases these conclusions are unlikely to matter even where the apparent value of the debt changes in the intervening period. Although it is clear from Rule 2.38(4) that, in order to qualify a creditor to vote, his debt must have existed at the date the company went into administration, it is well established that, when valuing the debt, one can take into account subsequent events when valuing the debt for the purpose of voting – see re Law Car[18], a case concerned with the liquidation of an insurance company." (HMRC v. Maxwell [2010] EWCA Civ 1379)
​
- Unliquidated tax debt does not become liquidated because HMRC issue assessments after relevant date
"[59] Thus, in my opinion, in respect of all six periods, any corporation tax claimed to be due, over and above the self-assessments, was not a liquidated ascertained sum, until HMRC had issued notices of amendment. However, once such notices were issued, I consider that the sums therein were liquidated and ascertained sums, in the amounts specified in the amendments (albeit subject to the possibility of challenge by appeal for tax purposes and assessment for voting purposes at meetings)[25]. The fact that the sums so specified were subject to appeal and stay applications would not, in my view, undermine that conclusion: to hold otherwise would involve confusing ascertainment with unchallengeability.
[60] Thus, as at the date the Company went into administration, I consider that the sums claimed to be due as corporation tax in respect of the six periods in issue were not liquidated ascertained debts, but they had become so by the date of the Meeting. As they must be characterised for the purposes of Rules 2.38 and 2.39 as at the date of the administration, they fell within Rule 2.38(5). Thus, so far as the issues involving interpretation of the 1986 Rules are concerned, I agree with the conclusions reached by the Judge." (HMRC v. Maxwell [2010] EWCA Civ 1379)
​
- But take account of subsequent events relevant to quantifying at that date
"[54] Accordingly, the chairman's powers of quantification under Rules 2.39(1) and (3) and under Rule 2.38(5) should be exercised taking into account events which have occurred since the date of the administration. Thus, if the debt is a claim for damages which had yet to be determined at the date of the administration, and, before the meeting, damages had been assessed by the court or agreed, the debt would still be treated at the meeting as unliquidated and unascertainable, but, at any rate absent very unusual circumstances, it should be accorded a value equal to the assessed or agreed figure, arguably subject to a discount to allow for the fact that the valuation is to be as at the date of administration." (HMRC v. Maxwell [2010] EWCA Civ 1379)
​​
- Secured debts: nil value in vote
"(4) Where a debt is wholly secured its value for voting purposes is nil.
(5) Where a debt is partly secured its value for voting purposes is the value of the unsecured part." (Insolvency Rules 2016, §15.31)
​
- Unliquidated or unascertained debts: chair to decide value for voting
"(2) A creditor may vote in respect of a debt of an unliquidated or unascertained amount if the convener or chair decides to put upon it an estimated minimum value for the purpose of entitlement to vote and admits the claim for that purpose." (Insolvency Rules 2016, §15.31)
​
Tax liabilities prior to assessment
​​
- Debt is unascertained if it cannot be estimated until some future event
"[89] ... In his judgment Sir G Mellish LJ said:
"The question really is, what is meant by 'an unliquidated debt' … The fair construction of the clause seems to me this: 'a contingent debt' refers to a case where there is a doubt if there will be any debt at all; a 'debt, the value of which cannot be ascertained' means a debt the amount of which cannot be estimated until the happening of some future event; and 'an unliquidated debt' includes not only all cases of damages to be ascertained by a jury, but beyond that, extends to any debt where the creditor fairly admits he cannot state the amount."
[90] If I apply those elaborations (I am sure the learned lord justice did not intend them to be definitions) it seems to me that the Revenue debt is not unascertained in that sense. While the amount is disputed, its determination is not dependent on anything other than an inquiry within the context of a piece of litigation. I doubt if that is the sort of future event that Sir G Mellish had in mind..." (HMRC v. Portsmouth City FC [2010] EWHC 2013 (Ch), Mann J)
​
- Unliquidated if creditor cannot fairly state amount (e.g. it depends on establishing sham)
"[88] I am prepared to assume that there is an underlying liability on an employer who fails to account for PAYE and NIC before any formal claim is made by HMRC and before any formal assessment. If and to the extent that the payments were shams there was a claim accordingly. The nature of the claim is therefore one which relies on payments being treated as shams, and may fail to the extent that image rights have some value. That value would have to be determined in some sort of inquiry. So both the basis of the claim, and its quantum, cannot be treated as certain as at the date of the administration (by which time formal assessments had not been served).
...
