Neutral Citation Number: [2010] EWHC 1710 (Ch)
Case No: HC09C02293
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 9 July 2010

Before :

SIR WILLIAM BLACKBURNE
(Sitting as a Judge of the High Court)
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Between :

	(1) David Emmanuel Merton Mond 
(2) ClearDebt Limited	Claimants	
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	MBNA Europe Bank Ltd	Defendant	

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Stephen Davies QC and Paul French (instructed by RHF Solicitors) for the Claimants
Matthew Collings QC (instructed by Denton Wilde Sapte) for the Defendant 

Hearing dates: 15, 16, 17, 18 and 21 June 2010
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Judgment

Sir William Blackburne  : 
Introduction

1.	By these proceedings, started by a claim form issued on 3 July 2009, the claimants seek declarations that the defendant, which is a provider of consumer credit by means of credit card accounts, contravened various terms of the so-called IVA Protocol (“the Protocol”) when voting against the proposal for an IVA put forward by a debtor whom I will refer to simply as C.   (For reasons which will appear it was suggested by counsel, and I agreed, that the debtor should not be identified by name.)
2.	Clause 1.1 of the Protocol, headed “Purpose of the protocol”, states that “The purpose of the protocol is to facilitate the efficient handling of straightforward consumer individual voluntary arrangements …The protocol recognises that the IVA supports a valid public policy objective by providing debt relief for individuals in financial distress.  It also recognises that at the centre of this process there is a person, who needs to understand the process and the associated paperwork and the impact that the IVA will have on their lives”. Clause 2.1, headed “Scope of the protocol”, states that it is “a voluntary agreement which provides an agreed standard framework for dealing with straightforward consumer IVAs and applies to both IVA providers and creditors”.   It goes on to state that “[b]y accepting the content of the protocol IVA providers and creditors agree to follow the processes and agreed documentation that forms part of the protocol.”  
3.	 It appears that by what is described as an “Open Letter to Insolvency Service” dated 18 December 2007, Eric Leenders, Executive Director of the British Bankers Association (“the BBA”) wrote to confirm the “continuing support of our members” for the Protocol and that “[i]n practice that means that our members are expected to abide by the terms of the protocol in relation to proposals drawn up on the basis of the protocol”.    This is reflected in clause 2.2 of the Protocol.  The defendant, which I shall refer to simply as MBNA, is a member of the BBA and is a “creditor” within the meaning of the Protocol.
4.	The Protocol became effective on 1 February 2008.
5.	The claimants are both “IVA providers” within the meaning of the Protocol. The first claimant, Mr Mond, is a licensed insolvency practitioner and senior partner of Hodgsons Chartered Accountants, a firm which Mr Mond describes in his first witness statement as “one of the leading independent business rescue and corporate personal insolvency specialists in the North West of England”.   Mr Mond states that he has specialised in personal and business insolvency and related matters for about 40 years.  He has been a member of several professional and other bodies concerned with insolvency law and practice, especially in the field of business recovery, and with projects for the review and reform of the law and its practical implementation.  Those bodies include the Council of the Association of Business Recovery Professionals, the Debt Resolution Forum, the Consumer Finance Forum and the Joint BBA/Insolvency standing committee on the Protocol (whose functions are, among others, to monitor and review the operation of the Protocol and to communicate and consult on its future development).  He is also the founder and chief executive of the second claimant, ClearDebt, which, according to Mr Mond’s first witness statement, “is a provider of debt solutions for individuals, whether IVAs (in accordance with the Protocol or otherwise) or debt management plans (“DMPs”).   
6.	IVAs need no introduction.   They are governed by Part VIII of the Insolvency Act 1986 (“the IA”) and Part 5 of the Insolvency Rules 1986 (“the IRules”).   DMPs do need some introduction.    They are informal arrangements between a debtor and his creditors.   They are not supervised (in the way that an IVA, if approved, has a supervisor) and are not regulated in any way.    In substance a DMP is a non-binding agreement between a debtor and his creditor for the payment of the debtor’s debt over a longer period than that provided by the terms of the underlying indebtedness.   They are designed to enable the debtor to repay his indebtedness, usually by periodic instalments, over an agreed period without the need for a formal insolvency procedure such as an IVA or bankruptcy.   Because they are non-binding, the creditor can change his mind and pull out of the arrangement, or at any rate seek to do so.   The creditor may or may not “freeze” or “suspend” interest payments on the debt; similarly, the amount of the periodic payment can be altered from time to time.  There are essentially two species of DMP: one that is between the debtor and a single creditor (referred to in the evidence before me as an “internal DMP”) and one that is entered into by the debtor with all of his creditors.  In the latter case it is likely that the debtor will need the assistance of a specialist provider to set it up.  One of the members of the group to which ClearDebt belongs, a company known as Abacus (Financial Consultants) Ltd, is just such a provider.
C’s IVA proposal. 
7.	As I have mentioned, the claimants complain that, in voting against C’s proposal for an IVA (“the Proposal”), MBNA contravened various terms of the Protocol.   C’s circumstances were as follows.   
8.	In early February 2009 C approached ClearDebt for financial advice concerned with his loan and credit card liabilities.   After ClearDebt had reviewed his financial and personal position and advised him of his options, C elected to propose an IVA to his creditors.   ClearDebt’s advice had been that C should enter into bankruptcy as this would secure for him the greatest measure of debt relief but C was unwilling to do so.  He was then advised to propose an IVA to his creditors. Mr Mond agreed to become C's nominee for the purposes of the Proposal and to be the supervisor of the IVA upon its approval.   The Proposal disclosed that C, who was 23 years old at the time, lived at home with his parents, had no significant assets other than a motorcycle which he required for travel to his place of employment as a plumber, and had unsecured liabilities totalling £18,969 made up of two loan creditors and three credit card creditors (of which MBNA was one).   The smallest of the five was for £2,099 and the largest was MBNA for £5,536.    (In fact MBNA’s claim was for a slightly larger amount but nothing turns on this.)  The Proposal also disclosed that C had a monthly income of £1,083, monthly outgoings of £860 and, in consequence, when applying what are known as the CCCS [or Consumer Credit Counselling Service] Budget Guidelines (a widely recognised standard in the field of personal insolvency), an excess of income over expenditure of £223 per month.  The Proposal stated that in the event of C’s bankruptcy unsecured creditors would receive nothing.   By the Proposal C proposed that his IVA would last for 60 months and that he would pay into it £223 per month (being his “disposable” income, namely the excess of his likely income over his CCCS-calculated expenditure) by standing order starting within 31 days of the approval of the IVA so that the funds injected into it, if each monthly payment was made, would total £13,380. The nominee’s fee, excluding VAT, would be £1500 and the supervisor’s fee, again excluding VAT, would be 15% of all realisations (after the payment of the nominee’s fee) and would be drawn as sums were received. In addition, 3.15% of the proposed monthly contribution would be paid to ClearDebt by way of premium for insurance to indemnify C against being unable to work owing to accident, illness or unemployment during the period of the IVA.   It was anticipated that the total estimated dividend payable to creditors would amount to 46p in the £.
9.	C was a “straightforward consumer” within the meaning of the Protocol.   This is because clause 3.1 of the Protocol states that “a person suitable for a straightforward consumer IVA is likely to be: in receipt of a regular income either from employment or from a regular pension, have 3 or more lines of credit from 2 or more creditors”.   C fulfilled both criteria.   The Proposal went on to propose that the terms of his IVA should consist of his Proposal and the standard conditions for IVAs as published by the IVA Forum.  Those standard conditions are as set out in Annex 4 to the Protocol.   It was common ground before me that the Proposal was, in the jargon, “protocol-compliant” or, as it was described,  a “PCIVA”. 
