Case No: 424 of 2010
Neutral Citation Number: [2012] EW Misc 16 (CC)
IN THE LEEDS COUNTY COURT
IN THE MATTER OF KEVIN WILLIAM LINFOOT (A Debtor)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
The Court House
Oxford Row
Leeds LS1 3BG

Date: 30/07/2012

Before:

His Honour Judge Behrens
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Between:

	KEVIN WILLIAM LINFOOT	Applicant	
	- and -		
	(1) ROBERT ADAMSON
(The Supervisor of the IVA of the Applicant)
(2) BANK OF SCOTLAND PLC
(3) NATIONAL WESTMINSTER BANK PLC	

Respondents	

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Andrew Latimer (instructed by Ward Hadaway) for the Applicant
Louis Doyle (instructed by Lee and Priestley) for the Supervisor
Paul French (instructed by Walker Morris) for Bank of Scotland plc
National Westminster Bank plc did not appear and were not represented.

Hearing date: 19 July 2012
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Judgment
Judge Behrens: 
1. Introduction
1. On 26 April 2012 a creditors’ meeting was held to consider a variation to the terms of an individual voluntary arrangement (“IVA”) in respect of the Applicant Kevin Linfoot (“Mr Linfoot”). It was rejected by 42.07% of the creditors voting, and so the variation was not approved by 75% in value of those present and voting as required by r.5.23(2) of the Insolvency Rules 1986 (“the Rules”).
2. In this application Mr Linfoot seeks to challenge two decisions of the First Respondent the Supervisor of the IVA Robert Adamson (“the Supervisor”) who was acting as the Chairman of the Meeting.
3. The first and most important decision complained against is the decision as to the amount for which the Second Respondent Bank of Scotland Plc (“BoS”), a secured creditor, was permitted to vote. As appears from the Record of Voting BoS was permitted to vote in the sum of £2,514,044. That figure was based on an estimate for the value of the security, Ravenswick Hall, Kirkbymoorside (“Ravenswick”), in the sum of £2,000,000. It is Mr Linfoot’s case that BoS should either not have been permitted to vote at all or that its vote should have been admitted in the sum of £1. In the alternative he contends that the Supervisor should have adjourned the meeting in order to investigate an offer in the sum of £4,678,900 which had been made for Ravenswick on 20th April 2012.
4. The second and less important decision relates to the amount for which another secured creditor, National Westminster Bank Plc (“NatWest”), was permitted to vote. As appears from the Record of Voting NatWest was permitted to vote in the sum of £537,058.35. That figure was based on an estimate of the value of the security, Bishopsthorpe Garth, York (“Bishopsthorpe Garth”) in the sum of £2,106,180. It is Mr Linfoot’s case that NatWest  should either not have been permitted to vote at all or that its vote should have been admitted in the sum of £1. In the alternative he contends that the Supervisor should have adjourned the meeting in order to investigate an offer in the sum of £2,600,000 which had been made for Bishopsthorpe Garth on 23rd April 2012
5. Both the Supervisor and BoS oppose the application. They contend that the decisions of the Supervisor were appropriate, in accordance with the terms of the IVA and in any event within his powers as supervisor. They contend that the Court should not interfere. NatWest have taken no active part in the proceedings. It has not filed any evidence as to the merits of the application and has not appeared before me. It is content to abide by any order that the Court makes.
6. The arguments have been wide ranging and I am particularly grateful to all three Counsel involved for their research and the clear way that the rival arguments have been expressed.
2. The IVA
2.1 The approval of the IVA
7. Mr Linfoot was the principal owner and Chairman of KW Linfoot plc until 23rd February 2009 when it entered creditors’ voluntary liquidation. The Company was a residential development company based in Leeds. 
8. On 16th March 2010 Mr Linfoot submitted a proposal for an IVA. The Statement of Affairs revealed assets of £184,501 and an estimated deficiency of £7,513,803. At the heart of the proposal was an offer by Mr Linfoot to make voluntary contributions of £2,700 per month for 5 years – a total of £162,000. On 22nd June 2010 the IVA was rejected at a meeting of creditors. However, following an order of this Court on 16th December 2010 the proposal (in an amended form) was approved.
2.2 Terms of the IVA
9. It is clear from paragraphs 7.2, 7.3, and Appendices 3 and 4 of the proposal that secured creditors were included in the Arrangement in the event of a shortfall. Otherwise secured creditors were excluded. In the event of a shortfall after a sale the unsecured element of any charge was to be included as an unsecured creditor within the Arrangement. (See Appendix 13).
10. The Statement of Affairs as at 16 March 2010 valued Ravenswick at £4,000,000 with an estimated deficiency of £370,000. It valued Bishopsthorpe Garth at £2,600,000 with an estimated deficiency of £78,000
The Standard Conditions
11. Under paragraph 1.13 of the proposal the R3 Standard Conditions for IVAs (“the Standard Conditions”) were incorporated into the Arrangement save in respects that are not material to this dispute. 
12. It is clear from Condition 4(4)(a) of the Standard Conditions that the IVA is not intended to affect the right of any Secured Creditor to enforce its Security.
13. Both Mr French and Mr Doyle rely on Condition 39 which provides:
39 	Secured Creditors
39(1) 	[Proving for balance of Debt] A Secured Creditor may claim for the balance of his Debt (if any), after deducting the value of his Security.