[90] If I apply those elaborations (I am sure the learned lord justice did not intend them to be definitions) it seems to me that the Revenue debt is not unascertained in that sense. While the amount is disputed, its determination is not dependent on anything other than an inquiry within the context of a piece of litigation. I doubt if that is the sort of future event that Sir G Mellish had in mind. However, it does seem to me that the debt falls to be treated as unliquidated within that elaboration. The fact that the claim had not been asserted as at the date of the administration is perhaps a small pointer to HMRC not feeling it was of a definable amount at that date, and the circumstances of its emerging indicate an intention to make it as high as possible and leave it to the taxpayer to challenge it. I do not know, and the chairman did not know, the material on which that is based, but the fact that it apparently encompasses all the payments made, with no apparent acknowledgment that image rights might have some value, supports the view that that is the basis on which the claim was ultimately made. As at the date of the administration there was no articulation even to that extent. As at that date there was no more than an underlying claim (which I assume for these purposes to exist) for an amount which depends on establishing a sham (or at least raising that issue – I make no finding as to where the burden would lie), and then, if that were established, perhaps determining the real value of image rights for which players were "paid". It seems to me that in those circumstances the creditor cannot "fairly" put a figure on the claim, or at least cannot "fairly" claim the whole amount due to be his debt. So adopting Sir G Mellish's elaboration, it seems to me that as at the date of the administration the disputed debts were unliquidated for the purposes of the rule." ​(HMRC v. Portsmouth City FC [2010] EWHC 2013 (Ch), Mann J)
​
- Not every disputed liability that is subject to litigation is unliquidated
"[91] I am not saying that any debt which can only be finally established by litigation is as an unliquidated debt for the purposes of the rule. There will be many disputed debts, both as to amount and as to liability, which will not fall to be dealt with as an unliquidated debt but which the chairman will have to allow in and mark as disputed. My decision is only as to the particular, somewhat unusual, facts of this case. The uncertainties as to the quantification of the debt seem to me to make it unliquidated for present purposes. HMRC could, in fact, have removed this difficulty if they had served an assessment, which itself gives rise to a defined liability, but they had not done that by the date which is accepted as being the relevant date for these purposes." (HMRC v. Portsmouth City FC [2010] EWHC 2013 (Ch), Mann J)
​
- Unliquidated if required to trawl through figures, investigate legal issues and carry out calculations that are not straightforward
"[58] In this case, HMRC rely on the point that, as at the date that the Company went into administration, the facts relating to the income and expenditure of the Company were known for all the six relevant periods. Accordingly, runs their argument, it would have been possible, effectively as a matter of arithmetic, to calculate how much was owing by way of corporation tax in respect of those periods, and the total tax owing was therefore a liquidated and ascertained sum, subject always to the right of the Company to challenge it. I see the force of that argument, but it seems to me that, as a matter of ordinary language, as at 9 September 2009, the amounts owing by way of corporation tax were not ascertained and liquidated (at least over and above the amounts specified in the Company's self-assessments). In order to calculate what was owing, one would have had to trawl through figures in the Company's accounts, investigate the law relating to EBTs and payments to directors, and carry out calculations which were not straightforward. In many damages claims, one could work out the amount likely to be assessed by the court, but that does mean that an unresolved damages claim is a liquidated or ascertained debt.
[59] Thus, in my opinion, in respect of all six periods, any corporation tax claimed to be due, over and above the self-assessments, was not a liquidated ascertained sum, until HMRC had issued notices of amendment. However, once such notices were issued, I consider that the sums therein were liquidated and ascertained sums, in the amounts specified in the amendments (albeit subject to the possibility of challenge by appeal for tax purposes and assessment for voting purposes at meetings)[25]. The fact that the sums so specified were subject to appeal and stay applications would not, in my view, undermine that conclusion: to hold otherwise would involve confusing ascertainment with unchallengeability." (HMRC v. Maxwell [2010] EWCA Civ 1379)​​
​
- Consider the competing merits of the arguments for/against liability and quantum
"[65] Whatever may have been the position at the Meeting, I consider that the evidence and argument before the Judge justified only one conclusion, namely that HMRC had made out a clear prima facie case to support their contention that the corporation tax they claimed was owing was indeed due, subject to the Company's right to set off its terminal loss claim of £239,713.78. HMRC's arguments on the law and the detailed facts and calculations justifying their ultimate figures were clearly and fully set out in documents they put before the court, and to which I have referred. On the other hand, the Administrators simply denied liability for all but a small proportion of the claimed tax in the most general terms and failed to put forward any specific evidence or legal arguments as to why the whole or part of the sums claimed were not due, and they had failed to put forward any grounds in the notices of appeal and applications for stay in respect of payment of the tax, in circumstances where the statute required such grounds.
[66] The Administrators could have come up with different facts and different calculations, just as they could have made legal submissions, with a view to persuading the Judge that HMRC were at least arguably wrong in their contentions. If that had happened, the Judge could have decided the issue before him in the light of the Administrators' arguments, and that could have led to various possible outcomes. (i) He might have rejected the Administrators' points, in which case he would have allowed HMRC's appeal. (ii) He might have accepted those points, in which case he would have dismissed HMRC's appeal. (iii) He might have accepted those points as to part of the tax claimed but not as to the balance, in which case he may have had to decide whether the votes he would have accorded to HMRC would or could have made a difference to the result of the Meeting. (iv) He might have decided that it was not possible to resolve the issue, in which case the "minimum" provision in Rule 2.38(5) would presumably have required him to dismiss the appeal." (HMRC v. Maxwell [2010] EWCA Civ 1379)
​
- Mere general denial of liability in the face of detailed support for debt will not lead to reduction of amount
"[67] However, because the Administrators adduced no factual evidence, no calculations (other than the terminal loss claim), and no legal arguments before the Judge, it seems to me that options (ii), (iii), and (iv) were simply shut off as possible courses for him to adopt. Assuming in the Administrators' favour, which may well be correct, that they had had to establish no more than an arguable case (in the same way as a party resisting summary judgment under CPR 24), a mere general denial of liability, coupled with speculation as to the information and advice the chairman saw, was insufficient to justify the Judge being satisfied that he should reduce the amount claimed by HMRC (save by deducting the terminal loss claim) for the purposes of Rule 2.38(5)." (HMRC v. Maxwell [2010] EWCA Civ 1379)
​
Not ususally open to chairman of meeting to go behind assessment
​
- Assessment debt is not contingent
​
"[32] I am unable to accept Mr Jones' submission that this was a contingent debt. It is clear that the applicant is correct that once an assessment has been issued the tax shown over the assessment is due and owing and, in the absence of evidence of fraud or collusion or some other exceptional circumstance which does not arise in this case, it is not open to the chairman of the meeting or to the court to go behind it. In my judgment, Mr Sharp should have admitted this debt in full and that the fact that the payment of the debt had been postponed does not mean that the debt ceased to be due and owing. I accept the submission made by Mr Mullen that the issue of the postponement is not material to this case." (HMRC v. Sharp [2015] EWHC 4272 (Ch), Sutcliffe QC)
​
- Assessment debt is decisive in the absence of fraud, collusion or exceptional circumstances
​
"[33] In the alternative to his submission that this was a contingent unascertained debt, Mr Jones submits that the chairman was exercising the power under Rule 4.70(1) to admit or reject the whole or part of the applicant's proof and he referred me to the decision of Re a Debtor No. 222 (1990), ex parte The Bank of Ireland[1992] BCLC 137, a decision of Palmer J and to the passage at page 144 f-h which stated as follows:
“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.”
