Assessing material irregularities in IVAs—Rowbury v Official Receiver

Assessing material irregularities in IVAs—Rowbury v Official Receiver

What constitutes material irregularities in individual voluntary arrangements (IVAs) and how will thecourt assess these? Faith Julian of 9 Stone Buildings examines thedecision in Rowbury and others v Official Receiver and others.

Original news

Rowbury and others v Official Receiver and others [2015] EWHC 2276 (Ch), [2015] All ER (D) 129 (Sep)

The applicants sought orders, including to revoke a voluntary arrangement proposed by a bankrupt at a meeting of his creditors. The Bankruptcy High Court held that, as a result of reversing thechairman’s decision not to suspend themeeting and discounting thevalue of one vote, thearrangement would be revoked and thebankruptcy re-instated.

What was thebackground to theapplication briefly?

This was an application for an order under section 262 of theInsolvency Act 1986 (IA 1986), or alternatively rule 5.22(5) of theInsolvency Rules 1986, SI 1986/1925 (IR 1986), to revoke an IVA approved at a creditors’ meeting on 8 December 2014. A second application was also before thecourt, but not dealt with in this judgment.

The bankruptcy occurred against thebackdrop of litigation regarding thedebtor’s (or alternatively thedebtor’s company’s) entitlement to share in thecontinuing income stream generated by thefilm known as Monty Python and theHoly Grail.

What were thelegal issues that theRegistrar had to decide in this application?

Registrar Briggs was asked to consider whether certain events occurring at themeeting amounted to ‘material irregularities’ for thepurposes of IA 1986, s 262(1)(b) such that theIVA could and should be revoked.

It was common ground that an irregularity will be material where, objectively assessed, theerror or omission ‘would be likely to have made a material difference to theway in which creditors would have considered and assessed theterms of theproposed IVA’ (Cadbury Schweppes plc v Somji [2001] 1 WLR

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.