P and his wife each proposed an IVA in 1999 pursuant to the terms of which acceptance of each was dependent upon acceptance of the other. It looking unlikely that the IVA of P’s wife would be approved, certain modifications were made and P’s IVA was approved at a creditors’ meeting with these modifications.
The IVA was varied at P’s request in 2001 and in 2002. In 2005 the supervisor successfully petitioned for P’s bankruptcy on the basis of arrears of IVA payments. P subsequently sought a declaration that the IVA was a nullity because (i) he had not consented to the modification contrary to s.258(2) Insolvency Act 1986; and (ii) the Chairman did not have the authority of HMRC to vote on their behalf in favour of the modification and accordingly the IVA was not approved by the requisite majority.In refusing the declaration the court found that (i) it could infer from the available evidence that P had consented to the modification prior to the creditors’ meeting; and (ii) although HMRC had not authorised the exercise of its proxy in favour of the modification, the absence of a subsequent objection by HMRC constituted ratification of the exercise of the proxy.The Judge went on to state that even if he had found that P had not consented to the modifications and/or that the unauthorized proxy had not been ratified, both shortcomings were material irregularities for the purposes of s.262 of the Act and accordingly would not invalidate the decision of the meeting of creditors unless and until the court made an order revoking or suspending any approval given by the meeting.The Court adopted a purposive approach to interpretation of Part VIII of the Act, noting that there was nothing in the Act to suggest that either of these shortcomings would result in the nullity of the IVA. S.258(2) should be construed by reference to s.262, which provided a comprehensive method for dealing with “material irregularities” in relation to meetings.
