No material irregularity at IVA meeting

An IVA was rejected by creditors. One of the creditors, who had voted in favour of the IVA in relation to a loan sum owing to him, applied for a reversal of the decision on the basis of material irregularity as a result of the failure by the IVA nominee to admit his further claim under a guarantee which, had it been admitted, would have resulted in the IVA being approved.

The creditor was Russian and wrote to the nominee before the meeting in Russian stating, among other things, that he could not speak English. The nominee wrote back in Russian using online translation software stating that the meeting was to be held at 10:00, Moscow time. In fact the meeting was to be held at 10:00, London time, ie three hours later. The creditor logged on at the wrong time and, realising his error and not being able to make the later meeting, sent through various documents in relation to the debt, but no proof of debt. Furthermore, an email attaching the reconciliation document purporting to state what was due under the guarantee was stuck in the creditor’s outbox and not received.

A member of the nominee’s team emailed the creditor during the meeting to ask him to confirm the amount owing, but received no reply and on that basis admitted the claim for the loan sum only.

In the circumstances, the judge ruled that there had been no material irregularity in the meeting and rejected the application, reasoning:

  • There was no obligation on the nominee to cause the notice of the meeting to be translated into Russian
  • The provision of the incorrect meeting time was an irregularity in that it misled the creditor, but it was not material as it was not a material reason why the creditor’s guarantee debt was not admitted where he still had time to, but did not send through a proof of debt or even an informal explanation of what he was claiming. The nominee cannot assume the existence of a debt from documents which do not state in terms what is due
  • Nor was the alleged refusal by the nominee to look at messages on the debtor’s mobile phone a material irregularity, as the nominee should not place reliance on documents not supplied directly to him by the creditor
  • In any event, given the various evidential issues in relation to the guarantee, even on the evidence in relation to the debt as put before the court, the claim could not have been valued at more than £1 at the meeting, which would not have affected the result.

Karapetian v Duffy and Foster, 6 May 2022, ICC Judge Mullen

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