An administrator accepted a proof for voting purposes at around a third of its value. This had the effect of giving that creditor more than 90% of the overall voting rights and the administrator’s proposals were approved. The decision was made in May but the director only discovered the valuation in July and considered the claim exaggerated. The administrators had sold some assets to a party connected with the creditor concerned.
An application to challenge the decision was made in August under IR 14.8 and 14.11, but these rules relate to adjudications on a proof for distribution purposes, not voting purposes. The correct rule was IR 15.35, but that application was now five months out of time. In view of that, the challenge could only proceed if the court was now prepared to extend the period of challenge. The court applied the Denton test which applies when seeking relief from sanction and refused the application. The directors knew the outcome of the vote in May (and so could have made enquiries earlier) and there were good practical reasons for the short time periods - extending time here would have caused significant disruption to the insolvency process and there was no compelling reason for the delay.
As well as being a reminder of the rules that apply to challenges of this type, the case highlights the importance of aggrieved creditors needing to act promptly.
Edwards v Tailby [2021] 7 WLUK 558