In December 2015, Hart J heard (and refused) an application by Mr Golstein for revocation of a decision of 31 May 2012 passing a proposal by Mr Bishop to enter into an Individual Voluntary Arrangement (IVA). Mr Golstein, who was claiming a sum of £122,000 from Mr Bishop, appealed the decision on the basis that his claim was not correctly admitted for voting purposes and that there was material non-disclosure by Mr Bishop which led to the passing of the IVA.
- The Court held that Hart J was correct to value Mr Golstein’s claim at only £1. Mr Golstein’s claim, which arose pursuant to a nebulous partnership agreement, was not a claim in debt. It was a claim for damages and therefore an unliquidated and unascertained amount that, pursuant to the Insolvency Rules, should be valued for £1.
- The Court held that there was a material irregularity in the approval of the IVA due to the failure of Mr Bishop to disclose that he was subject to disciplinary proceedings before the Solicitors Disciplinary Tribunal. Objectively, disclosure would have caused those creditors that did not personally know Mr Bishop to assess the IVA differently and, because of the value of objective creditor votes, there would have been a substantial chance that the IVA would have been rejected.
This case provides useful guidance on the concept of materiality and non-disclosure in the context of IVAs. It is an objective test: whether a creditor objectively would have considered and assessed the IVA differently if the disclosure had been made, but the votes of creditors (acting on a subjective basis) must still be taken into account when calculating the impact that the non-disclosure likely had on approval.