Property tycoon Moises Gertner, who is facing debts of around £600m, has lost a High Court battle over an individual voluntary arrangement (IVA) that would have seen creditors receive just 7 pence in the pound.
Gertner obtained approval for the IVA in December 2015 when his largest creditor, Kaupthing Bank HF – whom he claimed he owed £557m – voted in favour of the proposal.
However a second creditor, CFL Finance, which is owed £12m by Gertner, challenged the IVA and the position of Kaupthing Bank.
The High Court today upheld CFL’s challenge and revoked the IVA, finding that the IVA with Kaupthing was a device designed to allow Gertner to avoid losing the vote in a creditors’ meeting. It concluded that the vote in favour should be overturned.
Giving judgment, Judge Keyser QC said that Gertner’s estimated statement of affairs showed that, in addition to Crown creditors and connected creditors, he owed £582,809,270 to unsecured creditors. He said it was envisaged that the IVA “would result in a dividend to unsecured creditors of 0.07p in the pound”.
He concluded: “I am of the view that there was a material irregularity at or in relation to the creditors’ meeting that approved the proposal, in that Kaupthing’s vote ought not to have been admitted or, alternatively, ought only to have been admitted in a nominal amount.”
Today’s decision paves the way for all of the creditors to seek their debts in full from Gertner via a bankruptcy. It is expected that Gertner will seek permission to appeal the judgment.
Hannah Blom-Cooper, a legal director in the fraud defence group at Mishcon de Reya, which advised CFL Finance, said: “This judgment is a stern warning to debtors looking to abuse the IVA process by agreeing side deals with certain creditors. The court has shown that they will clamp down on any arrangements aimed at allowing debtors to avoid their obligations to creditors.”
