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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Green (Supervisor of the IVA of Wright) v Wright [2017] EWCA Civ 111 (01 March 2017) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2017/111.html Cite as: [2017] EWCA Civ 111, [2017] WLR(D) 143, [2017] Bus LR 1070 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY
HIS HONOUR JUDGE HODGE QC
M14C358
Strand, London, WC2A 2LL |
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B e f o r e :
And
LORD JUSTICE IRWIN
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JAMES ![]() ![]() ![]() ![]() ![]() | Appellant |
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- and - |
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JAMES PATRICK ![]() ![]() |
Respondent |
____________________
Ian Tucker (instructed by Stephensons) for the Respondent
Hearing date: 15 November 2016
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VERSION
OF JUDGMENT APPROVED
Crown Copyright ©
Lord Justice David Richards:
"[Termination in certain circumstances]
The Arrangement shall terminate upon:
(a) the Supervisor issuing a Certificate of Termination under Paragraph 71;
(b) the making of a bankruptcy order against the Debtor;
(c) the Debtor's death."
"28(1) [Assets in the possession of the Debtor]
Property constituting an asset of the Arrangement in the possession, custody or control of the Debtor shall be held by the Debtor upon trust for the purposes of the Arrangement until realisation thereof (if so provided) in accordance with the Arrangement.
28(2) [Assets in the possession of the Supervisor]
Property constituting an asset of the Arrangement in the possession, custody or control of the Supervisor shall be held by the Supervisor upon trust for the purposes of the Arrangement.
28(3) [Effect upon Trusts of termination of Arrangement]
Upon termination of the arrangement within the meaning of paragraph 11 the trusts referred to in subparagraphs (1) and (2) shall cease save that asserts already realised shall after provision for the supervisor's fees and disbursements be distributed to arrangement creditors."
"44 Mr Zacaroli submits that the CVA, including the trust created by it, failed and terminated on the liquidation of Gallagher. He accepts that the terms of the CVA may dictate what is to happen on liquidation to a trust created by the CVA, but he submits that where the parties have failed to state clearly what is to happen, the court must apply a default rule. That rule, he says, should be that where the liquidation causes the CVA itself to fail or terminate, any trust created over assets of the company for the purpose of the CVA also terminates. He again submits that the trust assets are held for the purpose of implementing the CVA as a whole and he says that if the CVA cannot be implemented as a whole, the trust cannot be carried into effect and, by analogy with Quistclose Investments Ltdv
Rolls Razor Ltd [1970] AC 567, the trust fails. Alternatively, he argues that the court should lean against construing the CVA as extending the life of the trust beyond the termination of the CVA caused by the liquidation."
"48 The real difficulty in Mr Zacaroli's way, as it seems to us, is in showing why a fully constituted trust created by a CVA should terminate on the CVA failing or terminating in the absence of any provisions requiring the trust to terminate and specifying what is to happen to the trust assets. It is not suggested that any moneys paid to creditors pursuant to the trust can or should be recovered. The fact that Gallagher was in breach of its obligations under the statutory contract constituted by the CVA and went into liquidation, thereby rendering it impossible to fulfil any further purpose of the CVA, does not entail the consequence that the trust also failed when plainly it can still be carried into effect. Whislt the administration of the trust may not, by reason of Gallagher's liquidation, produce the full benefit originally envisaged for the CVA creditors, that is no reason for denying those creditors such benefit as carrying the trust into effect might still provide. The Quistclose case [1970] AC 567 has no relevance to the present circumstances even by way of analogy. In that case money was advanced by a third party lender to enable the company to continue to pay a declared dividend. But that purpose could not be fulfilled when the company went into liquidation and so, the House of Lords held, there was a resulting trust to the lender. In the present case the supervisors can carry the CVA trust into effect. We agree with Mr Pascoe that unless there is a provision in the CVA to the contrary, the CVA trust should continue."
"That, in my judgment, can only mean that the creditors are no long to be treated as creditors for the purposes of the arrangement. They are no longer persons in whose favour a dividend can be declared, pursuant to the powers conferred by paragraph 49(1)."