[34] On the evidence in this case Mr Jones submits that Mr Sharp was justified in his decision to exclude that part of the alleged debt exceeding £6,960 as obviously bad and he relies on the following matters. He submits that the applicant's claim is based on an assessment dated 27 November 2013, which relied on an unascertained estimated profit figure of £250,000, which seems to have been based on the applicant's view that the company had significantly understated its turnover for the year ending 29 September 2011 by providing a turnover figure of £115,765. He says it is very clear that the applicant's view was erroneous because in the company's CT 600 and in its accounts, that figure of £115,765 was clearly expressed as the operating profit on a turnover of about £467,000. Mr Jones submits that the company accurately declared the net profit of £115,765 on turnover of £467,336 and moreover, the company has paid the tax due on those figures.
[35] I am unable to accept this alternative submission of Mr Jones for a number of reasons. First, it is clear that the assessment is not solely based, if indeed it is based at all, on a mix up by either the applicant or the company's agent (which filed the CT 600) of the turnover and profit figures. It is clear from Mrs Roberts' letters, which I have recited at length earlier in this judgment, that the applicant was relying on other information in making the assessment. Second, it is clearly, in my judgment, the case that the company has not helped itself by being so reluctant to provide the information requested by the applicant on numerous occasions. That resistance to providing the information requested only confirms my view that it is impossible for this court to say that the assessment is obviously wrong and misconceived. Finally, and in any event, I am persuaded by Mr Mullen that the issue of the assessment itself is decisive and that the chairman should have admitted it in its entirety. There is no evidence of fraud or collusion or some other exceptional circumstances such as would undermine that assessment." (HMRC v. Sharp [2015] EWHC 4272 (Ch), Sutcliffe QC)
​
"[36] Even if the best judgment point had been raised before Registrar Derrett, I consider that it could not properly have been adjudicated upon by her. I say this because it seems to me that, absent a truly exceptional case, it would not have been open to her, exercising an insolvency jurisdiction, to go behind the assessment." (Hope v. Ireland [2014] EWHC 3854 (Ch), John Males QC)
​
"[27] Counsel for Mr Earley disputed these contentions at a number of levels. First, he sought to go behind the assessments and contend that the amounts thereof were not due. This approach is not open to him. It is for the General Commissioners and the court or tribunal on appeal from them to consider that issue; not this court or anything to do with this arrangement – see Revenue & Customs v Chamberlain [2011] EWCA Civ 271. Second, he contended that the amount of the assessments was neither liquidated nor ascertained, with the consequence that under Insolvency Rule 5.21(3) the chairman of any relevant meeting could not permit Revenue & Customs to vote in respect of any amount in excess of a pound. Even if this contention of counsel for Mr Earley were correct, it would not deal with the whole of the case for Revenue & Customs in that it has no effect on the amount of any prospective dividend. In fact, however, it is incorrect. The amount of an assessment is a debt and is both liquidated and ascertained. This is recognised by the Court of Appeal in the context of corporation tax in HMRC v Maxwell [2010] EWCA Civ 1379 paragraphs 56 and 59." (HMRC v. Earley [2011] EWHC 1783 (Ch))
​
- Assessment not decisive where not properly justified and issued for tactical purposes re the CVA
"[92] That being the case, HMRC then says that the service of the assessments, which made clear HMRC's claim (if not its full factual basis) and gave rise to a technical liability to pay, means that the chairman should, in the exercise of his discretion, have decided to value the claims at their full amount. I do not accept that argument. The chairman has a discretion. The nature of HMRC's challenge is such that it can only succeed if the decision he took could not be justified, which in turn means (on the facts of this case) that HMRC has to establish the only justifiable decision was to admit the Revenue's claim in full. The nature of the Revenue's claims, the paucity of information provided, and their prima facie tactical purpose makes that claim unsustainable. These were not claims which were self-evidently wholly right, or even prima facie wholly justifiable, absent the technical liability under the assessments. If the chairman had stuck by the originally expressed view that the claims would be admitted but marked as objected to then that might of itself be a justifiable decision, but even if that is right it was not the only justifiable decision. A middle ground, of allowing the claims but making a discount to reflect the fact that they might not succeed in whole, might have been even more justifiable, but again it is not the only justifiable decision and would probably not help the Revenue in this case because any significant reduction below the full amount would still leave them with less than 25% of the vote, so any irregularity in this respect would not be material." (HMRC v. Portsmouth City FC [2010] EWHC 2013 (Ch), Mann J)
​
False representation or fraud by officer to obtain approval: offence
"(1) If, for the purpose of obtaining the approval of the members or creditors of a company to a proposal for a voluntary arrangement, a person who is an officer of the company—
(a) makes any false representation, or
(b) fraudulently does, or omits to do, anything, he commits an offence.
(2) Subsection (1) applies even if the proposal is not approved.
(3) For purposes of this section “officer” includes a shadow director.
(4) A person guilty of an offence under this section is liable to imprisonment or a fine, or both." (IA 1986, s.6A)
​
CHALLENGING APPROVAL
​​
Persons who may bring a challenge
"(2) The persons who may apply under subsection (1) are—
(a) a person entitled, in accordance with the rules, to vote at the meeting of the company or in the relevant qualifying decision procedure];
(aa) a person who would have been entitled, in accordance with the rules, to vote in the relevant qualifying decision procedure if he had had notice of it;
(b) the nominee or any person who has replaced him under section 2(4) or 4(2); and
(c) if the company is being wound up or is in administration, the liquidator or administrator." (IA 1986, s.6)
​
Time limit for challenge
"(3)An application under this section shall not be made
(a) after the end of the period of 28 days beginning with the first day on which each of the reports required by section 4(6) and (6A) has been made to the court; or
(b)in the case of a person who was not given notice of the relevant qualifying decision procedure, after the end of the period of 28 days beginning with the day on which he became aware that the relevant qualifying decision procedure had taken place,
but (subject to that) an application made by a person within subsection (2)(aa) on the ground that the voluntary arrangement prejudices his interests may be made after the arrangement has ceased to have effect, unless it came to an end prematurely." (IA 1986, s.6)
​​
Reports
​
"(6) After the conclusion of the company meeting in accordance with the rules, the chairman of the meeting shall report the result of the meeting to the court, and, immediately after reporting to the court, shall give notice of the result of the meeting to such persons as may be prescribed.
