Booth v Mond

This is my extemporary judgment in the case of Nigel John Hargreaves, case number 48 of 2009 in the Wakefield County Court, case number 0LS 30100 in the Leeds District Registry, and case number 445 of 2010 in the Manchester District Registry. The applicant in this case is Mr. Philip Booth, in his capacity as supervisor of an individual voluntary arrangement in respect of Mr. Nigel John Hargreaves, his revised proposals having been approved on 24th February 2009. Mr. Hargreaves is represented by Miss Cristin Toman of counsel, instructed by Chadwick Lawrence of Wakefield. The respondent to this application is Mr. David Emanuel Mond in his capacity as former trustee in bankruptcy of Mr. Hargreaves. He is represented by Mr. David Moyhuddin of counsel, instructed by Halliwells of Manchester.

The bankruptcy order from which Mr. Mond derives his status was made on 18th July 2005. On the same day, Mr. Lawrence Ian Freedman was appointed to act as Mr. Hargreaves’s trustee in bankruptcy. By a block transfer of insolvency appointments order made by myself on 16th November 2007, Mr. Mond was appointed as Mr. Hargreaves's trustee in bankruptcy in place of Mr. Freedman. As I have indicated, Mr. Hargreaves was made bankrupt on 18th July 2005; and he was automatically discharged from that bankruptcy on 18th July 2006.

Prior to his discharge from bankruptcy, Mr. Hargreaves had entered into an income payments agreement dated 6th March 2006 pursuant to Section 310A of the Insolvency Act 1986 (as amended). The insolvency payments agreement was made between Mr. Hargreaves as the bankrupt and Mr. Freedman as his then trustee in bankruptcy. It provided, by clause 1, that the bankrupt was to pay to the trustee the total sum of £66,484 by equal monthly instalments of £1,846.78 out of his income. Those payments were to be made by the bankrupt on the first day of each calendar month, the first instalment to be made on or before 1st March 2006, and for a period of 36 consecutive months. Section 310A provides that an income payments agreement for the purposes of the section means a written agreement between a bankrupt and his trustee which provides that the bankrupt is to pay to the trustee an amount equal to a specified part or proportion of the bankrupt's income for a specified period.

A provision of an income payments agreement of such a kind may be enforced as if it were a provision of an income payments order. Section 310A(4) provides for sub-sections (5) and sub-sections (7) to (9) of Section 310 to apply to an income payments agreement as they apply to an income payments order. By sub-section (5), an income payments agreement must specify the period during which it is to have effect; and that period (a) may end after the discharge of the bankrupt, but (b) may not end after the period of three months beginning with the date on which the agreement is made. By sub-section (6), an income payments agreement may (subject to sub-section (5)(b)) be varied either by written agreement between the parties, or by the Court on an application made by the bankrupt, the trustee or the official receiver. By sub-section (7), the Court may not vary an income payments agreement so as to include provision of a kind which could not be included in an income payments order, and shall grant an application to vary an income payments agreement if and to the extent that the Court thinks variation necessary to avoid the effect mentioned in section 310(2). That sub-section provides that the Court shall not make an income payments order the effect of which would be would be to reduce the income of the bankrupt below what appears to the Court to be necessary for meeting the reasonable domestic needs of the bankrupt and his family.

The Insolvency Rules contain specific provisions relating both to income payments orders and income payments agreements. The provisions relating to income payments orders to are to be found in Chapter 16 of Part 6 at rules 6.189 through to 6.193, and the provisions relating to income payments agreements are to be found at Chapter 16A at rule 6.193A through to rule 6.193C. One of the issues that has arisen during the course of this hearing has been the effect in law of an income payments agreement and the means by which it is capable of enforcement.