"I fully accept that, if a dividend has been declared, but not paid, then the continuation of the supervisor's powers, duties, obligations, responsibilities and functions effected by 14(1) would enable him to make payment of that declared dividend. However once the arrangement has been satisfactorily concluded by the issue by the supervisor of a completion certificate, the debtor, it seems to me, is released from all debts subject to the arrangement. In my judgment, that release applies for all purposes of the arrangement and brings an end to the trusts affecting the arrangement assets."
"My judgment is firmly rooted upon my interpretation of the effect of paragraph 9(2) of the Standard Conditions, which, in my judgment, has operated to release the debtor from all debts, which are subject to the arrangement, and means that there are no longer any beneficiaries of any trust created by the arrangement. In short, completion of the arrangement means what it says: that the arrangement has come to an end."
"It seems to me that the provision means what Mr Tucker submits that it means: that the debtor is released from all debts which are subject to the arrangement."
Lord Justice Irwin:
APPENDIX
"1 Miscellaneous definitions
1 In the Arrangement, except where the context otherwise demands:
(a) "the Act" means the Insolvency Act 1986 as amended; ...
(f) "Creditor" is a person bound by the Arrangement to whom a Debt is owed;
(g) "Debt" has the meaning given to it in section 382 of the Act with the modifications necessary to refer to avoluntary
arrangement;
(h) "the Debtor" means the person who makes the Proposal;
(i) "Dividend" means a distribution to Creditors.
4 Nature and effect of the Arrangement
4(1) [Nature of Arrangement] The Arrangement is a proposal under PartVIII
of the Act for a scheme of arrangement of the Debtor's affairs or a composition in full and final satisfaction of the Debtor's Debts.
4(2) [Claims against third parties] Unless the proposal indicates to the contrary, nothing in the Arrangement shall be construed as effecting a composition or satisfaction of any Debt owed by a person other than the debtor, whether that debt is owed jointly by the Debtor or otherwise.
4(3) [Restriction on Creditor's rights] After the commencement of the Arrangement, no Creditor shall, in respect of any Debt which is subject to the Arrangement:
(a) have a remedy against the property or person of the Debtor;
(b) commence or continue any action or other legal proceeding against the Debtor.
8 Duration of Arrangement
8(1) [General rule] Unless extended under the provisions of these Conditions, the Arrangement shall continue until the end of the period stated in the proposal.
8(2) [Extension of duration by Supervisor] The Supervisor may, if he thinks fir for the purposes of finalising the administration of the Arrangement, extend the duration of the Arrangement by sending a notice to this effect ("an Extension Notice") to the Debtor and all Creditors. This may be done on up to 2 occasions: for a period of up to 6 months in the first instance and for a period of up to 3 months in the second instance.
8(3) [Extension Notice] An extension Notice shall be sent not less than 7 days prior to the date upon which the Arrangement is otherwise due to complete and must state the reason or reasons for the extension.
8(4) [Effect of extension] In the event of the Extension Notice being sent, the Arrangement shall continue for the period specified therein, or for the maximum allowable period for that extension (being 6 months for a first extension and 3 months for a second extension) commencing on the date immediately after that on which the Arrangement would otherwise have been completed, whichever is the sooner.
8(5) [Supervising notice calling a meeting of Creditors] In the event that a meeting of Creditors has been called by the Supervisor for a time after the Arrangement would otherwise have expired, the duration of the Arrangement shall be extended to the date of that meeting and of any adjournment thereof.
8(6) [Further extension] Any extension for a period longer than that provided for under Paragraph 8(2) shall require approval as avariation
in accordance with Paragraph 81.
9 Completion of Arrangement
9(1) [The Completion Certificate]
Upon the expiration of the Arrangement, the Supervisor shall, if the Debtor has complied with his obligations under the Arrangement, issue a certificate ("the Completion Certificate") stating that the Proposal has been fully implemented.
9(2) [Effect of Completion Certificate]
Save to the extent provided in Paragraph 4(4), upon the issue by the Supervisor of a Completion Certificate, the Debtor shall be released from all Debts which are subject to the Arrangement.