(6A)After the company's creditors have decided whether to approve the proposed voluntary arrangement the person who sought the decision must—
(a)report the creditors' decision to the court, and
(b)immediately after reporting to the court, give notice of the creditors' decision to such persons as may be prescribed." (IA 1986, s.4(6) - (6A))
​
Exclusive procedure
(7)Except in pursuance of the preceding provisions of this section,
(a) a decision taken at a company meeting summoned under section 3 is not invalidated by any irregularity at or in relation to the meeting, and
(b) a decision of the company's creditors made in the relevant qualifying decision procedure is not invalidated by any irregularity in relation to the relevant qualifying decision procedure." (IA 1986, s.6)
​
Unfair prejudice
"(1) 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 which has effect under section 4A unfairly prejudices the interests of a creditor, member or contributory of the company;..." (IA 1986, s.6(1)(a))
​
- Judge based on the material that existed at the time the CVA was approved
"[71] It is common ground that the issue whether a cva unfairly prejudices the interests of a creditor under IA s.6 is to be judged on the information available at the time the cva was approved." (Prudential Assurance Company Ltd v. PRG Powerhouse Limited [2007] EWHC 1002 (Ch), Etherton J)
​
- Prejudice is generally inevitable (unfair prejudice required)
"[72] There is no conceptual difficulty and probably little practical difficulty in showing the presence or absence of "prejudice" for the purposes of IA s.6. Any cva which leaves the creditor in a less advantageous position than before the cva – looking at both the present and the future – will be prejudicial." (Prudential Assurance Company Ltd v. PRG Powerhouse Limited [2007] EWHC 1002 (Ch), Etherton J)
​
- Compare to alternatives (e.g. winding up) and other creditors
"[75] In broad terms, the cases show that unfairness may be assessed by a comparative analysis from a number of different angles. They include what I would describe as vertical and horizontal comparisons. Vertical comparison is with the position on winding up (or, in the case of individuals, bankruptcy). Horizontal comparison is with other creditors or classes of creditors. In that context, another helpful guide, in the case of a cva, is comparison with the position if, instead of a cva, there had been a formal scheme of arrangement under CA s.425 (compromise or arrangement between a company and its creditors or members), on which the different classes of creditors would have been required to meet and vote separately." (Prudential Assurance Company Ltd v. PRG Powerhouse Limited [2007] EWHC 1002 (Ch), Etherton J)
​
- Unfair prejudice may arise even if arrangement is better than bankruptcy/liquidation
"It is clear, however, that comparison with the position on bankruptcy or winding up is not always conclusive as to unfair prejudice. In Re a debtor (No. 101 of 1999) Ferris J considered an iva in which the Inland Revenue and Customs & Excise (together "the Revenue") were to be paid a dividend in satisfaction of their debts, whereas other debts would not be extinguished. The Revenue applied to the court under IA s.262 for the creditors' approval to the proposed voluntary arrangement to be revoked on the ground of unfair prejudice. At first instance the Judge rejected the Revenue's application on the ground that the Revenue would be better off under the iva than on bankruptcy. On the appeal, it was accepted by the Revenue that, if that was the right comparison to be made, there was no challenge to the Judge's conclusion that they would receive more money at an earlier date under the arrangement than they would receive under a bankruptcy and, on that basis, the arrangement, far from unfairly prejudicing them, was to their advantage.
Ferris J considered, however, that was too narrow a view. He said at p. 63d that, in considering whether the interests of a creditor are unfairly prejudiced, the Court has to consider all the circumstances. He accepted the argument of the Revenue's counsel that, in addition to considering whether what the Revenue were to receive under the arrangements was unfair by comparison with what they would have been likely to receive under a bankruptcy, it was necessary to take a wider view of the impact of the iva. In particular, he observed that in the absence of the iva the Revenue, like other creditors, would retain all their rights, including the right to seek a bankruptcy order, the right to obtain and seek to enforce a judgment, and the ability to press for a more satisfactory arrangement in which there would be no differential treatment of creditors.
Ferris J further noted that the Judge had failed to take into account the effect of the arrangement on the other creditors and, in particular, the fact that they had exercised their majority vote in a way which, if it was allowed to stand, would force the Revenue to accept a reduced payment in satisfaction of their debts while leaving the position of other creditors unchanged or even improved (by the elimination of competing debt). Ferris J concluded that, in comparing the position of the Revenue under the arrangement only with their likely entitlement on bankruptcy, the court below took too narrow a view, and that, in all the circumstances, the arrangement unfairly prejudiced the Revenue." (Prudential Assurance Company Ltd v. PRG Powerhouse Limited [2007] EWHC 1002 (Ch), Etherton J)
​
- Unfairness must arise out of the arrangement itself
"[41] iii) The fact that different creditors were treated differently is something which calls for close scrutiny, but it does not make any prejudice (disadvantage) unfair. ibid
iv) The preceding proposition means that it is not necessarily unfair that one creditor or class of creditors should be paid in full when others are not; though obviously that requires particularly careful scrutiny.
