Peter Rees examines the validity of faxed proxies.

Peter Rees is a partner and licensed insolvency practitioner at Wansbroughs Willey Hargrave.

In the High Court at the end of November, Mr Justice Laddie decided that faxed proxies were now valid in individual voluntary arrangement cases. This overruled an earlier decision in Exeter County Court.

The facts of the case, to be reported as Re a Debtor (Nos. 2021 and 2022 in 1995) were relatively simple. The nominee of a proposed IVA called a meeting, giving particular notice to all the creditors. One creditor wanted to appoint the chairman as proxy to reject the proposal. The faxed proxy arrived in time for the meeting but the hard copy did not arrive until the following day. Having received the faxed proxy, the chairman tried to contact the creditor by telephone to confirm its authenticity, but was unable to do so.

He decided to reject the proposal according to the established principle. An IVA proposal was approved by the votes of the creditors present at the meeting.

The dissatisfied creditor appealed, alleging that there had been a material irregularity at the meeting. After a day and a half of argument, Mr Justice Laddie concluded, for a number of reasons, that the faxed proxy was valid and should have been accepted.

The case is important because it is the first in which the question of the validity of faxed proxies has been argued at length in the High Court.

The judge specifically stated that his decision was only concerned with IVAs and further stated that he made no comment as to the implication of this decision on other insolvency procedures.

The advice to insolvency professionals and other clients is that the decision is also binding on corporate voluntary arrangements. In all likelihood the same ruling will apply to other insolvency procedures as well.

This is a welcome clarification of the law. However, it may create another difficulty. In the case of IVAs/CVAs, there is no deadline, prior to the commencement of the creditors' meeting, for the submission of proxies, however transmitted. This may cause last minute disruption and increase the need for adjournments.

If the decision is subsequently upheld to apply to company voluntary liquidations as well, this same problem will not occur, because the rules require that the proxy must still be submitted prior to the meeting.