9(3) [Notification of issue of Completion Certificate]
Copies of the Completion Certificate issued under this Paragraph shall be sent by the Supervisor to the Debtor, the Creditors, the Secretary of State for Trade and Industry and the Court together with the Supervisor's report under Rule 5.34 (completion or termination of Arrangement).
11 Termination of Arrangement
11(1) [Termination in certain circumstances]
The Arrangement shall terminate upon:
(a) the Supervisor issuing a Certificate of Termination under Paragraph 71;
(b) the making of a bankruptcy order against the Debtor;
(c) the Debtor's death.
12 Supervisor's functions
12(1) [Primary function] The Supervisor's primary function is to supervise the Debtor's performance of his obligations under the Arrangement and to administer the Arrangement.
12(2) [Other functions] The Supervisor shall also undertake such functions as are given to him in the Proposal, Act and Rules.
13 Supervisor's Powers
13 Subject to those powers more particularly given to him in the Arrangement, Act and Rules, the Supervisor shall have the following powers:
(1) [Getting in assets] power to take possession of, collect, get in and hold any or all of the assets which, under the terms of the Arrangement, he is to hold as trustee;
(2) [Realisation of assets] power to sell or otherwise dispose of any asset referred to in Sub-paragraph (1) in such manner as may seem to him expedient.
14 Supervisor's powers upon completion/termination
14(1) [Exercise of powers after completion/termination]
Completion and/or termination of the Arrangement shall not affect the Supervisor's power to carry out such of his functions and to exercise such of his powers as are necessary for him to fully carry out his duties, obligations and responsibilities under the Arrangement, Act and Rules and to resolve such matters as may have arisen during the course of the Arrangement.
26 Arrangement assets
26 Property other than Excluded Assets belonging to orvested in the Debtor at the date of commencement of the Arrangement which would form part of the Debtor's estate in a bankruptcy shall be subject to the Arrangement and be an asset thereof.
27 After-acquired assets
27(1) [After-acquired assets subject to arrangement]
Should the debtor inherit any property, or receive or become entitled to any property which had not been foreseen in the proposal then such property shall become an asset of the arrangement upon the debtor's becoming entitled to it ('After-Acquired Assets').
27(2) [After-Acquired Assets to be supplementary]
After-Acquired Assets shall be sold or realised to the extent necessary to effect full repayment of the creditors together with interest, if any, to which the creditors are entitled pursuant to the arrangement as such will be supplementary to any other contribution or property which the debtor is to include in the arrangement.
27(3) [Continuance of debtor's obligations]
Until the issue of a completion certificate all the debtor's obligations under the arrangement, including any obligations to make contributions or realise property, continue notwithstanding the realisation of any After-Acquired Assets.
28 Trust of Arrangement assets
28(1) [Assets in the possession of the Debtor]
Property constituting an asset of the Arrangement in the possession, custody or control of the Debtor shall be held by the Debtor upon trust for the purposes of the Arrangement until realisation thereof (if so provided) in accordance with the Arrangement.
28(2) [Assets in the possession of the Supervisor]
Property constituting an asset of the Arrangement in the possession, custody or control of the Supervisor shall be held by the Supervisor upon trust for the purposes of the Arrangement.
28(3) [Effect upon Trusts of termination of Arrangement]
Upon termination of the arrangement [within the meaning of paragraph 11] the trusts referred to in subparagraphs (1) and (2) shall cease save that assets already realised shall [after provision for the supervisor's fees and disbursements] be distributed to arrangement creditors.
49 Distribution by Dividend
49(1) [Duty to declare and distribute Dividends]
At the time or times specified in the Proposal or, if none, whenever the Supervisor has sufficient funds in hand for the purpose, the Supervisor shall, subject to the retention of such sums as he considers necessary for payment of the expenses of the Arrangement, declare and distribute Dividends among the Creditors in respect of those of their claims which have been admitted.
49(2) [Calculation and distribution of Dividend]
In the calculation and distribution of a Dividend the Supervisor shall make provision:
(a) for any Debts which are the subject of claims which have not yet been determined; and
(b) for disputed claims."