v) For unfair prejudice to justify a challenge it must come from the arrangement itself – Sisu Capital v Tucker [2005] EWHC 2170
vi) It may be necessary to consider the possibility of a fairer scheme. However, this is not done on the basis of speculation as to what might have been available, or speculation as to whether the administrator could have obtained a different deal. Unless the court is satisfied that a better compromise would have been available it can only compare that which was proposed with no compromise at all – ibid." (HMRC v. Portsmouth City FC [2010] EWHC 2013 (Ch), Mann J)
​
- No unfairness where payments to one class of creditors will be made out of assets not falling within the CVA
"[68] However, I do not think I need to resolve that, because even if the CVA actually does provide for the football creditors to be paid in full, it does not do so at the expense of the other creditors at all, so it is not, in my view, unfair to those creditors. Subject to a particularly successful attack on the Premier League's insolvency policy and the corresponding provisions of its rules, so far as football creditors are paid in full they are not being paid out of assets which would otherwise fall into the CVA, so they are not being paid at the expense of the other creditors. The money out of which they are being paid is money which would not otherwise come into the CVA (or into the club) in the events which have happened or in any events which are likely to happen. The vertical comparison is significant..." (HMRC v. Portsmouth City FC [2010] EWHC 2013 (Ch), Mann J)
​
- Unfair to allow creditors who are being paid in full outside the CVA to vote
"[74] I have found this point a little more troublesome than some of the others, but in the end I find that it suffers the same fate – it does not amount to unfair prejudice. If it were the case that these creditors had no real interest in the CVA at all then there might be something in it. Why should those with no interest in the CVA at all, and who were being paid outside it, be entitled to force unwilling creditors into a CVA which is not approved by a requisite majority of that smaller class? However, as Mr Sheldon pointed out, that is not quite this case. The football creditors do have an interest in the CVA being approved. If it is not approved, and if there is a liquidation, then their contracts of employment come to an end. They may or may not get ones that are as favourable in that event, but if they continue into the new company after the CVA then the balance of their present contracts will be honoured. Mr Sheldon also submitted that they would also have an interest in the event that they were not in fact paid with moneys coming from the Premier League, but that seems to me to be a technical possibility only. Nevertheless, they are creditors, and they do, as creditors, have what can be described as a real interest in the outcome. In the circumstances, troubling though this point is, I do not think it amounts to unfair prejudice. Furthermore, in the end, HMRC have been bound into a CVA which can only leave them financially better off than a liquidation, on the assumptions on which I have to operate for the purposes of this application and appeal. That, too, is not unfair in my view." (HMRC v. Portsmouth City FC [2010] EWHC 2013 (Ch), Mann J)
​
Material irregularity
​
"(1) 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—
[...]
(b) that there has been some material irregularity at or in relation to the meeting of the company, or in relation to the relevant qualifying decision procedure."
​
Relevant qualifying decision procedure
​
"(1A)In this section—
(a) the “relevant qualifying decision procedure” means the qualifying decision procedure in which the company's creditors decide whether to approve a voluntary arrangement;
(b) references to a decision made in the relevant qualifying decision procedure include any other decision made in that qualifying decision procedure." (IA 1986, s.6)​
​​
EFFECT OF APPROVAL
​​
- Non-disclosure: substantial chance that creditors would not have approved the CVA
"[41]...vii) So far as material irregularity is concerned, both elements must be established – irregularity and its materiality.
viii) In cases where the irregularity is the non-disclosure or inaccurate disclosure of information, the question is whether the revelation of the truth would have made a difference to the way in which the creditors would have considered the terms of the CVA. The test is whether there is a substantial chance that they would not have approved the CVA in its presented form. The chance must be substantial, but it does not have to proved to beyond the 50% level. Re Trident Fashions (No 2) [2004] 2 BCLC 35." (HMRC v. Portsmouth City FC [2010] EWHC 2013 (Ch), Mann J)
​​
CVA takes effect in accordance with its terms
"​(1) This section applies where a decision approving a voluntary arrangement has effect under section 4A.
(2) The voluntary arrangement—
(a) takes effect as if made by the company at the time the creditors decided to approve the voluntary arrangement], and
(b) binds every person who in accordance with the rules—
(i) was entitled to vote in the qualifying decision procedure by which the creditors' decision to approve the voluntary arrangement was made, or
(ii) would have been so entitled if he had had notice of it, as if he were a party to the voluntary arrangement." (IA 1986, s.5)
​
Who is bound
​​
- Crown can be bound like any other creditor
"For the avoidance of doubt it is hereby declared that provisions of this Act which derive from the Insolvency Act 1985 and Part A1 and sections 233A and 233B and Schedule 4ZZA bind the Crown so far as affecting or relating to the following matters, namely—
(a)remedies against, or against the property of, companies or individuals;
(b)priorities of debts;
(c)transactions at an undervalue or preferences;
(d)voluntary arrangements approved under Part I or Part VIII, and
(e)discharge from bankruptcy." (Insolvency Act 1986, s.434)
​
"[47]...Under section 434 of the 1986 Act the Crown can be bound by the CVA like any other creditor. The effect of those provisions and my finding above that notice to the HSE is sufficient notice to the Crown means that the Crown is bound by the terms of the CVA to the extent that it was a creditor at the date of the meeting." (Snoozebox Limited v. HSE [2023] EWHC 851 (Ch), Richard Farnhill)
​
- Must have been someone who would have been entitled to vote, i.e. creditor
"[47] Under section 5(2)(b) it was binding on any party that was entitled to vote at the meeting or that would have been entitled to vote if they had been given notice of the meeting. IR r.15.28(5) makes clear that it is creditors who are entitled to vote at that meeting in respect of their respective debts. Under section 434 of the 1986 Act the Crown can be bound by the CVA like any other creditor. The effect of those provisions and my finding above that notice to the HSE is sufficient notice to the Crown means that the Crown is bound by the terms of the CVA to the extent that it was a creditor at the date of the meeting." (Snoozebox Limited v. HSE [2023] EWHC 851 (Ch), Richard Farnhill)
​
- Creditor requires a debt, but debt has an extended meaning
​​
"[57] Where does this leave a first instance judge? Pulling together these threads the position seems to me to be this. A CVA requires a proposal to be put to creditors. The term "creditor" must be given a wide meaning, but a "creditor" must have a "debt". The term "debt" has a meaning that extends well beyond a debt strictly so called. It includes pecuniary liabilities (obligations that may turn into debts strictly so called) that might spring out of an existing legal relationship." (Discovery (Northampton) Ltd v Debenhams Retail Ltd [2019] EWHC 2441 (Ch), Norris J)
​
- Includes future potential claims arising out of facts that occurred before CVA
​​
"[60] If the principles established by Re Sutherland and Frid are applied to this case, it is right in my judgment to conclude that T&N is subject to contingent liabilities to pay damages to those who have already been carelessly exposed to asbestos by the actions of T&N and who later suffer compensatable loss, resulting in claims for damages in negligence against T&N. The creditors in respect of those contingent liabilities are the persons who have been carelessly exposed to asbestos and who will have claims in negligence if they suffer loss as a result. Reverting to Lord Reid's speech, the contingent liability to pay damages is a liability which, by reason of something done by the person (i.e. the use or distribution by T&N of asbestos or asbestos products) will necessarily arise or come into being if one or more certain events occur (i.e. the onset of asbestos-related conditions in persons previously exposed to asbestos by T&N). Lord Guest referred specifically to the contingent debtor being "automatically involved by the operation of law in the payment" of the debt once the contingency occurred. That precisely describes the situation here. The careless exposure of persons to asbestos by T&N will automatically by the operation of the law of negligence lead to the liability to pay damages, assuming the existence of the other necessary elements of a claim in negligence.