In the course of her reply, Miss Toman, for the supervisor, submitted that an income payments agreement does not have contractual effect because there is no consideration for it. I reject that submission. I do so on two grounds: First, it seems to me that the consideration for entry into an income payments agreement is the implied forbearance by the trustee in bankruptcy of the institution of an application for an income payments order pursuant to Section 310; but in any event rule 6.193B sub-rule (2) provides that when the official receiver or the trustee signs and dates the income payments agreement it shall come into force. It seems to me that, by force of statute, even if there is no consideration for an income payments agreement, it thereupon becomes enforceable in the same way as any other agreement, by the force of the Insolvency Rules. Moreover, whilst specific provision many be contained within the Act and the Rules for the enforcement of an income payments agreement, it seems to me that any such means of enforcement are not intended to be exhaustive, and that the trustee in bankruptcy, as a party to the income payments agreement, is capable of enforcing it in any way that would apply to a normal contractual document.

Initially, and for a little over two years, Mr. Hargreaves kept up the income payments pursuant to the terms of his agreement; but it is common ground between the parties that the final nine instalments were unpaid such that, as at the date of the approval of the individual voluntary arrangement, a total sum of £16,620.84 was then due and owing. At no time has any application been made by Mr. Hargreaves, or by the trustee in bankruptcy, to vary the terms of the income payments agreement. It is unnecessary in those circumstances for me to go into what the likely outcome of such an application might have been, save to say this: that on the evidence before the Court, I am not satisfied that a case for varying the income payments agreement would have been made out. In particular, on the evidence before the Court, such as it is, I am not satisfied that Mr. Hargreaves would have been able to discharge the burden of establishing that the agreement had the effect of requiring him to make payments which would have reduced his income below what appeared to the Court to be necessary for meeting his reasonable domestic needs, together with those of his family.

In his individual voluntary arrangement, at paragraph 2.13, Mr. Hargreaves discloses that in April 2006 he had agreed to a three year income payments agreement with his trustee in bankruptcy commencing at £1,850 per month. He did not, however, disclose that he was in arrears with the payments thereunder; nor was his trustee in bankruptcy included within the schedule of creditors set out in the appended statement of affairs. There is in evidence before the Court an e-mail (at page 51 of exhibit DEMM1 to the witness statement of Mr. Mond dated 10th September 2009) which shows that, as of 11th December 2008, Mr. Hargreaves was sending an e-mail to a representative of the trustee in bankruptcy which showed that he was aware that the standing order for the income payments had been missed. He said that he had changed the family's bank account a couple of months previously, and he had been assured that everything would transfer, but he would check and make sure that the standing order was paid in December and from then onwards. Meanwhile, he said he had sent an extra payment for the one missed. It is apparent from the fact that, as of only two or three months later, nine months arrears were in existence, that Mr. Hargreaves did not do so. Further light is thrown upon that by a letter from Mr. Hargreaves to the same representative of the trustee in bankruptcy dated 27th April 2009 (at page 44 of exhibit DEMM1) in which he states that he was five months in arrears to the end of 2008. Given his financial situation, he says that he should perhaps have submitted a request to vary the agreement during its last year, but he had instead chosen to honour the payments where possible until he reached the end of the previous year, when the pressure from his creditors became too great.

There is no direct evidence from Mr. Hargreaves as to why he did not disclose the arrears under the income payments agreement in his proposal for his individual voluntary arrangement. Absent any such explanation, the inference that I draw is that Mr. Hargreaves was fully aware at the time of the proposal for his individual voluntary arrangement that he was in arrears, but he either chose not to disclose the fact or he considered - whether on professional advice or not it is not possible to say - that such arrears did not need to be disclosed for the purposes of his individual voluntary arrangement. But what I am satisfied of, on the evidence, is that it was not by any inadvertence that the existence of those arrears was not disclosed in his individual voluntary arrangement. So the position is that, at the time of the individual voluntary arrangement, there were arrears due and owing under the income payments agreement of some £16,620 odd; but the existence of those arrears, and the status of the trustee in bankruptcy as an actual or potential creditor, was not disclosed.