10.	The Proposal, in accordance with the procedure laid down by the IA and IRules where there is no intention to apply for an interim order, was sent to C's creditors under cover of a letter dated 3 March 2009 giving notice of an intended meeting of creditors on 18 March 2009.   At the same time Mr Mond, as nominee, submitted a report to the court in compliance with the then requirements of section 256A of the IA.  By a proxy dated 11 March 2009, MBNA (acting by its agent KPMG) instructed Mr Mond as chairman of the proposed creditors’ meeting to vote against the Proposal.  The following grounds for rejection were stated on a document which accompanied the proxy form: “high fees”, “disposable income available for a DMP” and “minimal number of creditors”.  The document in question was prepared and sent by KPMG following instructions from Ms Karen Reddy, an employee of the defendant.  At the time her role was to review and come to a decision on IVA proposals, in particular whether to support or reject them. C’s Proposal came before her.  The upshot was that her actual instruction to KPMG as to the reasons for rejecting the Proposal differed slightly from those stated on the document which accompanied the proxy form mandating Mr Mond to vote against it at the forthcoming meeting of creditors.  
11.	As MBNA held more than 25% of C’s indebtedness, MBNA’s decision to reject the Proposal meant that it would not be approved.    The meeting fixed for 18 March 2009 was adjourned for seven days to 25 March.   There were communications between Mr Mond on the one hand and MBNA (and KPMG on its behalf) on the other to see whether MBNA would be willing to withdraw its opposition.  MBNA was not willing to do so.  On 25 March the meeting of creditors was again adjourned for a few days.   When it became apparent that MBNA was not willing to withdraw its opposition the Proposal was withdrawn.
12.	MBNA’s precise reasons for opposing the Proposal and whether those reasons changed as the days passed have been a matter of some dispute.   One at least of those reasons was (and was throughout the process) MBNA’s view that, having regard to C’s disposable income and the small number of creditors, a DMP was feasible and manageable.   The relevance of the number of creditors was that, if only few in number, they could be more easily contacted with a view to similar arrangements being entered into.   To this end a member of MBNA’s Insolvency Team contacted C in mid-April 2009 with the offer to set up a DMP for him.   The result was that on 16 April he agreed to do so on terms that he would make a monthly payment of £70 towards his indebtedness until it was paid off (with interest and fees chargeable in respect of the indebtedness being frozen in the meantime), the payments would be made by direct debit and the arrangement would be reviewed annually.    The figure of £70 per month was calculated as that proportion of his monthly disposable income of £223, taking into account the amounts owed to his other creditors, which would leave a balance sufficient to make proportionate monthly payments to those other creditors. In accordance with this arrangement C paid the initial monthly instalment later that month and has since continued to meet the monthly instalments due under the arrangement.  The evidence discloses that C was able to enter into DMPs with each of the other four creditors, reviewable six-monthly.
13.	The position therefore is that C has come to informal arrangements with each of his five creditors for the payment of their respective debts by instalments.   There is nothing in the evidence to indicate that any of the other four creditors is unhappy with these arrangements or, more particularly, that either C or any of those other creditors has any complaint to make about MBNA’s opposition to C’s (now withdrawn) Proposal.   The only persons who, it would appear, are unhappy with what has happened are Mr Mond, the nominee under the Proposal (and, if the Proposal had been accepted, the intended supervisor under the IVA), and ClearDebt which had advised C on his options and suggested to him that an IVA was the best solution once he had rejected the bankruptcy option. It is because C is not a party to these proceedings and makes no complaint against MBNA, but the proceedings have as their factual foundation the circumstances in which C’s Proposal was launched but was later withdrawn, that counsel suggested, and I agreed, that C’s identity should not be revealed.
Declaratory relief: the nature of the Protocol
14.	The only relief claimed is for declarations that, by voting against the Proposal, MBNA acted in breach of various provisions of the Protocol.  (In fact the Proposal was never put to the vote but MBNA’s intention to vote against was its instruction to Mr Mond on the proxy form.)
15.	An issue arises as to whether in the circumstances of this case it is appropriate for the court to grant declaratory relief at all.   Mr Matthew Collings QC, appearing for MBNA, submitted that the Protocol does not create binding obligations enforceable in law between creditors and IVA providers (the expression used in the Protocol and defined to mean insolvency practitioners and IVA provider firms employing insolvency practitioners: see clause 2.5) but is no more than a voluntary industry standard or guideline framework for use by those who have agreed to give effect to it.   Creditors do not have to follow its terms but choose to do so because doing so facilitates the efficient handling of straightforward consumer IVAs.  Disputes over its meaning and application are for that reason non-justiciable.  The court, he submitted, should decline to grant any declaratory relief.   
16.	For the claimants, Mr Stephen Davies QC submitted that the terms of the Protocol are binding on members of the BBA (including therefore MBNA) because, through the BBA (by its Executive Director’s letter of 17 December 2007) they agreed to comply with it.   It creates, he said, mutual obligations of a bilateral nature.  The promises that each side makes to the other are not gratuitous: they are supported by consideration.   The structure is that if a provider chooses to present a PCIVA, that provider will comply with the letter of the Protocol.   The quid pro quo is that the BBA member will then be obliged to comply as well.   The agreement (i.e. the Protocol) is “voluntary” only in the sense that there is a choice whether or not to enter into it. It is binding once entered into in that if the provider decides to use it as a framework for the proposal BBA members, through their association’s letter, have agreed to comply with it.   The BBA may withdraw its members from it without breaching it.   But while the BBA continues to give its support to it, the Protocol has effect as between the relevant parties when it is invoked.   When invoked it therefore creates obligations of a binding nature.    Moreover, the core duties are expressed as “obligations” and should be construed as such.   Conversely, it is hard to see why the parties would want to enter into an agreement which did not bind them to fulfil its terms.   The fact therefore that the Protocol is described as a “voluntary agreement” does not denote that there was no intention to create legal relations.
17.	If the Protocol does operate as Mr Davies submitted, it constitutes in effect an elective contract: it is only if the IVA provider chooses to prepare a PCIVA proposal that the creditors (and then only those of them that have agreed, directly or through an association such as the BBA, to abide by its terms) are contractually obliged to observe its terms.   If that is indeed its effect, it gives rise to a very peculiar contract.   Presumably, it is between the IVA provider as the person involved in the PCIVA proposal and each creditor who has agreed to be bound by the Protocol.   If there are several such creditors in any given case presumably several such contracts arise.   But the IVA provider is no more than the person who has advised and assisted the debtor to formulate and present his proposals.   The proposal, whether Protocol-compliant or not, is that of the debtor.   Yet clause 3.6 of the Protocol states in terms that “[t]he protocol does not require that the debtor has to follow the protocol process …”
18.	It is clear to me that the Protocol is not intended to operate in the way that Mr Davies suggested.   It is clear that, as Mr Collings submitted, it operates as a voluntary industry standard or code of best practice.   This is evident not least from the language used in the Protocol and the imprecise and aspirational nature of many of its terms.
19.	Thus, by clause 2.1, it is stated that “Creditors are expected to abide by the terms of the protocol in relation to proposals drawn up on that basis” (emphasis added).   (Mr Davies accepted, I should say, that the “creditors” there referred to are creditors who have agreed to support the Protocol.)
