BankruptcyIndividual voluntary arrangement - approving creditors offered secret collateral advantage - dissentient creditor entitled to bankruptcy orderCadbury Schweppes Plc v Somji: CA (Judge and Robert Walker LJJ and Sir Christopher Staughton): 20 December 2000The petitioner was a dissentient creditor who contended that majority approval of an individual voluntary arrangement (IVA) proposed by the debtor had been obtained by secret collateral payments made to two other initially dissentient creditors.

On its application for a bankruptcy order under section 276(1)(b) of the Insolvency Act 1986, the judge found that there had been a secret deal to influence the vote of two other creditors at the IVA meeting and that, if that fact had been known, it would have influenced the vote.

He held that he therefore had jurisdiction to make a bankruptcy order under section 276(1)(b).

The debtor appealed, contending that the judge erred in applying old authorities decided before the less formal new regime introduced by the 1986 Act.

Robin Potts QC and Nigel Dougherty (instructed by Evans Dodd) for the debtor.

Mark Phillips QC and Fidelis Oditah (instructed by Linklaters & Alliance) for the petitioner.Held, dismissing the appeal, that basic principles of equality and good faith between creditors derived from the old authorities had not been jettisoned under the new regime; that a debtor's proposal for an IVA with his creditors must therefore be characterised by complete transparency and good faith; and that if some creditors were induced to approve an IVA by a secret collateral advantage not disclosed to others, the court could be satisfied under section 276(1)(b) of the 1986 Act that information presented to the meeting was false or misleading or contained a material omission, and that a bankruptcy order should therefore be granted at the petition of a dissentient creditor.

(WLR)