The trustee in bankruptcy wishes to recover those arrears from Mr. Hargreaves. Initially, he wrote to Mr. Hargreaves seeking to do so outside the individual voluntary arrangement; but, in response to Mr. Hargreaves’s letter of 27th April 2009 (to the effect that if he were to continue making payments under the income payments agreement, then he would immediately fall into arrears with his IVA payments, ultimately leading to its failure and no doubt to a second bankruptcy), on 29th April the trustee in bankruptcy, by his representative, wrote both to Dr. Hargreaves and to the supervisor of the voluntary arrangement indicating that, in order to deal with the arrears of the income payments agreement in the most pragmatic way, the trustee in bankruptcy would formally request that these be included in the IVA for the purpose of receiving a dividend in the sum of £16,620.84, the nine missed payments of £1,846.76 per month. After some intermediate correspondence, on 22nd June 2009 the supervisor responded that, having taken advice and looked at matters in detail, it was his contention that Mr. Hargreaves would have good grounds for making an application to the Court to vary the income payments agreement, and to have it discharged in its entirety, thereby wiping out the arrears and any claim in the IVA. For that reason he confirmed that the trustee in bankruptcy's claim was rejected in its entirety. He also indicated that any court proceedings initiated against Mr. Hargreaves for recovery of this amount would be defended.

Miss Toman has taken me to the provisions of the IVA and, in particular, to cause 6.6, which provides that a proof may be admitted for inclusion in the arrangement by the supervisor, either for the whole amount claimed or in part; and if the supervisor rejects a proof in whole or in part he is to prepare a written statement of his reasons for doing so and to send it forthwith to the creditor. In the event of such rejection, the creditor or purported creditor is to have the right of application to the court on the admissibility of such proof of debt or claim, provided that such application is made within 21 days of the creditor receiving the written statement. I do not view the correspondence, the terms of which I have just recited, as amounting either to the submission of a proof of debt or its formal rejection. It does not seem to me that any restriction in clause 6.6 is engaged. Miss Toman also took me to clause 6.7, in which Mr. Hargreaves expressed his belief that he had disclosed all of his liabilities. He continued: "However, should I have inadvertently omitted any creditor the supervisor will have the authority to invite any such creditor to participate in the voluntary arrangement subject to the supervisor considering that the creditor has a valid claim and subject to, if admitted, the likely dividend to unsecured creditors not being reduced by more than 10 per cent".

On the evidence, I am satisfied that if the trustee in bankruptcy's claim were to be admitted, the likely dividend to unsecured creditors would not be reduced by more than 10 per cent. However, as I have already indicated, on the evidence, I am not satisfied that clause 6.7 is engaged in any way because I am not satisfied that the trustee in bankruptcy was omitted inadvertently. On the evidence, Mr. Hargreaves knew of his unpaid liability to the trustee in bankruptcy; and it does not seem to me, on the evidence, that I can say that the trustee in bankruptcy was inadvertently omitted as a creditor.

Following on from the exchange of letters to which I have referred, the trustee in bankruptcy clearly contemplated making an application for an order pursuant to Section 263(3) of the Insolvency Act that sums due to the trustee from the bankrupt pursuant to the payments agreement were incorrectly excluded from the individual voluntary arrangement, and for an order that the supervisor be directed to include the trustee as a creditor within the IVA for voting and dividend purposes. To that end, Mr. Mond prepared the witness statement of 10th September with exhibit DEMM 1 to which I have already referred. Before any such application was issued by the trustee in bankruptcy, however, the supervisor, acting by Chadwick Lawrence, issued his own application in the Wakefield County Court dated 14th October 2009 and issued on 16th October. That application sought directions pursuant to Section 263(4) of the Insolvency Act as to whether or not sums due to the respondent in his capacity as trustee in bankruptcy of Mr. Hargreaves pursuant to the income payments agreement should be included or excluded from the individual voluntary arrangement for voting and dividend purposes.