20.	The key definition of a “straightforward consumer IVA” to which the Protocol is intended to apply (see clause 3.1) is couched in uncertainty.   Thus, clause 3.1 states that “Not all cases can be classified as a straightforward consumer IVA.   A person suitable for a straightforward consumer IVA is likely to be …” (emphasis added). Two tests then follow.  (I have set them out at paragraph 9 above.)   There follow a series of provisions setting out considerations which either are not material to the application of the Protocol or else operate to render a person’s circumstances “unsuitable” for the application of the Protocol.   But the dividing line between what is and what is not a “straightforward consumer IVA” remains somewhat elusive.   
21.	Clause 4 is aspirational in nature.   Headed “Transparency”, it states (by clause 4.1) that “All parties should act openly and disclose all relevant matters”.   Clause 4.2 then gives some examples - I do not understand them to be exhaustive - of what should be disclosed.   Clause 4.5 provides that “…behaviour which does not comply with the terms of the protocol may be reported to the standing committee”.   It then adds “however, the standing committee does not override existing regulatory procedures”.   The standing committee is referred to in clause 2.6 and has the function of monitoring and reviewing the efficient operation of the Protocol.    
22.	Clause 6 which is one of a group of clauses under the general description of “Obligations on insolvency practitioners” is headed “Advice”.   Clause 6.1 states that:
“When approached by an individual in financial difficulty, the IVA provider will ensure the individual receives appropriate advice in the light of their particular circumstances, leading to a proposed course of action to resolve their debt problem.   Full information on the advantages and disadvantages of all available debt resolution processes should be provided.    Non-financial considerations should be taken into account.”
This is a provision to which the claimants attach considerable importance.   The duty of the IVA provider under this clause is to the “individual in financial difficulties” who has approached him for advice.   That individual, however, is not a party to the Protocol and, as has been seen, is not bound to follow “the protocol process” (see clause 3.6). The statement at the conclusion of clause 6.1 that “non-financial considerations should be taken into account” leaves unstated what those considerations might be.
23.	The purpose of clause 6.2 is not at all clear.  This states that:
“It is accepted that for some, bankruptcy is not a preferred option as it could lead to loss of employment or membership of a professional body, which then has other financial consequences.   Others may wish to avoid the perceived stigma of bankruptcy.”
At the most, this clause appears to remind the IVA provider that bankruptcy may not be the best “debt resolution process” (the expression used in clause 6.1) for the debtor in question.   
24.	Clause 7 states what information concerning assets, liabilities, income and expenditure, should be included in a proposal and how such information should be verified.  It provides a useful guide or check-list of the steps that should be taken to perform this essential part of the IVA process.   
25.	Clause 8, headed “Use of standard documentation”, starts by emphasising the utility of the use of such documentation.   Then, clause 8.2 states that:
“For protocol compliant IVAs, IPs should use the agreed standard terms (Annex 4) and the summary sheet (Annex 5).   There is no standard format for the IVA proposal.”
And clause 8.3 then states:
“All documentation should state clearly that the IVA follows the protocol and that the agreed format IVA documentation has been used.   Similarly, any variation from the protocol …should be clearly identified in all relevant paperwork.”
(There was a difference between the parties as to how strictly this provision was to be observed.   Curiously, Mr Mond was of the view that any departure from the strict terms of the Protocol would render the proposal in question non-compliant, while MBNA’s view was that variations from the Protocol, if identified, would not necessarily have that effect.    Yet according to Mr Davies’s argument, on this vital question (has there or has there not been compliance with the Protocol and, if there has not, does the Protocol nevertheless continue to apply?), hangs whether, if the proposal is Protocol-compliant, there results a contract binding on creditors who have agreed to give effect to the Protocol.)
26.	Clauses 12 to 15 set out what are described in a side heading as “Obligations on creditors”.   Clause 12.1 states that:
“In all dealings with a customer proposing an IVA under this protocol, creditors will continue to treat the customer in accordance with the regulatory standards and codes of practice to which they are subject…”
There is then a reference to annex 2 which in turn contains references to the Banking Code and to certain OFT guidelines.   Clause 12.2 obliges creditors “[t]hroughout the duration of a protocol compliant IVA to treat their customers as referred to in clause 12.1.”   The clause also obliges creditors to “co-operate with the duly appointed nominee and supervisor in relation to the efficient operation of this protocol…”
27.	Clause 12.3 obliges “Lenders” to take “reasonable measures to avoid offering further credit to individuals known to have an IVA in place, unless this is in justifiable circumstances…”   Apart from the aspirational nature of this provision and the uncertain nature of the exception (“…unless this is in justifiable circumstances…”) it is not obvious who the “Lenders” are to which the clause refers.   Are they any lenders or are they confined to existing creditors of the debtor?   If it is the former, one wonders how the clause is to be enforced.   
28.	Clause 13, in particular clauses 13.1 and 13.2, is a key provision in the current dispute.   I set out those two sub-clauses:
“13.1	It is understood that one of the aims of the Protocol is to improve efficiency in the IVA process and to this extent creditors and IVA providers will avoid the need for modifications of an IVA proposal wherever possible.   This does not affect the right of creditors to vote for or against an IVA proposal.
13.2   Where a creditor or their agent on their behalf votes against a protocol compliant IVA proposal, their reason for so doing should be disclosed to the IVA provider.”
Clauses 13.3 to 13.5 set out matters which are largely covered by the standard terms referred to in clause 8.2.
29.	The overall impression given by the Protocol is that it sets out how the IVA provider, on whose advice and with whose assistance the debtor presents a PCIVA proposal, should go about the process of formulating and advising him on it and, assuming the proposal is Protocol-compliant, how the creditors who have elected to abide by the Protocol, should treat the debtor.   It is clearly a statement of best practice.   It does not in my view seek to set out the terms of any contract by which the IVA provider and the creditors, electing to operate the Protocol, are to be bound in law.
The relief which the claimants seek
30.	But does that mean that the court should decline to express any view, by declaration or otherwise, on the meaning and operation of the Protocol?   Before coming to a view on this I should set out the declarations which the claimants seek.  They all allege Protocol contraventions by MBNA in its treatment of C’s (now withdrawn) Proposal.  I set them out in a slightly different order from the order in which they appear in the particulars of claim. 
31.	The claimants allege contraventions of clause 2.2 and annex 1.   Clause 2.2 recites that “Creditors who are members of the [BBA] have indicated their support of the protocol process in a letter attached at Annex 1…”   Annex 1 is Mr Leenders’s letter of 18 December 2007 referred to earlier.   It confirmed the continuing support of BBA members “as we move towards full implementation of the new standards” and stated that “in practice that means our members are expected to abide by the terms of the protocol in relation to proposals drawn up on the basis of the Protocol”.   The claimants allege that, contrary to that expectation, by rejecting a PCIVA proposal on the ground that a DMP is more suitable where, on the figures, the debtor is able to repay his debt to MBNA within ten years, alternatively on the ground that “the debtor has a minimal number of creditors and/or it is reasonable for the debtor to engage with the creditors individually”, MBNA was “voting against a PCIVA in circumstances where the most appropriate solution to [C’s] financial circumstances was an IVA” and was “failing to recognise and acknowledge that the nominee in relation to the proposal and in accordance with clauses 6 and 7 of the proposal has …prior to the preparation of the proposal in compliance with the Protocol, conducted an in-depth and thorough review of the debtor’s circumstances, financial capabilities and ability to repay outstanding debts; and … in accordance with the legislation and best practice guidance issued by the appropriate governing bodies …concluded that an IVA is the most appropriate debt management solution having regard to the circumstances”.
