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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Smith-Evans v Smailes  EWHC 3199 (Ch) (29 July 2013)
Cite as:  1 WLR 1548,  WLR 1548,  EWHC 3199 (Ch),  BPIR 306,  WLR(D) 423
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110 Fetter Lane,
London EC4 1NL
B e f o r e :
(Sitting as a Judge of the High Court
|CHRISTINE ANN SMITH-EVANS||Appellant|
|- and -|
165 Fleet Street, 8th Floor, London, EC4A 2DY
Tel No: 020 7421 4046 Fax No: 020 7422 6134
Web: www.merrillcorp.com/mls Email: firstname.lastname@example.org
(Official Shorthand Writers to the Court)
Mr Adam Al-Attar (instructed by Isadore Goldman) appeared for the Respondent
Crown Copyright ©
Monday, 29 July 2013
"If the nominee is of the opinion that the debtor…is able to petition for his own bankruptcy, the nominee shall, within 14 days…submit a report to the court stating—
(a) whether, in his opinion, the voluntary arrangement which the debtor is proposing has a reasonable prospect of being approved and implemented,
(b) whether, in his opinion, a meeting of the debtor's creditors should be summoned to consider the debtor's proposal, and
(c) if in his opinion such a meeting should be summoned, the date on which, and time and place at which, he proposes the meeting should be held."
"(1) A creditors' meeting summoned under section 257 shall decide whether to approve the proposed voluntary arrangement.
(2) The meeting may approve the proposed voluntary arrangement with modifications, but shall not do so unless the debtor consents to each modification."
"(1) This section has effect where the meeting summoned under section 257 approves the proposed voluntary arrangement (with or without modifications).
(2) The approved arrangement—
(a) takes effect as if made by the debtor at the meeting, and
(b) binds every person who in accordance with the rules—
(i) was entitled to vote at the meeting (whether or not he was present or represented at it), or
(ii) would have been so entitled if he had had notice of it,
as if he were a party to the arrangement."
"(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 approved by a creditors' meeting summoned under section 257 unfairly prejudices the interests of a creditor of the debtor;
(b) that there has been some material irregularity at or in relation to such a meeting.
(2) The persons who may apply under this section are-
(a) the debtor…"
(Then other persons are mentioned.)
"(3) An application under this section shall not be made (a) after the end of the period of 28 days beginning with the day on which the report of the creditors' meeting was made to the court under section 259 or
(b) in the case of a person who was not given notice of the creditors' meeting, after the end of the period of 28 days beginning with the day on which he became aware that the meeting had taken place…
(4) Where on an application under this section the court is satisfied as to either of the grounds mentioned in subsection (1), it may do one or both of the following, namely—
(a) revoke or suspend any approval given by the meeting;
(b) give a direction to any person for the summoning of a further meeting of the debtor's creditors to consider any revised proposal he may make or, in a case falling within subsection (1)(b) [material irregularity], to reconsider his original proposal…
(8) Except in pursuance of the preceding provisions of this section, an approval given at a creditors' meeting summoned under section 257 is not invalidated by any irregularity at or in relation to the meeting."
"I should be grateful if you would please review the above matters, and should you have any problems with the changes…please advise me by 4 p.m today at the latest, as I need to report to the court and all known creditors of the modifications that were made to the debtor's proposal."
There was no reply from TIX to this email, but the proposal was duly reported by the letter of 30 May 2008, which inferentially went after the 3 June email, as I have indicated.
"Both sides agreed that ratification is an election by a person to adopt a transaction purportedly entered into in his name or on his behalf, but not in fact authorised by him at the time. Effective ratification is 'equivalent to an antecedent authority' (Lord Sterndale MR in Koenigsblatt v Sweet  2 Ch 314, 325) and so it has retrospective effect."
Subsequently, the following statement of Pennycuick J in Re Mawcon Ltd  1 WLR 78 at 83 was cited by way of illustration:
"It is well established that a ratification may be implied from conduct. It is further well established that the adoption of part of a transaction operates as a ratification of the whole transaction. A principal cannot pick out of a transaction those acts which are to his advantage. If he ratifies at all he must ratify cum onere."
In my judgment, that applies in this case, so that any authority that the chairman may initially have lacked has been provided retrospectively by a ratification on the particular facts of this case.
"The chairman's decision on any matter under this Rule or under paragraph (3) of Rule 5.21 is subject to appeal to the court by any creditor or by the debtor."
Under sub-rule (4):
"If the chairman is in doubt whether a claim should be admitted or rejected, he shall mark it as objected to and allow votes to be cast in respect of it, subject to such votes being subsequently declared invalid if the objection to the claim is sustained.
(5) If on an appeal the chairman's decision is reversed or varied, or votes are declared invalid, the court may order another meeting to be summoned, or make such order as it thinks just.
The court's power to make an order under this paragraph is exercisable only if it considers that the circumstances giving rise to the appeal are such as give rise to unfair prejudice or material irregularity."
In that respect the criterion for an appeal precisely mirrors section 262.
"(6) An application to the court by way of appeal against the chairman's decision shall not be made after the end of the period of 28 days beginning with the first day on which the report required by section 259 is made to the court."
That also reflects the period specified under section 262.
"In my view, there is a difference between circumstances which give rise to something which may be described as a material irregularity and something which invalidates approval or means that approval was simply never achieved. I put this example to Miss Jordan. Take a case where the chairman wrongly calculated the votes and believes that 78 per cent of creditors have voted to approve an arrangement and reports to the court and the creditors and the debtor to that effect but in fact only 68 per cent of creditors voted to approve. In one sense that is indeed a material irregularity. But it goes further since as a matter of fact and of law the requisite majority was not attained such that in reality there never was approval. It cannot be that in those circumstances section 262(8) could be said to overcome the problem by making real that which simply never was. The reason it cannot is because of its wording, which presupposes approval: it is 'an approval given at a creditors' meeting' which 'is not invalidated'. Non-approval cannot, however, be transformed into approval."
"I do not…think that this problem can be solved by the suggested distinction between 'nullity' and 'procedural irregularity'. Such distinctions have not proved workable in administrative law…and I do not think they are workable here."
Though that was in a different context, it seems to me that those observations apply to the present context as well.