IVAs and the importance of disclosure (Golstein v Bishop)

IVAs and the importance of disclosure (Golstein v Bishop)

Richard Ascroft, barrister at Guildhall Chambers, says that Golstein v Bishop underlines the importance of ensuring disclosure of all matters potentially relevant to an assessment by creditors of proposals for an individual voluntary arrangement (IVA).

Original news

Golstein v Bishop [2016] EWHC 2804 (Ch), [2016] All ER (D) 162 (Nov)

The Chancery Division made an order, under section 262(4)(a) of the Insolvency Act 1986 (IA 1986), revoking the approval of an IVA where material irregularity had been established. The IVA had been approved following the termination of a professional partnership between solicitors, the appellant (G) and the first respondent (B). In earlier proceedings, the court had granted (in part) G's appeal against a district judge's refusal to revoke the decision approving the IVA on the ground that B, who had proposed the IVA, had failed to disclose the fact that he had been the subject of disciplinary proceedings before the Solicitors Disciplinary Tribunal. In granting the order under IA 1986, s 264(4)(a), the court held that there was no detriment to the IVA creditors in revoking the approval since they stood to recover very little, if anything, from it.

What was the background to the case?

The appellant and the first respondent were both solicitors. Between October 2007 and June 2010, they carried on business in partnership. Following the dissolution of the partnership, the appellant began proceedings in the High Court seeking various forms of relief in relation to the partnership.

The first respondent proposed the IVA in response to a bankruptcy petition presented against him by the appellant. The petition debt was about £19,000, reflecting an unpaid costs order obtained by the appellant in the partnership proceedings.

The relevant meeting of creditors took place in May 2012. Shortly before the meeting, a friend and neighbour of the first respondent tendered to the appellant a sum sufficient to discharge the petition debt

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