32.	They allege (and primarily allege) contravention of clause 13.2.  This clause states that “where a creditor or their agent on their behalf votes against a protocol compliant IVA proposals, their reason for so doing should be disclosed to the IVA provider”.    The claimants allege that in voting against the Proposal on the basis that C had sufficient income available for a DMP, MBNA was (a) contravening that clause in that “although a reason was provided, it was not a justifiable reason since, in the context of the Protocol, the most appropriate debt solution to [C’s] financial circumstances was a PCIVA and a DMP would render [C] worse off”; (b) contravening clause 2.2 and annex 1 in that it was “voting against a PCIVA in circumstances where the most appropriate debt solution to [C’s] financial circumstances was a IVA”; (c) “failing to recognise and acknowledge that Mr Mond, as nominee in relation to the Proposal and in accordance with Clauses 6 and 7 of the Protocol, had…prior to the preparation of the Proposal in compliance with the Protocol, conducted an in-depth and thorough review of [C’s] circumstances, financial capabilities and ability to repay outstanding debts and…in accordance with the legislation and best practice guidance issued by the appropriate governing bodies, concluded that an IVA was the most appropriate debt solution having regard to the circumstances” and (d) “voting entirely in its own interests without regard to [C’s] financial position and the interests of the general body of [C’s] creditors”.  This is the core complaint (“the core complaint”) to which I shall return later.  The separate complaint – summarised in the preceding paragraph – is encompassed within this complaint and does not add anything.
33.	They also allege that in voting against the Proposal on the basis that C had a minimal number of creditors (see the statement of the grounds for rejecting the Proposal set out in paragraph 10 above) MBNA contravened clause 13.2 since such a reason was not a justifiable reason as, in the context of clause 3.1, C had precisely the sort of credit contemplated as being appropriate for a PCIVA and that MBNA contravened clause 2.2 and Annex 1 in that it was voting against a PCIVA in circumstances where the most appropriate debt solution to C’s financial circumstances was an IVA”.  This complaint adds nothing.  I explain later how it arises. 
34.	They allege, finally, that MBNA’s conduct was in breach of the Protocol insofar as it rejected the Proposal because the fees of the nominee and supervisor were too high (see paragraph 10 above) or that it was not happy with the reduction in C’s salary or that he had conducted transactions on his MBNA credit card account after contacting ClearDebt for advice or because of what were referred to as “C’s demographics” (by which I understood, his age and personal circumstances).   
Declaratory relief: is it appropriate to grant any? 
35.	The court’s jurisdiction to grant a declaration is undoubted: the present statutory basis for doing so is section 19 of the Senior Courts Act 1981 and CPR r40.20.   The principles governing the exercise of this jurisdiction were recently summarised by Aikens LJ in Rolls-Royce plc v Unite the Union [2009] EWCA Civ 387; [2010] 1WLR 318 at 120:     
“120	For the purposes of the present case, I think that the principles in the case can be summarised as follows.
(1)	The power of the court to grant declaratory relief is discretionary. 
(2)	There must, in general, be a real and present dispute between the parties before the court as to the existence or extent of a legal right between them.   However, the claimant does not need to have a present cause of action against the defendant.
(3)	Each party must, in general, be affected by the court’s determination of the issues concerning the legal right in question.
(4)	The fact that the claimant is not a party to the relevant contract in respect of which a declaration is sought is not fatal to an application for a declaration, provided that it is directly affected by the issue; (in this respect the cases have undoubtedly “moved on” from Meadows).
(5)	The court will be prepared to give declaratory relief in respect of a “friendly action” or where there is an “academic question” if all parties so wish, even on “private law” issues.   This may particularly be so if it is a “test case”, or it may affect a significant number of other cases, and it is in the public interest to decide the issue concerned.
(6)	However, the court must be satisfied that all sides of the argument will be fully and properly put.   It must therefore ensure that all those affected are either before it or will have their arguments put before the court.
(7)	In all cases, assuming that the other tests are satisfied, the court must ask: is this the most effective way of resolving the issues raised?   In answering that question it must consider the other options of resolving this issue.”
In Financial Services Authority v Rourke [2001] EWHC 704 (Ch), Neuberger J observed (on page 6) that:
“…When considering whether to grant a declaration or not, the court should take into account justice to the claimant, justice to the defendant, whether the declaration would serve a useful purpose and whether there are any other special reasons why or why not the court should grant the declaration.”
In Nokia Corporation v Interdigital Technology Corporation [2007] EWHC 3077 (Pat) Pumphrey LJ asked [at 5] when considering whether to grant a negative declaration  
“…Would the declaration if granted be the legal equivalent of shouting in an empty room, or is there some point in it?”
36.	The principal issue which has been debated before me, namely what scope there is under the Protocol for a creditor, expected to abide by the Protocol’s terms, to reject a PCIVA proposal is one of considerable practical importance in the operation of the Protocol.   I was told that members of the BBA constitute over 90% in value of the creditors in the average “straightforward consumer” IVA, i.e. an IVA proposed by the ordinary man in the street who gets into debt.   This is because most of the indebtedness in such cases arises from credit card transactions.    As its opening words proclaim, the Protocol is intended to facilitate, albeit in a non-binding manner, the efficient handling of straightforward consumer IVAs.   I was told, and accept, that it has had a considerable and beneficial impact on the day to day operation of the IVA process in straightforward cases.   As Mr Mond’s first witness statement explained, it was the existence of the Protocol which, ostensibly at least, led to the Insolvency Service withdrawing on 27 October 2008 a Legislative Reform Order (under the Legislative and Regulatory Reform Act 2006) which was aimed at simplifying IVAs and introducing other changes to the process. (I explain later some of the background that led to the laying of the Order.)  The Insolvency Service press statement which followed the LRO withdrawal stated that: 
“The successful operation of the IVA Protocol has resulted in many of the desired improvements in the IVA marketplace being implemented without the need for further legislation, a position which has become clear within the past two months.   Those in the industry have worked hard to streamline the process for IVA approval with far fewer modifications now being proposed.   It is now felt that the operation of the Protocol should continue to be monitored by the IVA Standing Committee, and that legislative change in this area should not be necessary as long as policy objectives are being met by non-statutory means.”
37.	I have therefore come to the view that, even though the Protocol does not give rise to a legally enforceable contract but is no more than a voluntary code of practice, the court should not decline, on that account alone, to exercise its discretion to grant declaratory relief in respect of it. It sets out the framework within which the parties to it are expected to approach large numbers of IVAs.
38.	That said, however, I feel considerable difficulty about granting any kind of declaratory relief on this claim where the only persons who are before me to debate the correct operation of the Protocol are two IVA providers, in reality Mr Mond alone since he effectively controls ClearDebt, and one, albeit important, member of the BBA.  I acknowledge Mr Mond’s very considerable knowledge and experience of IVAs and his involvement in the consultations which led to the establishment of the Protocol.   I do not think, however, that it is right for the court to pronounce formally on the meaning and effect of an industry-wide guide to good practice in the way that I am invited to do.   I might have been the more inclined to grant declaratory relief if, for example, the BBA had been represented before me and if I had felt confident that the views expressed by Mr Mond on the way that the Protocol is intended to operate were representative of the broad spread of IVA providers.  I am far from persuaded that they are. In evidence was an exchange of correspondence showing that the ICAEW to which a great many insolvency practitioners belong does not accept Mr Mond’s position on what I have described as the “core complaint”.  