39(2) 	[Voluntary surrender of Security] If a Secured Creditor voluntarily surrenders his Security for the general benefit of the Creditors, he may claim for his whole Debt, as if it were unsecured.
39(3) 	[Altering value of Security] A Secured Creditor may, with the agreement of the Supervisor or the leave of the Court, at any time alter the value which he has, in his claim, put upon his Security.
39(4) 	[Test of Security’s value] If the Supervisor is dissatisfied with the value which a Secured Creditor puts on his Security (whether in his claim or by way of revaluation), he may require the Security to be professionally valued by a person agreed as between the Creditor and the Supervisor, or in default of such agreement by the Court.
39(5) 	[Professional valuation treated as amended valuation] Where a professional valuation has been carried out under the previous Sub-paragraph, that valuation shall be treated as an amended valuation of the Creditor.
39(6) 	[Realisation of Security] If a Creditor who has valued his Security subsequently realises it:
(a) 	the Creditor shall forthwith notify the Supervisor and shall give the Supervisor such information relating thereto as he may reasonably require;
(b) 	the net amount realised shall be substituted for the value previously put by the Creditor on the Security, and
(c) 	that amount shall be treated in all respects as an amended valuation by him. ...
14. Mr French submits that clause 39 sets out the procedure in relation to the valuation of the secured creditor’s security:
1. In the first instance it is for the secured creditor to assess the value of its security (39.1). Once he has so valued it he can only change it with the agreement of the supervisor (39.3)
2. If the Supervisor is dissatisfied with the value he can require the security to be professionally valued. (39.4) In that event the professional valuation is substituted for the valuation as assessed by the creditor. (39.5)
3. If the security is subsequently realised the secured creditor must notify the Supervisor and the net amount realised is substituted for the valuation as assessed by the creditor (39.6).
15. Both Mr French and Mr Doyle drew my attention to rules 6.115 – 6.119 of the Rules which deal with the position of secured creditors in the case of bankruptcy. There are some similarities between the bankruptcy regime and the IVA regime. Thus in a bankruptcy it is for the secured creditor to value its security in a proof of debt. The value in the proof may be altered (rule 6.115). There is a similar rule as to effect of realisation (rule 6.119). However there are also significant differences. In a bankruptcy it may be necessary to get the permission of the court to alter the value of the security. Subject to the right of alteration the trustee has the right to redeem the security at the value contained in the proof. The trustee also has the right to require the secured property to be offered for sale.
16. It is also necessary to consider Conditions 63 and 64 of the Standard Conditions. Condition 64 is within Part X which is entitled "The Creditors Committee and Meetings of Creditors." 
17. Under Condition 63(1) a creditor is only entitled to vote to the extent that he has lodged his claim in time and the claim has been admitted in accordance with condition 64. Under Condition 63(3) a secured creditor is entitled to vote only in respect of the balance (if any) of his debts after deducting the value of his security as estimated by him.
18. Condition 64 provides:
64(1)	The Chairman has power to admit or reject a Creditor’s claim for the purpose of his entitlement to vote, and the power is exercisable with respect to the whole or any part of the claim.
64(2)	The Chairman’s decision on entitlement to vote is subject to appeal to the Court by any creditor, or by the Debtor, within 21 days of the meeting of creditors at which the decision was made or such longer period as the Court shall, in the special circumstances allow.
64(3)	If the Chairman is in doubt whether a claim should be admitted or rejected, he shall mark it objected and allow the creditor to vote, subject to his vote being subsequently declared invalid if the objection to the claim is sustained
64(4)	If on appeal the Chairman’s decision is revered or varied or a creditor’s vote is declared invalid, the Court may order another meeting to be summoned or make such other order as it thinks fit provided that the Court considers the matter is such as to give rise to unfair prejudice or material irregularity.
64(5)	…
19. Conditions 63 and 64 mirror a number of the Rules. [See for example rules 2.38 – 2.40 in respect of Administrations, 4.70 in respect of liquidations and 5.21 – 5.22 in respect of IVAs].
3. The Application to vary the IVA
20. It is clear that there have been disagreements between Mr Linfoot and the Supervisor and that the IVA has not run completely smoothly. It is, however, common ground that Mr Linfoot duly made the voluntary contributions under the agreement. The Supervisor however took the view that Mr Linfoot was in breach of his obligations under the agreement and served a Notice of Default on Mr Linfoot on 17th January 2012. In that notice four allegations are made. It was alleged that there was a sum of £47,000 due to the arrangement in respect of the sale of some number plates at an undervalue, there was a failure to disclose all of Mr Linfoot’s assets or his current income and expenditure and Mr Linfoot was not co-operating with the sale of Ravenswick. 
