Re Nc

Judgment Date26 November 1999
Date26 November 1999
Docket NumberNo. 2313 AD
CourtHigh Court


No. 2313 AD


Bankruptcy - Company law - Directors - Arrangement - Evidence of fraudulent conduct on part of arranging debtor as company director - Protection of public - Company in receivership - Whether requirement to protect public and commercial community adequately served by disqualification order or restriction order.

The Court’s power under section 105 of the Bankruptcy Act 1988 to override the majority of creditors and refuse to protect the arranging debtor, would generally be exercised where the arrangement would offend against public policy, or where the arranging debtor had been guilty of immoral, reckless or dishonest conduct. In this case the indebtedness of the petitioner was inextricably linked to the management and business of the company and the alleged misconduct was committed on behalf of the company. Accordingly, the public policy of protecting the commercial community would be satisfied by making a disqualification order pursuant to section 160 of the Companies Act 1990. So held by the High Court in approving the proposal of the petitioner and making a disqualification order.


Judgment of Ms. Justice Laffoy delivered on the 26th day of November, 1999.


By Order of this Court made on 1st February, 1999 it was ordered, in pursuance of Section 87 of the Bankruptcy Act 1988 (the Act of 1988). that the person and property of the debtor named on the title hereof (the Arranging Debtor) be protected from any action or other process until further order. Pursuant to the direction of the Court, the preliminary meeting of creditors pursuant to Section 90(a) of the Act of 1988 was held on 6th October, 1999. Subsequently, at the private sitting, which was adjourned from time to time until last Monday, 22nd November 1999, the creditors voting either in person or by proxy unanimously accepted the proposal of the Arranging Debtor. Those creditors included Ulster Bank Commercial Services Limited (UBCS) whose claim was allowed by the Official Assignee and is deemed to be admitted in the sum of £1,158,000.


Section 92(1) of the Act of 1988 provides that if, at the private sitting, three-fifths in number and value of the creditors voting accept the proposal of an arranging debtor, it shall be deemed to be accepted by the creditors, subject to the approval of the Court and, if approved by the Court, the proposal shall be binding on the arranging debtor and on all persons who were creditors at the date of the petition and who had notice of the sitting.


Section 105 of the Act of 1988 provides that the Court may, if it thinks fit, adjudicate the debtor bankrupt if, inter alia, his proposal is not reasonable and proper to be executed under the direction of the Court. The issue addressed in this judgment is whether the Court should approve of the proposal of the Arranging Debtor.


The reason this issue is controversial, notwithstanding the clear statutory majority in favour of the proposal, is that in the interim period between the granting of protection to the Arranging Debtor and the private sitting. in July’ 1999, the Official Assignee, as he is empowered to do under Section 61(6) of the Act of 1988 “in case of doubt or difficulty.., in connection with the affairs of any bankrupt or arranging debtor”, sought the directions of the Court as to whether the Arranging Debtor should receive the continuing protection of the Court in the light of the evidence put by the Official Assignee before the Court. The evidence consisted of affidavits put by UBCS before the Official Assignee in support of its proof of debt, in which it was alleged that the debt claimed by UBCS to be due by the Arranging Debtor to it had arisen or had been contributed to by fraudulent conduct on the part of the Arranging Debtor.


The reference of the Official Assignee was heard on 28th July, 1999. Having heard the Official Assignee, Counsel for the Arranging Debtor and Counsel for UBCS, the Court ordered that the protection should be continued until further order. Counsel on behalf of UBCS had submitted that the protection should continue until all the creditors would have their “say” at the private meeting.


The Arranging...

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