39.	There is another reason why I am unhappy about being asked to make declarations of the kind sought.  I indicated in the course of argument that I doubted very much whether it was appropriate to make formal declarations in respect of an IVA proposal which was withdrawn, where the parties who would have been affected by it if it had been pursued to a vote and approved by the necessary majority, namely C and the five creditors, have since reached arrangements for the discharge by C of the debts he owes to those creditors and where C is not a party to the proceedings and no steps have been taken to canvass his views on any of the questions that arise.  Some of those questions have concerned what precisely he was advised to do by ClearDebt and why, and, later, by MBNA when it suggested that he might wish to enter into a DMP.
40.	Take for example the allegations summarised in paragraph 34. They turn on facts specific to C’s now abandoned Proposal and no useful purpose would be served by pronouncing on them by way of declaration.  In any event, the evidence establishes to my satisfaction that, contrary to what was set out in the statement of reasons for rejecting the Proposal which accompanied the completed proxy mandating Mr Mond to reject the Proposal and contrary also to what was discussed in subsequent communications between the claimants and MBNA, MBNA was not relying on any of the matters set out in that paragraph as grounds for rejecting the Proposal.
41.	I should also add, because it is convenient to do so at this point, that I am not concerned to pass judgment on MBNA’s modus operandi as a provider of credit to “straightforward consumers” in general or on MBNA’s dealings with C in particular.   Much time was taken up on these matters in Mr Davies’s cross-examination of Mr Erwin of MBNA (he was and is employed by MBNA as Head of Insolvency and Vendor Management and, in that capacity, in charge of the team responsible for dealing with credit card customers unable to pay the sums due on their credit cards), for example whether MBNA sufficiently, fairly and timeously explained to C what options were open to him as regards DMPs and whether, more generally, MBNA’s conduct did or did not comply either with codes of practice applicable generally in the fields of consumer lending or with their own internal procedures.   Not only are these not germane to a correct understanding of the Protocol and are not pleaded but, as regards MBNA’s treatment of C (or the other debtors to whom Mr Mond referred in his third witness statement), it would have been preferable if I had heard from C and those other debtors.   Moreover, because of the way in which these proceedings have been brought, that is by the claimants as two IVA providers, rather than by the debtors alleging, if they could, breaches of some applicable regulatory code, this court has not been able properly to explore these matters. 
The real purpose of these proceedings
42.	The reality is, as Mr Davies accepted, that C’s case does no more than illustrate the issues of interpretation of the Protocol which divide the claimants and MBNA.  As I have mentioned, Mr Mond’s evidence referred to other cases (not mentioned in the pleadings) where similar issues have arisen.
43.	Moreover, several passages in Mr Mond’s first witness statement show that his and ClearDebt’s aim in bringing these proceedings has been to establish, if they can, that MBNA’s general approach to IVA proposals is incorrect, subversive of the purpose of the Protocol, harmful to what Mr Mond describes as the IVA market and detrimental to what he refers to as the general body of debtors.    For example, in paragraphs 80 to 81, Mr Mond stated that:
“80.	The effect of MBNA’s conduct is not necessarily simply on the individual cases concerned.   As can be seen with [C], the effect has been to expose him to a non-statutory non-contractual piecemeal set of agreements with his individual creditors, rather than a statutory scheme binding on all his creditors, treating them equally.   But, because MBNA adopts a similar attitude across the whole of the industry, it is having an effect on the ways that IVAs are dealt with, ultimately to the detriment of the Protocol and to the general body of debtors.
81.	My knowledge of the IVA market (derived from my own practice, my chairmanship of DRF, my work with the IVA Standing Committee and from general enquiries of other IPs) shows that MBNA is adopting a similar approach in relation to other IVA proposals where it holds a 25% majority, with the effect that this is limiting the number of IVAs that are being offered.”
44.	This is reflected in paragraph 64 of the particulars of claim which states that:
“It is important and relevant for Mr Mond and ClearDebt to obtain declaratory relief as to the extent that MBNA is contravening the Protocol in order that they, and other IVA providers, have a framework against which they can satisfy the valid public policy objective of providing debt relief for individuals in financial distress, as recognised by the Protocol and supported by the BBA, as:- 
64.1	The Protocol, as a voluntary industry-process was intended to provide a format appropriate to industry users and to provide clarification of the obligations on creditors in relation to the IVA process, with a view to providing a satisfactory outcome for all stakeholders in a more timely and effective manner than by a regulatory solution.
64.2	The Protocol was intended to provide an agreed standard framework for dealing with straightforward consumer IVAs, whereby IVA providers drew up proposals based on standard documentation stating that it followed the Protocol, in respect of which creditors (especially creditors who are members of the BBA) were expected to abide and to avoid unnecessary modifications.
64.3	The Protocol does not fulfil its purpose if MBNA, a member of the BBA, votes entirely selfishly to reject PCIVAs where it holds more than 25% of the debtor’s debts, and effectively vetoes the PCIVA unless it terms are complied with.
64.4	The Protocol only works, or is effective, if large businesses such as MBNA observe its terms and spirit.
64.5	The perception is that the conduct of MBNA in response to proposals for PCIVAs is defeating the entire purpose of the Protocol.”
45.	It is clear therefore that the claimants’ purpose is not to put right what they contend was MBNA’s wrongful rejection of the Proposal (notwithstanding that C himself does not complain): they accept that MBNA’s rejection of it cannot be overturned and are faced with the fact that C and his creditors have reached arrangements which, for the time being at least, have avoided the need for the imposition of a formal insolvency process (whether bankruptcy or an IVA).  Their concern, on the behalf of “the IVA industry”, is to vindicate Mr Mond’s view of how the Protocol is intended to operate.  This brings me to what really is at the heart of these proceedings.
The core complaint
46.	The position which, in the view of the claimants, a creditor should adopt    when presented with a PCIVA proposal but which they say that MBNA’s policy has persistently flouted is most neatly summarised in paragraph 49 of Mr Mond’s  first witness statement:
“…the meaning and effect of the Protocol, with which members of the BBA as creditors are expected to abide, is that where a PCIVA was proposed, such creditors are expected to vote in favour of the IVA, unmodified, unless good reasons to the contrary are disclosed.”
It was later made clear that “expected” in that passage should be understood as meaning “required”. 
47.	To the same effect is paragraph 76 of the same witness statement:
“My understanding is that the principal issue upon which MBNA relies is the fact that it maintains that a DMP is the most suitable form of debt solution for [C] and others in his situation.   I disagree.   And, not only do I think that it is inappropriate for [C], my view is that the BBA support for the Protocol is such that it is not for the MBNA to second guess my professional opinion and vote against the proposal.   I respectfully suggest that the proper approach should be that, in circumstances where an IP has put his name as nominee to a PCIVA proposal, this must be taken to indicate that he has reached the view that an IVA is the most appropriate form of debt solution for the particular debtor…”
48.	Mr Mond expanded on his reasons for this stance in the following passage from that witness statement:  
“52.	…It [the Protocol] operates and relies upon trust operating between the IVA Provider and the creditors.   I am obliged, by the terms of Clause 6.1 of the Protocol, my professional obligations and (it has to be said) my personal long-held view that debtors should have the appropriate advice available to them at all times, to ensure that the debtor received appropriate advice in the light of their circumstances, leading to a proposed course of action to resolve their debt problem.    The Protocol has, in my view, emphasised the nature of the advice given to debtors by IVA providers, such that when faced with what appears to be a Protocol-compliant IVA Proposal, the debtor can be satisfied that that is the most appropriate debt solution for the debtor.   In those circumstances, unless there are very good reasons to the contrary, the creditor, especially a BBA-member creditor, is expected to vote in favour.   The fact that a PCIVA is proposed is almost like a warranty for the IVA Provider that the IVA is appropriate.   It is not then for the creditor to second-guess that debtor or the IVA provider.   It is certainly not the case that a BBA member should be voting against it for its own selfish (and I would say, against the background of the Protocol, capricious) reasons.