[61] This is in one important respect a stronger case than Re Sutherland. As already noted, the majority did not regard as decisive that the liability to pay the balancing charges would arise only as a result of the company's own choice to sell the ships. In this case there is no question of volition. There is nothing which T&N can do to incur or avoid the liability. There is no medical intervention which can prevent the development of the asbestos-related conditions in those who have been exposed to asbestos. Nature will take its course." (Re T&N Limited [2005] EWHC 2870 (Ch), David Richards J)
​
- Includes liability to which company is vulnerable under statutory regime (including tax regime)
​​
"[77] However, the mere fact that a company could become under a liability pursuant to a provision in a statute which was in force before the insolvency event, cannot mean that, where the liability arises after the insolvency event, it falls within rule 13.12(1)(b). It would be dangerous to try and suggest a universally applicable formula, given the many different statutory and other liabilities and obligations which could exist. However, I would suggest that, at least normally, in order for a company to have incurred a relevant "obligation" under rule 13.12(1)(b), it must have taken, or been subjected to, some step or combination of steps which (a) had some legal effect (such as putting it under some legal duty or into some legal relationship), and which (b) resulted in it being vulnerable to the specific liability in question, such that there would be a real prospect of that liability being incurred. If these two requirements are satisfied, it is also, I think, relevant to consider (c) whether it would be consistent with the regime under which the liability is imposed to conclude that the step or combination of steps gave rise to an obligation under rule 13.12(1)(b).
[78] When deciding whether a particular state of affairs or relationship is sufficient to amount to the "incur[ring]" of an "obligation", "by reason of which" the liability arose, considerable assistance can, I think, be gained from the majority decision in Winter v Inland Revenue Commissioners, In re Sutherland (dec'd) [1963] AC 235. That case was concerned with whether an arrangement was within the expression "contingent liabilities" in section 50 of the Finance Act 1940. As Lord Reid explained at p 247, at the relevant date, "the position of the company … was that, by applying for and accepting allowances in respect of these ships, it had become bound by the statute to pay tax under a balancing charge when it ceased to use these ships in its trade, if the moneys which it received for them exceeded any expenditure on them which was still unallowed".
[79] In those circumstances, the majority concluded that the obligation was a contingent liability as at the relevant date. Lord Reid said this at p 248:
"[I]f an Act says I must pay tax if I trade and make a profit, I am not before I begin trading under a contingent liability to pay tax in the event of my starting trading. In neither case have I committed myself to anything. But if I agree by contract to accept allowances on the footing that I will pay a sum if I later sell something above a certain price I have committed myself and I come under a contingent liability to pay in that event.""
...
[81] It is true that in Sutherland, the House of Lords was concerned with the meaning of "contingent liabilities" in the context of estate duty, whereas these appeals are concerned with the meaning of "obligation" from which a contingent liability derives in insolvency legislation. It was suggested that the reasoning of Lord Reid should not, therefore, be relied on here. I do not agree. Lord Reid gave a characteristically illuminating and authoritative analysis of an issue of principle. It appears to me that the issue of (i) what is a contingent liability and (ii) what is an obligation by reason of which a contingent liability arises, are closely related. In Sutherland the House had to decide whether what a company had done was sufficient, in Lord Reid's words, to have "committed [it]self" to a contingent liability. As I see it, that is much the same thing as having incurred an obligation from which a contingent liability may arise, for the purposes of rule 13.12(1)(b)." (Re Nortel Companies [2013] UKSC 52)
​​​
- Liability to PAYE arises before any formal claim
"[85] HMRC's case is that the debts were neither unliquidated nor unascertained for the purposes of the rules. An obligation on the employer to pay PAYE amounts and NIC arises when the associated payments are made to the employee. That is a liability arising then and there under the Income Tax (Pay as You Earn) Regulations 2003 Regs 21 and 68 in the case of PAYE; and there is said to be a corresponding regulation (which I was not shown) in respect of NIC. Thus the liability arises. If the employer does not account properly then the liability may be unknown in the sense that no-one has worked it out, but working it out is a mere matter of mechanics when one knows the information. The only reason that the amount is unknown is because a human being has not worked it out. This does not bring it within the category of unliquidated or unascertained debts for the purposes of Rule 1.17, so the chairman should have allowed it to be voted in full, albeit marking it as objected to.
...
