Premises used for business purposes — Business failed — Voluntary arrangement proposed — Interim order made preventing creditors pursuing legal proceedings against debtor — Whether landlord entitled to levy distress on debtor’s property for non payment of rent — High Court holding that right to levy distress not affected by existence of interim order
The applicants were the freehold owners and landlords of retail premises 36 Bucklersbury, Hitchin, leased to the tenants at an annual rent of £15,000. The tenants’ business declined and an individual voluntary arrangement under the provisions of Part VIII of the Insolvency Act 1986 was proposed. In November 1992 the county court made an interim order under section 252 of the 1986 Act that no bankruptcy petition relating to the debtor might be presented or proceeded with (section 252(2)(a)) and that no other proceedings, execution or other legal process should be commenced or continued against the debtor or his property except with the leave of the court.
In January 1993 the landlords distrained for arrears of £15,000 in rent. The tenants protested in view of the interim order, but the landlords took the view that they were entitled to act as they did notwithstanding the order. A district judge made an order restraining the continuation or completion of the distress and an order that the goods be restored to the tenants. The landlords applied to the High Court to discharge the order of the district judge
Held The landlords’ application succeeded.
1. The purpose of an interim order under section 252 was to protect and preserve the debtor’s estate from claims of creditors for a relatively short period of time to enable the creditors to consider the debtor’s proposals. Once they had had that opportunity, if they approved the proposal there was no longer any need for the interim order, for they would be bound by the arrangement and would all share in it: see section 262(1)(a).
2. If the creditors failed to approve the proposal, the creditors would be free to pursue whatever remedy each considered appropriate, including the presentation of a bankruptcy petition. Thus, the voluntary arrangement was a true alternative to bankruptcy.
3. Therefore, in construing section 252 it was legitimate to see how the 1986 Act dealt with the rights of creditors in the interim period between presentation and disposal of the bankruptcy petition as an analogy to the period between the initiation of the proposed voluntary arrangement and its disposal by the creditors’ meeting.
4. Considering section 285(1) and (2) which were the relevant provisions, it was clear that the words “other proceedings” in section 252(2)(a) were intended to relate solely to proceedings before a court, ie of a judicial or adjudicative nature. They were not apt to cover the ancient self-help remedy of distress for rent.
5. Moreover, section 252(2)(b) was intended to restrict only those rights which a creditor could enforce by “legal process” against the debtor or his property, that is process of a judicial or adjudicative nature and not rights which might be enforced without recourse to such process, ie the distress in the present case.
Nicholas Peacock (instructed by McLellans, of Hertford) appeared for the landlords; Martin Collier (instructed by Pellys, of Bishops Stortford) appeared for the tenants.