53.	I firmly believe that the position of MBNA, namely that despite the Protocol and of the fact that it is a member of the BBA, it is free to vote in any way it wishes, for whatever reason, when faced with a  proposal for a Protocol-complaint IVA, is wrong, both on the terms of the Protocol and certainly having regard to its spirit of promoting efficiency, certainty and above all, trust, from the point of view of creditors, debtors and IVA Providers.”
Again, the reference in paragraph 52 to “expected” is to be understood as if instead “required” had appeared.
49.	It is that view of the Protocol, in particular that it seeks to limit the freedom of a creditor to vote for or against a proposal (a freedom explicitly recognised by clause 13.1 of the Protocol), that lies at the heart of what I have described as “the core complaint”. Even though, for the reasons explained above, I am unwilling to grant declarations in the formal manner sought does not mean that I should not express my view on this complaint.  I do so in deference to the arguments which have been addressed on it and in the hope that what I say may be of assistance in the operation of the Protocol. 
50.	Mr Davies submitted that, seen in the light of the events which led to the establishment of the Protocol, clause 13.2 is to be understood as being more than a mere disclosure provision.
51.	His written opening submissions and Mr Mond’s evidence dealt in some detail with the steps taken by practitioners and others in the personal insolvency field (or “stakeholders” as the literature describes them) to reform IVAs.  Those steps started with the IVA Forum co-hosted by the Insolvency Service and the BBA, the setting-up of a stakeholder working group to consider how the IVA regime could be improved, the publication by the group in July 2005 of its findings and recommendations in a report entitled “Improving Individual Voluntary Arrangements”, the Insolvency Service’s responses published in March 2006 to the replies it received in response to that report and the publication by the Insolvency Service in May 2007 of a further document on proposed changes to the IVA. All of this culminated in the laying before Parliament in October 2008 of the LRO intended to establish a simplified form of IVA, the so-called Simple Individual Voluntary Arrangement, (or SIVA), and its sudden (and unexpected) withdrawal just over a fortnight later.   The essence of the proposed SIVA, which was to be limited to IVAs where the undisputed debts did not exceed £75,000, was that it could be approved by a simple majority in value of those creditors that voted on it.   There was also to be a simplified voting procedure and no right to modify the proposal in question.
52.	The impetus for these changes, deriving from the July 2005 report, was to adapt the IVA (which, when introduced by the IA, had been envisaged as providing a rescue and rehabilitation process for business-generated personal insolvency to what the report described as “the small minority of individuals who find themselves with a debt problem”.   What was sought, in the words of the report, was that individuals who find themselves in that situation “should have access to a solution which best suits their circumstances” and that “that solution should offer the debtor a fresh start whilst ensuring that those who can pay their creditors do so over a reasonable timeframe”.   The emphasis, Mr Davies pointed out, was on debt relief.    
53.	As I have earlier mentioned, the LRO was withdrawn because the Protocol was seen to have effected “many of the desired improvements in the IVA marketplace” which stakeholders were hoping that the SIVA would achieve.  The result, it was felt, was that there was no need for further legislation.   It is against that background, Mr Davies submitted, that the Protocol, and in particular clause 13, should be interpreted.
54.	He referred to the Statement of Insolvency Practice 3 (or “SIP3”) promulgated with effect from 1 April 2007 under procedures agreed and adopted by the insolvency regulatory authorities (including the Law Society and the principal accountancy bodies and the IPA) acting through the Joint Insolvency Committee.  Its purpose is to set out best practice which insolvency practitioners are required to follow, failing which they may face disciplinary or regulatory action.   Paragraph 1.5 of SIP 3 states that:
“In many cases, the member’s [i.e. the IP’s] role will change during the conduct of the case, for example from adviser to nominee to supervisor.   These roles will involve different responsibilities: for example, when acting as adviser the member’s role will be to consider the best course of action for the debtor in the light of their particular circumstances; when he becomes nominee his duty will be to the creditors and the court; and when acting as supervisor his responsibilities will be governed by the terms of the arrangement.   The member should be mindful of possible conflicts of interest arising from these changes of role…”
55.	He submitted that, as SIP 3 makes clear, the insolvency practitioner is unquestionably under a professional duty when considering and advising a debtor on a possible IVA proposal to seek to ensure a fair balance between the interests of the debtor, the creditors and any other parties involved and to exercise independence and objectivity.   This was reflected in clause 12.1 of the Protocol which obliges creditors to treat the debtor in accordance with the regulatory standards and codes of practice to which creditors are subject as set out in annex 2 to the Protocol.   One of these is guidance published by the OFT called “Treating customers fairly - towards fair outcomes for customers”.    He emphasised the importance of the creditor subscribing to the duties laid down in this and other guidance.
56.	He submitted that the IVA provider’s need, when the debtor seeks advice from him, to undertake a professional and objective review of the debtor’s options, taking into account the interests of the debtor’s creditors, as well as those of the debtor, in carrying out the review, informs the interpretation of the Protocol.  This need and the aim of achieving debt relief are, he said, explicitly recognised by the Protocol in that the statement of its purpose set out in clause 1.1 includes a recognition that “the IVA supports a valid public policy objective by providing debt relief for individuals in financial distress”, and because clause 6.1 requires the IVA provider, when approached by an individual in financial difficulty, “to ensure the individual receives appropriate advice in the light of their particular circumstances, leading to a proposed course of action to resolve their debt problem”.  He drew my attention to the BBA’s acceptance of these matters in Mr Leender’s letter of 18 December 2007 stating that:
“We would also concur with your comment that ‘debtors should have access to the debt management solution identified as the most appropriate to their circumstances and their ability to repay their debt in a reasonable timescale’ - where the most appropriate solution is an IVA, then our hope is that an IVA is made available.”
57.	How, asked Mr Davies, can this be achieved if it is open to a creditor (bound by the Protocol) to vote against the PCIVA proposal and thereby seek to block its acceptance when, being Protocol-compliant, the proposal is (in the words of clause 6.1) the product of “appropriate advice in the light of [his] particular circumstances, leading to a proposed course of action to resolve [his] debt problem” which the IVA provider has given to the debtor?   If, as in C’s case, the creditor holds more than 25% in value of the undisputed debts, then the vote against will block the proposal and therefore frustrate the course of action which the IVA provider has suggested to the debtor to resolve his debt problems.   Such a freedom in the creditor, unless exercised for good reason, so far from fulfilling the purpose of the Protocol, undermines and frustrates it.   A “good reason” for this purpose would be if the IVA were not in fact Protocol-compliant or the IVA provider’s fees were outside the industry norm, or that there was fraud or other wrongdoing on the part of the debtor, or that there were serious misrepresentations of fact in the proposal, or the debtor’s circumstances had changed materially since the proposal was drafted.   Mr Davies cited these as examples of a good reason.   He did not suggest that they were exclusive.   All of them, he said, could justify a vote against the proposal. 
58.	The point in issue is a short one.   If Mr Mond’s view is correct it involves reading the Protocol as qualifying the otherwise unqualified reference in clause 13.1 to “the right of creditors to vote for against and IVA  proposal” as if there were added the words “subject to clause 13.2” before the words “against” so that that part of clause 13.1 should read:
“This does not affect the right of creditors to vote for or, subject to clause 13.2, against an IVA proposal.”
and as if at the end of clause 13.2 the words “and it shall be a good reason” had been added.