[88] I am prepared to assume that there is an underlying liability on an employer who fails to account for PAYE and NIC before any formal claim is made by HMRC and before any formal assessment..." (HMRC v. Portsmouth City FC [2010] EWHC 2013 (Ch), Mann J)
​​​
- Includes a potential fine by virtue of past conduct
"[68] The alleged failure to discharge the duties arising from those relationships is what is said to give rise to breaches of section 33 of the 1974 Act, upon which the Prosecution is founded. That is the specific liability to which the Company is now vulnerable under (b). It is apparent, from Lord Neuberger's reference to the penumbra of the regime, that an entity may be considered "vulnerable" well before steps are taken to commence the process that results in the liability. In Re Nortel itself no FSD had been issued and indeed no investigation had even been started by the regulator before the administration; it was sufficient that the group contained a service company pension scheme or insufficiently resourced pension scheme. Re Nortel endorsed Re T&N where breach of the duty of care was sufficient to create the requisite relationship long before that relationship gave rise to an actionable claim. Here, the facts giving rise to the Prosecutions had all happened and the Company was under investigation. Moreover, at least from Mr Poulter's letter of 16 November 2016 that process had ceased to be a routine matter: the facts had been considered by the HSE and found to meet the criteria for mandatory investigation. In that sense it is a stronger case than Re Nortel. The Company was, it seems to me, well within the penumbra of criminal prosecution from at least November 2016." (Snoozebox Limited v. HSE [2023] EWHC 851 (Ch), Richard Farnhill)
​
- Includes future rent
​​
"[58] "Future rent" may not be a provable debt: a dictum in the Court of Appeal says that the non-provability of future rent might be open to review, and a dictum in the House of Lords explains why "future rent" should not be provable. In a strict sense it might not be a debt at all: dicta at first instance and in the House of Lords explain why. But "future rent" is a least a pecuniary liability to which the company may become subject in the future by reason of an existing obligation. That is clearly so in the case of a tenant whose landlord insists (by refusal to accept a surrender or exercise a right of re-entry) that the lease remain in being and that the tenant continue to be exposed to performance of the covenant for rent, under which as time passes rent will accrue due, payable as a debt.
[59] This liability might be characterised as a contingent claim (as the liability under an indemnity against rent is treated) or as a contingent claim that the Insolvency Rules require to be treated in a special way. It might by its nature (because of the difficulty of assessing the contingency) simply be a non-provable claim. But it is well established at first instance (and affirmed by the House of Lords) that provision must be made in any winding-up for this claim (whatever its exact nature). As such it is a "debt" within the extended meaning of that term, and the landlord is a "creditor" (within the extensive meaning of that term) in relation to it." ​(Discovery (Northampton) Ltd v Debenhams Retail Ltd [2019] EWHC 2441 (Ch), Norris J)
​
- Liability to potential costs order only included when legal proceedings commenced
"[73]...Both Lord Neuberger and Lord Sumption found that the necessary relationship that is required under head (a) arises on the commencement of proceedings. It is that relationship that brings into play the rules that render the parties vulnerable to a financial liability for costs, the requirement under (b). It would have been open to the Supreme Court in Re Nortel either to find that the costs cases were wrong without stating what created the necessary relationship, or to lay down a different relationship, for example that the liability for costs is tied to the facts giving rise to the underlying claim and so arises at the same time as that claim for insolvency purposes. It did not do so. Lord Neuberger and Lord Sumption were explicit both in saying that the costs cases were wrong and, separately, in saying that the legal relationship that underpins a contingent claim for costs is created by entering litigation.
...
[85] I agree with the HSE, therefore, that the necessary legal relationship for an award of costs is different to that under which any fine will be imposed and arises later in time. Applying Re Nortel, the commencement of proceedings, in this case the Prosecution, was a necessary step for the relevant "legal effect" to come into existence. That step was not taken until some time after the CVA, such that any costs award is not affected by the CVA." (Snoozebox Limited v. HSE [2023] EWHC 851 (Ch), Richard Farnhill)
​
Nature of approved arrangement
​
- Bilateral statutory agreement between each creditor and the company
"[45] In Johnson v Davies at pp. 129H-130A Chadwick LJ described the statutory effect of an iva under IA s.260(2), which is for all material purposes the same as IA s.5(2), as creating a "statutory hypothesis … that the person who has notice of and was entitled to vote at the meeting is party to an arrangement to which he has given his consent": see also Welsby v Brelec Installations Limited [2002] 2 BCLC 576 at 579g (Blackburne J).
[46] The hypothetical agreement is a bilateral agreement between each creditor and the company. IA s.1(1) refers to the intention to make a proposal "to the company and its creditors for a composition in satisfaction of its debts or a scheme of arrangement of its affairs". IR r.1.1(1) contains a similar formulation. As Mr Sheldon also observed, IR r.1.3(2)(c) requires the directors of the company to state in their proposal the nature and amount of the company's liabilities, and how they are to be dealt with by the arrangement.
[47] In the short, each creditor is a party to the arrangement by virtue of being, and in the capacity of, a creditor of the company. It is the company, and not any third party, which has the benefit of and can enforce, the rights and obligations conferred by the cva. This interpretation of the statutory provisions is supported by the case law.
...
[49] In Welsby v Brelec Installations Limited Blackburne J said at p.579g, in relation to a cva:
"… the effect of the creditors' approval of the debtors' proposal is, as is well-established, to give rise to a species of statutory contract between the creditors bound by the arrangement on the one hand and the debtor on the other."" (Prudential Assurance Company Ltd v. PRG Powerhouse Limited [2007] EWHC 1002 (Ch), Etherton J)
​
- Prevents collection of liabilities to which it applies
"[3](iii) The CVA prevents collection of any fine; for the avoidance of any doubt it does not limit the imposition of such a fine, nor does it affect anything other than collection (for example, the fact that a fine was imposed could still be an aggravating factor in any future prosecution).
...
(v) The Company was released from the obligation to make payment of any fine on 18 October 2018 under clause 7.6 of the CVA. Any order for costs is unaffected. It remains open to the Crown Court to make either or both such orders." (Snoozebox Limited v. HSE [2023] EWHC 851 (Ch), Richard Farnhill)
​
- No direct effect on rights of one creditor against another
"[51] The hypothetical agreement resulting from approval of a cva is not, therefore, one between creditors as to rights and obligations between themselves in a capacity other than as creditors of the company. In relation to the Guarantees PRG's obligations are those of a debtor arising out of a contract made by itself as principal on its own behalf. There is nothing in IA or IR which makes the CVA binding and enforceable as between PRG and the Guaranteed Landlords in respect of such obligations." (Prudential Assurance Company Ltd v. PRG Powerhouse Limited [2007] EWHC 1002 (Ch), Etherton J)
​
- But company can have right to prevent creditor enforcing against third party
"[61] In terms of what legitimately may be encompassed within a cva, there is no difference in substance between an obligation of a creditor not to enforce a contract with a third party, on the one hand, and an obligation of the creditor to deal with the third party as if the creditor's contract with the third party did not exist, on the other hand. If the former is enforceable by the debtor company against the creditor, there is no legitimate policy reason, nor anything in the relevant legislation, for holding the latter to be unenforceable by the debtor company.