The evidence in support of that application consists of a single witness statement of Miss Katharine Elizabeth Roberts dated 14th October 2009 together with exhibit KER1. Miss Roberts is a solicitor employed by Chadwick Lawrence, the supervisor's solicitors. In answer to the application, the trustee in bankruptcy, Mr. Mond, relies upon his witness statement of 10th September, together with a second witness statement made in response to Miss Roberts's witness statement of 9th November 2009 together with exhibit DEMM2. Those three witness statements together comprised the evidence on this application. I have had the benefit of written skeleton submissions from Miss Toman and from Mr. Mohyuddin both dated 27th January 2010, and of a written note to the Court from Mr. Mohyuddin dated 16th February 2010 addressing the points made by Miss Toman in her written submissions. I have also had the benefit of oral submissions from Miss Toman for a little over an hour, from Mr. Mohyuddin for about 50 minutes, and in reply from Miss Toman for about 20 minutes.

In the course of her oral submissions, Miss Toman indicated that in addressing the issue whether the arrears under the income payments agreement attracted a dividend under the terms of the individual voluntary arrangement, there were essentially three questions to consider: The first was whether the respondent trustee in bankruptcy was a creditor for the purposes of the IVA; secondly, whether the arrears under the income payments agreement amounted to a provable bankruptcy debt; and, thirdly, whether it was legally possible for a trustee in bankruptcy to compromise his claim to the payment of arrears under an income payments order or agreement within the context of an individual voluntary arrangement.

A number of points were, I think, common ground. The first is that arrears under the income payments agreement were a bankruptcy debt in relation to the individual voluntary arrangement for the purposes of the statutory definition in Section 382 of the Insolvency Act 1986. That is because they constituted a debt or liability to which Mr. Hargreaves was subject at the time of his individual voluntary arrangement. The second matter which is common ground is that, although they were a bankruptcy debt for the purposes of the 2009 IVA, they were not a bankruptcy debt for the purposes of the earlier 2005 bankruptcy because inevitably they post-dated the commencement of the 2005 bankruptcy, having arisen only in the course of that bankruptcy by virtue of the agreement of 6th March 2006.

It is at this point that the measure of common ground dissolves. Miss Toman submits that the arrears, although a bankruptcy debt, are not a provable debt within the meaning of insolvency rule 12.3. It is necessary to look at rule 12.3 in some detail. It provides that, subject as follows, "… in administration, winding up and bankruptcy, all claims by creditors are provable as debts against the company or, as the case may be, the bankrupt, whether they are present or future, certain or contingent, ascertained or sounding only in damages". There then follows, in sub-rule 12.3(2) a number of debts that are expressly provided not to be provable. They include “any obligation (other than an obligation to pay a lump sum or to pay costs) arising under an order made in family...proceedings”. I can pass over sub-rule 2(b) and move to sub-rule 12.3(3), which provides that nothing in the rule “prejudices any enactment or rule of law under which a particular kind of debt is not provable, whether on grounds of public policy or otherwise”.

Miss Toman submits that that exception applies to arrears under an income payments agreement or income payments order. I reject that submission. Miss Toman's submission is founded essentially upon two cases: the first is a decision of Rimer J in the case of Re Bradley-Hole(A Bankrupt) [1995] 1 WLR 1097. At page 117, just below letter E, Rimer J records that under the pre-1986 insolvency regime it was clear that no proof could be made in a bankruptcy in respect of (a) arrears of any periodical payments at the date of the receiving order or (b) future payments due to be made after the date of the receiving order. He explains that the reason underlying these decisions was that neither the arrears nor the future periodical payments were capable of valuation or estimation, since it was within the discretion of the Court as to how far arrears might be enforced and the Court could also vary its order as to any future payments. The inability to prove for these payments in the bankruptcy did not mean that the beneficiary was remediless, but that they simply remained personal liabilities from which the bankrupt was not discharged by his bankruptcy and the intended beneficiary could continue to look to enforce payment of them out of his personal earnings. Rimer J then went on to explain that the new insolvency regime introduced in 1986 had preserved those principles, although it dealt with the matter differently. He expressed the view that, on a natural reading of the definition of a “bankruptcy debt” in section 382 it could be said to include indebtedness under periodical payments orders, a construction which he said appeared to be supported by section 281(5), which was concerned with the effect of discharge from bankruptcy. But he went on to say that it was clear that no proof could be made in bankruptcy for any obligation arising under a periodical payments order because of the effect of rule 12.3(2), to which I have already referred.