59.	The claimants do not suggest that the qualification is effective in law to cut down the creditor’s right to vote against a proposal if he chooses.   This is because the IA and the IRules do not seek to qualify the right of a creditor to vote against an IVA proposal.   Nor, so far as I am aware, does statute do so in other insolvency contexts where the creditor has a right to vote on a matter.   Indeed, Mr Mond accepted that, if despite the Protocol (as he would construe it), a creditor with an unchallenged debt chooses to vote against a proposal and has no “good reason” for doing so, his vote must be counted and, if it represents more than 25% in value of the creditors present in person or by proxy and voting on the resolution in question, then the IVA will not be approved.      
60.	Given the restraint on the creditor’s freedom to vote as he chooses if Mr Mond’s understanding of how the Protocol is to be interpreted is correct, I would have expected the Protocol to have made this explicit in its wording and, what is more, to have spelled out the consequences of a wrongful vote against.   This the Protocol simply does not do.
61.	Over and above that, I am unable to accept the foundation for Mr Mond’s approach, articulated in the passage from paragraphs 52 and 53 of his first witness statement set out above, that the effect of clause 6.1 and the IVA provider’s professional obligations “to ensure that the debtor receives appropriate advice in the light of their circumstances, leading to a proposed course of action to resolve their debt problem”, is that the submission of a PCIVA proposal amounts to a “warranty” that the proposed IVA is appropriate with the result that a creditor bound by the Protocol must vote in favour of it unless he can establish a good reason why he should not.
62.	Whenever a person becomes insolvent, in the sense that he is unable to pay his debts as they fall due, a tension between his interests and those of his creditors inevitably arises.   The debtor’s interest is to obtain forgiveness, if he can, for as much as possible of his indebtedness which, failing the creditor’s agreement, can be achieved only by bankruptcy or an IVA, or, failing those, the grant of as long a period of time as he can secure from the creditor to pay off his debt.    By contrast, the interest of the creditor is to obtain payment of what is due, and as speedily as possible, or payment of as much of it as is practically possible.   It must be a rare case where, if the debtor is insolvent, these interests coincide.     
63.	The assumption underlying Mr Mond’s approach to clause 13.2 is that the IVA provider is obliged, and is able, to resolve this tension and reach a view of what payments the debtor should make under the IVA which is fair as between debtor and creditor with the result that the IVA proposal is one to which the creditor should not be permitted to object except for good reason.   But striking such a balance is not some mechanical process but a matter of judgment.   Differing minds can reasonably hold quite different views. 
64.	I am quite unable to discern from the terms of the Protocol that so difficult a question of judgment is intended to be conferred upon the IVA provider, acting on the instruction of the debtor who has consulted him, such that the creditor is not permitted to “second guess” (Mr Mond’s expression) the IVA provider’s opinion (as reflected in the proposal) except where he can demonstrate that there is a good reason to do so.   When I asked Mr Davies who was to be the judge of what amounts to a good reason, he answered that it was the IVA provider.   That seems scarcely likely, let alone fair.
65.	I am therefore of the view that it is not right to construe clause 13.2 of the Protocol (or, for that matter, clause 13.1) as permitting a creditor bound by the Protocol to vote against a PCIVA proposal only if he has good reason to do so.
66.	I mention in passing, although I have reached my view without relying on it that the BBA is also of my opinion.   See Mr Leender’s letter to MBNA’s solicitors dated 28 May 2010.
67.	What then is the purpose of the obligation on the creditor under clause 13.2 to give his reasons for voting against a proposal if (however judged) the reasons do not have to be good reasons?   The answer lies, in my view, in clause 4.1.   This provision, under the side heading of “Transparency and co-operation”, states that “All parties should act openly and disclose all relevant matters”.   By having to state his reasons for voting against a PCIVA proposal the creditor is more likely to approach the matter with care and only reject the proposal if he has thought about the matter than if he is free to keep silent about his reasons for rejecting a proposal.   Moreover, a statement of his reasons for doing so will enable the debtor and those advising him (including the IVA provider) to consider whether the objection can be met. 
A “good reason”
68.	Given my view of the meaning of the Protocol, it is not necessary to go into the further question whether, in C’s case, MBNA’s reasons for rejecting his Proposal was or was not a “good” one.  Having heard much argument on the issue I will nevertheless say a few general words on the topic in so far as, in the events that have happened, it is appropriate to do so. 
69.	The claimants’ objection to the DMP in C’s case had, or appeared to have, two strands: (1) the criteria which MBNA followed when deciding to prefer a DMP to an IVA and (2) the manner in which MBNA went about the negotiation of the DMP with C in the instant case.    For reasons already explained, I do not think it appropriate to go into the second of those two matters.   They were summarised in paragraph 77b of Mr Davies’s opening written submissions and concentrated on the way in which MBNA treated C once it had made it clear that it was rejecting his Proposal and whether, when dealing with C, MBNA followed its own internal procedures.   There was also criticism of the review into C’s case conducted by Mr Benedict Erwin (Ms Reddy’s superior) when a review of MBNA’s rejection of the Proposal was sought.   It is only in connection with the first of those two strands that I feel it appropriate to say anything.  
70.	MBNA’s general approach to IVA proposals (they do not approach the matter differently depending on whether the proposal is Protocol-compliant or MBNA’s debt does or does not exceed 25% of the debtor’s total indebtedness) appears from the evidence of Mr Erwin.   He was at the time and remains employed by MBNA as head of its Insolvency and Vendor Management.   He explained that until July 2009 the insolvency team under him made all decisions whether to accept or reject IVA proposals.  Since then KPMG has assumed responsibility for making decisions on MBNA’s behalf but does so in the same way that MBNA’s insolvency team previously did.   He stated that the decision whether to accept or reject an IVA proposal is made after making what he describes as “reasoned judgment, taking into account all of the factors relevant to the customer in question”.   He explained, and I accept, that because the circumstances of each case differ it is not possible to state comprehensively how the criteria could be applied to every case but he ventured the following overview:
“9.	As a starting point, we do not look at customers in financial difficulty as having a choice just between an IVA and bankruptcy.   An IVA is often appropriate for a customer facing difficulties, but IVAs are not always the best alternative to bankruptcy.   In suitable cases, MBNA will offer to put a customer onto an internal debt management plan (“DMP”).   Under an internal DMP, we stop interest from accruing on the debt and we stop charging fees on the account.   The customer makes monthly repayments of an agreed amount.   This enables the customer to repay his debt over an agreed period in a way that strikes a fair balance between the customer’s needs and our right to be repaid. 
10.	In considering whether an internal DMP would be appropriate we look, among other things, at a customer’s income and expenditure, with expenditure on living expenses quantified in accordance with the Consumer Credit Counselling Service (“CCCS”) Budget Guidelines… We deduct the customer’s monthly expenditure from his income to give his disposable income.   We multiply the disposable income by customer’s debt to MBNA, and divide the outcome by the customer’s total outstanding debts to all creditors.   This gives the pro-rata amount that the customer could repay to MBNA each month under an internal DMP.   We would consider the customer for an internal DMP if he were able to repay more than 0.8% of his debt to MBNA each month. 
11.	We work on the basis that MBNA should receive a pro-rata share of the customer’s disposable income under an internal DMP.   In doing so, we ensure that the customer is able to treat all of his creditors equally.   MBNA does not seek any advantage over the other creditors.   We use a figure of 0.8% per month because this gives a maximum length of internal DMP of 10 years.   We do not agree DMPs of more than 10 years. 