[62] Accordingly, clause 3.14 is in principle enforceable by Powerhouse as an obligation of the Guaranteed Landlords not to claim against PRG under the Guarantees." (Prudential Assurance Company Ltd v. PRG Powerhouse Limited [2007] EWHC 1002 (Ch), Etherton J)
​
Interpretation of arrangement
​
- Interpret CVA in light of arrangement as a whole
"[65]...In accordance with usual principles, the CVA must be interpreted in the light of the arrangement as a whole. The overall commercial package embodied in the CVA is clear enough: PRG was to pay £1.5m to fund the dividend to be paid to the Scheme Fund Creditors, including, in particular, the Guaranteed Landlords, who would, on receipt of the dividend, be precluded from enforcing the Guarantees; and, for that reason, PRG did not need, and was willing to give up, its rights of recourse as surety against Powerhouse. That the agreement of PRG to give up its rights of recourse was consequential, in the way I have described, is both commercially obvious and, more importantly, made plain by the introductory word "Consequently" in clause 3.13. That word must be given separate and distinct weight, and so provides a deliberate linkage between clause 3.12 and clause 3.13. The word "Consequently" is to be interpreted, in its context, as meaning "And on that basis". To the extent that the assumed basis is not correct, clause 3.13 does not preclude PRG's right of recourse against Powerhouse." (Prudential Assurance Company Ltd v. PRG Powerhouse Limited [2007] EWHC 1002 (Ch), Etherton J)
​
- Debts and liabilities interpreted in same broad way as for identifying creditors
"[48] That shifts the focus to ask which debts are covered by the CVA. The starting point in answering that question is the CVA itself. Under clause 7.6, it is only to apply to "debts and liabilities owing to the Creditors to which it was subject at the Administration Date". The Company entered administration on 8 November 2017." (Snoozebox Limited v. HSE [2023] EWHC 851 (Ch), Richard Farnhill)
​​
Creditor without notice of CVA
​
- Bound unless challenges arrangement within 28 days
"[98] If HM Treasury were a creditor that had not received notice of the CVA then it would, as I have noted above, have had 28 days from the date on which it received notice in which to challenge the CVA for procedural irregularity under section 6 of the 1986 Act. There is no dispute that the time limit is absolute (Re Bournemouth & Boscombe Athletic Football Club Ltd [1998] BPIR 183). Nor is there any dispute that HM Treasury had notice of the CVA by October 2022 at the latest and has initiated no such challenge. That was the appropriate route for HM Treasury to take if it felt that it ought to have been treated as a creditor; it chose not to do so, and it is too late for it to change its mind now. The Crown is bound by the terms of the CVA and is out of time to file a proof of loss under it." (Snoozebox Limited v. HSE [2023] EWHC 851 (Ch), Richard Farnhill)
​
- Only entitled to distribution in accordance with terms of the arrangement
"[95] Mr Brockman submitted that if I were to find, as in fact I have, that the fine was caught by the CVA as a contingent claim I ought still to find that the Crown was entitled to a dividend under section 5(2A) of the 1986 Act. That provides:
If –
a) when the arrangement ceases to have effect any amount payable under the arrangement to a person bound by virtue of subsection (2)(b)(ii) has not been paid, and
b) the arrangement did not come to an end prematurely,
the company shall at that time become liable to pay to that person the amount payable under the arrangement.
[96] As such, the Crown is only entitled to a distribution in accordance with the terms of the arrangement, that is the CVA. According to the terms of the CVA, any creditor that has not already filed a proof of debt is now out of time to recover under it. No proof of debt was ever filed in respect of any fine, so section 5(2A) does not apply.
[97] Mr Brockman submitted that this would be an unfair outcome, effectively shutting the Crown out in circumstances where HM Treasury, at least, had no notice of the CVA at the time. I have rejected the submission that HM Treasury constitutes a creditor independent of the Crown or, therefore, the HSE. That finding is fatal to this argument: the relevant Crown body did have notice." (Snoozebox Limited v. HSE [2023] EWHC 851 (Ch), Richard Farnhill)
​
Power to stay/dismiss existing insolvency proceedings
"(3) Subject as follows, if the company is being wound up or is in administration, the court may do one or both of the following, namely—
(a) by order stay or sist all proceedings in the winding up or provide for the appointment of the administrator to cease to have effect;
(b) give such directions with respect to the conduct of the winding up or the administration as it thinks appropriate for facilitating the implementation of the voluntary arrangement.
(3A)Where immediately before the voluntary arrangement took effect a moratorium for the company was in force under Part A1 and a petition for the winding up of the company, other than an excepted petition within the meaning of section A20, was presented before the beginning of the moratorium, the court must dismiss the petition.
(4) The court shall not make an order under subsection (3)(a) or dismiss a petition under subsection (3A)—
(a) at any time before the end of the period of 28 days beginning with the first day on which each of the reports required by section 4(6) and (6A) has been made to the court, or
(b) at any time when an application under the next section or an appeal in respect of such an application is pending, or at any time in the period within which such an appeal may be brought." (IA 1986, s.5)
​
Failure to adhere to terms
​
"(2A) If—
(a) when the arrangement ceases to have effect any amount payable under the arrangement to a person bound by virtue of subsection (2)(b)(ii) has not been paid, and
(b) the arrangement did not come to an end prematurely,
the company shall at that time become liable to pay to that person the amount payable under the arrangement." (IA 1986, s.5)
​