Relying on a passage in the commentary of Muir-Hunter On Personal Insolvency at paragraph 7-1245.10, Miss Toman submits that the public policy exception in Insolvency Rule 12.3(3) applies to arrears under both an income payments order and an income payments agreement. She says that it is clear from authorities such as the decision of the Court of Appeal in Cartwright v. Cartwright [2002] EWCA Civ. 931 that foreign maintenance orders are not provable debts. The basis upon which they are not provable is that they are subject to variation or review by the Court and are therefore not final and conclusive. As such, they are not enforceable in the English courts and are therefore not provable in a bankruptcy. She submits that the important factor which makes a debt not provable is the fact that payments are subject to review by the Court. She submits that there is no reason to confine the rule that orders for the payment of a sum subject to review are non-provable to family proceedings, and that the reasoning in relation to family proceedings applies equally to the income payments agreement in this case.

As I say, I do not accept that submission. In her leading judgment in Cartwright v. Cartwright at paragraph 28, Arden LJ indicated that the Court there had to assume that the provision for periodical payments in a Hong Kong order was variable by the Hong Kong court. In those circumstances, the payments constituted a debt which by virtue of a rule of law was unenforceable in the United Kingdom. She then referred to Harrop v. Harrop. That is a reference to a decision of Scrutton J reported at [1920] 3 KB 386. At paragraph 17 of her judgment, Arden LJ had indicated that at common law a foreign maintenance order which was variable could not be enforced in England because it was not final and conclusive. That was the proposition for which she cited Harrop v. Harrop as authority.

The actual decision in that case was placed before me. It is clear that Scrutton J's reasoning proceeded on the footing that the foreign maintenance order in that case had been liable to be discharged or varied upon an application being made for an order to enforce it (see page 398 of the report). On that basis, at pages 401 to 402, Scrutton J expressed the view that the order in that case, an order made in the State of Perak, now in Malaysia, was not final and conclusive within the doctrine of English law which enabled judgments of foreign courts to be enforced in England.

I accept Mr. Mohyuddin's submission for the trustee in bankruptcy that it is not the fact of review that makes a debt non-provable in a bankruptcy; it is the fact of uncertainty and the absence of finality and conclusiveness which underlies the conclusion that the debt is non-provable. In my judgment, it would be an unwarranted extension of the cases concerning the non-provability of foreign maintenance and similar orders to extend them to arrears that have already accrued under either an income payments agreement or an income payments order. I can see no principled basis for saying that they fall within any rule of law which makes them not provable. There are no grounds of public policy which would justify such an exclusion; nor is there any reason in principle why they should not be provable in a bankruptcy.

In my judgment, arrears under an income payments order or agreement constitute a provable debt in the bankruptcy of the payer. It follows that, if Mr. Hargreaves's arrears do not fall within the scope of his individual voluntary arrangement, it would be open to the trustee in bankruptcy to enforce payment by way of service of a statutory demand, followed, in the event of non-payment, by the presentation of a bankruptcy petition. That course would only be avoided if the arrears fall within the scope of the individual voluntary arrangement.

It then becomes necessary to decide whether the arrears do so fall within the scope of the individual voluntary arrangement. Miss Toman submitted that it was not legally possible for the trustee in bankruptcy to compromise a claim for arrears under an income payments agreement or an income payments order within an individual voluntary arrangement. I was referred in this context to further observations of Rimer J in Re Bradley-Hole at page 1118, beginning at letter F. There Rimer J held that it was not possible to compromise a claim for the benefit of a periodical payments order because such benefit was incapable of being released by agreement, but could only be discharged by the court. In Rimer J's view, this principle prevented Mr. Badly-Hole from claiming in the voluntary arrangement in respect of payments destined to accrue in the period after the relevant date. He said that the essence of a voluntary arrangement was that under it each creditor compromised or released his rights against the debtor in respect of his pre-existing debt and received in exchange and in full satisfaction whatever payment terms were being offered by the debtor. It appeared to him that any claim by Mrs. Bradley-Hole in respect of those particular payments could only be on the basis that she had compromised or released her rights under the order against the bankrupt in exchange for the payment terms offered under the arrangement. In his judgment, it was not competent for her to make such a compromise or release; and he therefore concluded that she was not entitled to claim in the arrangement for any payments which fell due after 6th April 1990; but he went on to hold that the position was different with regard to the arrears which had accrued due by that date. Nevertheless, Miss Toman submits that that principle applies here.