12.	In considering whether an internal DMP would be appropriate, we also look at the number of other creditors that the customer has.   If he has what in our opinion is a manageable number of creditors, then we feel he is likely to be able to agree DMPs or similar arrangements with his other creditors, so he may be able to avoid the need for an IVA or bankruptcy.   If, after we have rejected an IVA proposal in favour of an internal DMP, the customer tries and fails to make arrangements with other creditors and needs further debt relief, we will of course reconsider whether an IVA would be appropriate.
13.	Aside from the question of whether an internal DMP is appropriate, in considering IVA proposals we also consider whether the proposed fee structure is reasonable for the proposal.     …the nominee and supervisors’ fees can come to a substantial proportion of the customer’s debts. We also take into account what interaction we have had with the customer over the months leading up to the IVA proposal.   This helps us to understand the customer’s circumstances and whether an IVA would be appropriate for them. 
14.	At a secondary level, we look at the customer’s demographics and his transactional behaviour.   Demographics are relevant because, for example, a young man at the start of his career is more likely to be able to sustain regular repayments on an internal DMP than a man on the verge of retirement.   The customer’s transactional behaviour is relevant as it may indicate the purpose for which he has been spending money and the likelihood of him being able to change that behaviour.   As I said though, demographics and transactional behaviour are secondary considerations. 
15.	We apply the same criteria when considering IVA proposals regardless of whether MBNA holds more or less than 25% of the vote, and regardless of the identity of the IVA provider or prospective nominee.   To put the decision making process in context, we approve the vast majority of IVA proposals that we receive...”       
He stated, although he was strongly challenged on this and I do not consider that the precise figure is important, that MBNA votes in favour of roughly 90% of all proposals that come before it.    (The challenge was directed chiefly to the fact that the perception in the “market” is that where MBNA holds more than 25% in value of the debtor’s debts, IVA providers do not advise debtors to propose an IVA since they know that it is likely to be rejected by MBNA having regard to the criteria applied in the way that Mr Erwin described and that this awareness distorts the figures.) 
71.	In C’s particular case Mr Erwin pointed out that by freezing interest and charges and taking a proportionate share of C’s disposable income C was believed to be able to repay all of his debt to MBNA in just over seven years.  When compared with the 46% repayment over five years under the proposed IVA, a DMP was more attractive to MBNA.
72.	Mr Brian Jackson, senior vice-president Recovery and Risk Operations Executive in MBNA, explained that:
“When a customer encounters financial difficulties, MBNA has to balance two potentially conflicting considerations.   On the one hand, in order to stay in business and to operate in a way that is fair to our other customers, we have to try to recover the money that we have lent.   The losses we make when individual customers do not pay their debts have to be accommodated in the business through the interest and other charges paid by other customers.   On the other hand, we seek to treat the individual customer fairly and reasonably…”
73.	The claimants strongly challenged whether MBNA does indeed treat individual customers fairly and reasonably.    They were strongly critical of a DMP, such as the one put in place with C, which extends over so many years.  The selection of a maximum 10-year period (in fact its is 10 years and 5 months) for an internal DMP (derived, it appears, from one-time US practice) was criticised as excessive and irrational.   Mr Mond’s experience was that in practice DMPs last on average no more on than two and a half years  He considered that any period which exceeded five years was unreasonable, pointing out that IVAs are rarely, if ever, for a longer period.  Overall, there was more than a hint in Mr Mond’s evidence and in Mr Davies’s submissions that once an IVA provider has advised the debtor to propose an IVA and has assisted him to submit a PCIVA proposal, it should never be open to a creditor to reject that proposal in favour of a DMP.  Mr Davies criticised what he regarded as the “mechanical approach” to the application of a 0.8% criterion, in particular as applied by Ms Reddy.   He was even more critical of Mr Erwin’s approach to DMPs and to the plight of creditors in the position of C. 
74.	Having regard to the evidence of Mr Erwin and Mr Jackson, I feel quite unable to say that their approach to IVA proposals, and the circumstances in which they reject them in favour of a DMP, are unreasonable.   There is, in my view, no intrinsic reason why a PCIVA proposal should not be rejected because the creditor considers that a DMP is preferable.  From the creditor’s point of view a DMP, if successful, has the result that the creditor receives payment in full, although this may involve waiving interest and fees and the like.  It is true that a DMP does not provide the debtor with “debt relief” (beyond, possibly, the waiver of unpaid interest and charges accruing after the DMP has been entered into).    It is true also that the DMP may well last longer than the customary five years for most IVAs.   But MBNA’s policy is not unfair towards other creditors: it does not seek to collect for itself a greater share of the debtor’s disposable income than is represented by its claim against the debtor when compared with the claims of the other creditors.   MBNA is entitled, in my view, to have regard to its own self-interest in the way that the evidence Mr Erwin and Mr Jackson described.    If the application of MBNA’s policy means that fewer IVAs are approved than persons in the position of Mr Mond consider should be the case, the remedy lies in modifying the terms of the proposal or in persuading Parliament to amend the legislation governing IVAs.
Disclosure of rejection reasons 
75.	There was some discussion on whether, as a disclosure of MBNA’s reasons for rejecting C’s Proposal, the brief statement “high fees”, “disposable income available for a DMP” and “minimal number of creditors” (see paragraph 10 above) was sufficient to comply with clause 13.2.
76.	The purpose of the disclosure requirement must be to give a sufficient description of each reason for voting against a PCIVA proposal to enable the debtor and the IVA provider advising him to understand the basis of the rejection.   I do not read the clause as requiring the creditor to go further and state the factors which have weighed with him in reaching his decision to vote against.   
77.	As to the three reasons given by MBNA in C’s case, I have explained that the reference to “high fees” was included in error.    But if it had been intended as a reason, it would in my view have amounted to a sufficient explanation of the reason.     
78.	The debate focused principally on the second reason.   It was said that the broad statement “disposable income available for DMP” could apply to just about every proposal in which the debtor has a disposable income since, if he has, he is likely to be able, at least in theory, to enter into a DMP.   This criticism misses the point.   The question here is not whether the reason for the rejection is good but simply what the reason is.    Although the statement given in C’s case could have been phrased more fully it was (or should have been) clear to the claimant that MBNA was rejecting the Proposal because it considered (rightly or wrongly) that a DMP was possible and was to be preferred.   The thought processes that led to that reason (for example, the assumed amount of disposable income, the length of the DMP should it run its full course, the practicality of putting the DMP in place, the position of other creditors and so forth) did not in my opinion have to be spelled out.
79.	The third of the three reasons (“minimal number of creditors”) was not in truth a reason.   It was not a self-standing ground of rejection.   It was, at most, a factor relevant to the DMP ground for rejection.   This is because, as the evidence made clear, a DMP is only practicable if the debtor’s other creditors are few in number: if they are numerous it is unlikely that DMPs can be agreed with them and in practice a DMP only works if similar arrangements are entered into with all of the debtor’s creditors (whether by separate DMPs or by a single composite DMP).
The way forward
80.	Although I have disagreed with the claimants’ understanding of the Protocol as it is presently framed, this does not mean that I do not have considerable sympathy for the approach, which the claimants have sought to champion, to the role of a creditor when asked to vote on a PCIVA proposal.    There is much to be said for the view that, as a matter of good practice, a creditor should only reject such a proposal if he has good reason to do so.   But the Protocol must spell this out and, what is more, give guidance on what is a good reason.
81.	It is open to Mr Mond and those who think as he does about clauses 13.1 and 13.2 to seek to have the Protocol amended to clarify these matters.   A mechanism exists for this in the standing committee, charged with monitoring and reviewing the efficient operation of the Protocol, mentioned in clause 2.6.