It is clear from the terms of Section 310A(6) that an income payments agreement may, subject to sub-section (5)(b), be varied by written agreement between the parties. Therefore, unless sub-section (5)(b) of section 310A is infringed, there can be no problem about the trustee in bankruptcy varying by way of compromise the terms of an income payments agreement. What Miss Toman submits is that the terms of sub-section (5)(b) of Section 310A would be infringed by the trustee in bankruptcy seeking to include the arrears under the income payments agreement within the scope of the individual voluntary arrangement. This is because an income payments agreement may not end after the period of three years beginning with the date on which the agreement was made. Here the individual voluntary arrangement commenced almost at the end of the three year period of the income payments agreement and continues for five years. On that footing, Miss Toman submits that the trustee in bankruptcy's adherence to the individual voluntary arrangement would contravene the prohibition in Section 310A(5)(b). I reject that submission. What that sub-section is seeking to do is not to regulate how an existing accrued liability under an income payments agreement or order is to be satisfied. What it is doing is providing that an agreement by a bankrupt to pay to his trustee an amount equal to a specified part or proportion of his income should not continue for longer than three years. That is not what the trustee would be doing by agreeing to accept payment of a pre-existing accrued liability under an income payments agreement outside the three year period. The debtor has already agreed to pay his income for three years, but he has not honoured that obligation, and arrears have accrued. All that the trustee in bankruptcy would be doing by adhering to an individual voluntary arrangement in respect of those arrears would be compromising the manner in which he should be entitled to receive payment of those accrued arrears. He would be receiving no additional income outside the three years period. I reject the submission that the individual voluntary arrangement takes effect as a variation of the income payments agreement which would have the effect of extending the period during which it is to have effect. As Mr. Mohyuddin submitted, the individual voluntary arrangement does not make the income payments agreement last longer than three years; it merely imposes a new obligation as to the method of satisfying that liability. It therefore seems to me that the trustee in bankruptcy was able to compromise his claim to the arrears within the context of the individual voluntary arrangement.

The final question is whether the trustee in bankruptcy is a creditor who is bound by, and entitled to the benefit of, the IVA. Mr. Mohyuddin submits that he is, irrespective of the true construction of the individual voluntary arrangement itself. That submission is founded upon what he submits is the wide effect of Section 260(2)(b) of the Insolvency Act 1986. That provides that the approved arrangement binds every person who in accordance with the rules was entitled to vote at the meeting (whether or not he was present or represented at it), or would have been so entitled if he had had notice of it as if he were a party to the arrangement.

Miss Toman submits that that is not the case, but that a creditor who is not a party to the arrangement is only bound to the extent that the contractual terms of the arrangement are expressed to bind him. She submits that that is not the case here. I was told that there was authority relevant to this issue, but it was not available to be placed before me. Happily, in those circumstances, I do not find it necessary in order to resolve this issue to decide between counsel's competing submissions. I say that because it seems to me quite clear, on the terms of the individual voluntary arrangement itself, that it was intended to bind all of Mr. Hargreaves’s creditors, whether or not they were identified as such in the statement of affairs. I reject Miss Toman's submission that ‘creditors’, for the purpose of the individual voluntary arrangement, is limited to those creditors identified as such in the statement of affairs. Miss Toman laid some emphasis upon the fact that, at certain places in the agreement, ‘creditor’ or ‘creditors’ appears with a capital letter ‘C’ and in others it does not. It seems to me that there is no consistent use within the individual voluntary arrangement of the lower or the upper case where the word 'creditor' or 'creditors' appears. That can be seen by looking at the apparently indiscriminate use of ‘creditor’ or ‘creditors’ with a small ‘c’ in sub-clauses 6.3 in the last line and 6.4 in the first line. There seems to me to be no rhyme or reason underlying the use of the upper or the lower case letter ‘C’.

What is clear, however, is that the proposal begins with a definition of terms which are expressed to apply to the voluntary arrangement without any qualification, such as would be introduced by the words "where the context so requires or admits". ‘Creditors’, with a capital ‘C’, is defined as meaning secured creditors, preferential creditors and unsecured creditors. It is a comprehensive definition embracing all creditors of whatsoever nature. That is then reinforced by the succeeding provisions of the agreement. In paragraph [?] in clause 1.1 Mr. Hargreaves says that he makes the following proposal to his creditors for a voluntary arrangement in satisfaction of his debts. He expresses the wish to make an equitable distribution of voluntary contributions to his creditors. At clause 4.1 he says that his liabilities are also set out in the attached statement of affairs. He continues: "All my creditors on the day this proposal is approved, whether those creditors be present or future, certain or contingent, ascertained or for as yet unquantified damages, shall participate in the IVA unless otherwise stated". At clause 8.9 he says that the supervisor will pay all his creditors in accordance with the terms of the voluntary arrangement as agreed on a pro rata basis in full and final settlement of their claims against him.

In my judgment, on its true construction, the individual voluntary arrangement is intended to bind all of Mr. Hargreaves's creditors and not simply those identified as such in the statement of affairs by name. The only provision to which Mr. Toman can refer which points against that is the clause to which I have already referred, clause 6.7, referring to the inadvertent omission of any creditor. What Miss Toman submits is that this is crucial in narrowing the class of creditor to those disclosed in the statement of affairs. She submits that the discretion to expand the class of creditors is wholly inconsistent with the trustee in bankruptcy's submission that the IVA is intended to apply to all creditors. In my judgment that gives to clause 6.7 a meaning and effect that it simply does not bear. I cannot see how clause 6.7 can operate to derogate from the width of the definition of ‘creditors’. Mr. Mohyuddin submitted that it is regrettable that, in practice, IVA proposals are not always happily drafted. In my judgment, clause 6.7 should be seen essentially as a provision inserted out of an abundance of caution, which does not in any way derogate from the breadth of the expressed definition of ‘creditors’ as meaning all of Mr. Hargreaves's creditors, and thus as including the trustee in bankruptcy in his capacity of payee under the income payments agreement.

For all of those reasons, therefore, I reject Miss Toman's submission. The arrears under the income payments agreement amount to a debt; it is a bankruptcy debt for the purposes of the 2009 individual voluntary arrangement, but not a bankruptcy debt for the purposes of the earlier 2005 bankruptcy from which Mr. Hargreaves was discharged a year later. It is a provable debt; and it is a debt that falls within the scope of the individual voluntary arrangement. Had I not come to that conclusion, the inevitable result would have been, in my judgment, that the trustee in bankruptcy would have been entitled to enforce the arrears under the income payments agreement by seeking to petition for Mr. Hargreaves's bankruptcy a second time, thereby defeating the individual voluntary arrangement, contrary to the wishes of Mr. Hargreaves and, no doubt, his creditors who supported the IVA. In those circumstances, I find it somewhat surprising that the supervisor should have taken the stance that he did. I can see no proper basis upon which, had it been necessary to do so, the supervisor should properly have refused to admit Mr. Mond in his capacity as trustee in bankruptcy pursuant to clause 6.7 had it been necessary for Mr. Mond to rely on that clause. The likely dividend to unsecured creditors would not have been reduced by more than 10 per cent, and Mr. Hargreaves should have disclosed the arrears at the time of his proposal; but the supervisor has taken the stance that he has, and I find that, for the reasons I have given, the respondent in his capacity as trustee in bankruptcy is entitled to be included within the IVA for voting and dividend purposes.