21. Meanwhile on 5th August 2011 Mr Linfoot had asked the Supervisor to convene a meeting of creditors to consider a variation to the IVA. The nature of the variation was that the balance of the voluntary payments and the amount due in respect of the number plates be paid by a third party. The Supervisor declined to hold the meeting.
22. An impasse was reached and eventually Mr Linfoot made an application to Court to require the Supervisor to summon the meeting. The Supervisor made a cross application for directions. The matter came before Judge Keyser QC on 2nd April 2012 as a contested hearing. Judge Keyser QC acceded to Mr Linfoot’s application but reserved the question of costs and adjourned all other matters. 
23. I have not been provided with a transcript of Judge Keyser QC’s judgment. However in a letter to creditors the Supervisor states that the judge considered that the convening of the meeting would ensure that all matters were fully canvassed and considered by all of Mr Linfoot’s creditors.
24. In the same letter the Supervisor pointed out to creditors that in accepting the proposed variation they would be foregoing the benefit of increased contributions over the next 4 years and the possibility of windfalls that Mr Linfoot might receive.
4. Ravenswick
25. Ravenswick is described in a valuation report by Colleys dated 15 March 2012 as a substantial country house and detached 3 bedroomed cottage standing in approximately 198 acres approximately 1 mile from Kirkbymoorside. It has been extensively and systematically vandalised. The estimated cost of repairs was £1,000,000. It has been marketed by Savills for over 2 years at various prices.. According to Colleys the price of £1,500,000 included only 93 acres but was prior to the vandalising of the house. Mr Linfoot presents a somewhat different picture in his witness statement. He suggests that the price of £1,500,000 was a price for the house only, that Savills received an offer of £2,400,000 for the house and an additional £1,300,000 for the land. He points out that planning permission has been achieved to erect a farmstead and that this will have increased the overall value.
26. It is not in dispute that BoS have a first charge over Ravenswick and that (for the purpose of this application) the sum of £4,514,044 is due under the charge.
27. On 8th March 2012 BoS entered into possession of Ravenswick under the terms of the charge. BoS instructed Colleys to value Ravenswick. On 15th March 2012 Colleys valued it at £2,000,000.
28. On 12th March 2012 a marketing appraisal by Mr Gilbertson, a local estate agent from Pickering suggested a sale value of £1,790,000.
5. Bishopsthorpe Garth
29. Much less is known about Bishopsthorpe Garth. According to Mr Linfoot it is actually 4 properties being a building plot for a 6,000 sq ft bungalow, very large gardens including a tennis court and a 20 acre paddock. 
30. It is common ground that Coutts are first mortgagee and NatWest have a second charge. It is not in dispute that £959,558.35 is due under the second charge. 
31. In the original Statement of Affairs Mr Linfoot valued Bishopsthorpe Garth at £2,600,000. There is currently an offer for the purchase of Bishopsthorpe Garth in the sum of £2,275,000 which, according to the Supervisor is proceeding.
32. According to the Supervisor’s witness statement the sum of £1,689,584 was due to Coutts.
6. The offers prior to the meeting
6.1 Ravenswick
33. On 20th April 2012 Mudd & Co ( a firm of Chartered Surveyors) made a subject to contract offer of £4,678,900 for Ravenswick to BoS’s agent. The letter included:
Our clients are based in Switzerland and offer to purchase the entire estate through their trusts. For the avoidance of any doubt we attach a copy of the sales particulars on which our clients have made their offer. The offer is not subject to any Bank borrowing and proof of adequate funding is available immediately where required.
34. It is not in dispute that the Supervisor was informed of the offer and knew of it at the creditor’s meeting on 26th April 2012.
35. There was an exchange of e-mails between Mr Gilbertson and Tim Mudd on 24th and 25th April 2012. They may be summarised:
1. At 17.09 on 24th April 2012 Mr Gilbertson informed Mr Mudd that he had been instructed to investigate the offer that had been made. He said he had been instructed to confirm proof of funding and the name, and information about, Mr Mudd's  client.
2. At 9.16 on 25th April 2012 Mr Mudd replied that he would be able to respond fully after a conference call on Friday (27th April). Meanwhile he asked in what form Lloyds would like to see the funds and sought permission to view the property.
3. Mr Gilbertson replied at 16.48 on 25th April 2012 in effect repeating the request for details of funding and attempting to arrange a time to enable Mr Mudd to view Ravenswick. There were two further e-mails dealing with the arrangements for the view.
6.2 Bishopsthorpe Garth
36. The offer for Bishopsthorpe Garth is not in fact in evidence. It is, however, not in dispute that an offer of £2,600,000 was received by the agents for NatWest on 23rd April 2012 and that the Supervisor was informed of it prior to the meeting on 26th April 2012.
7. The meeting of creditors
37. The meeting of creditors took place at 11 am on 26th April 2012. It lasted for 7 minutes. As already noted the variation was rejected. Mr Linfoot was not present but he was legally represented by Counsel, Miss Eleanor Temple. In the light of the submissions that have been made it is worth recording that there was no application for the meeting to be adjourned.
38. Votes to the value of £6,683,482 were cast in favour of the variation and to the value of £4,853,746 against it. Both BoS and NatWest voted against the proposal. BoS were permitted to vote in the sum of £2,514,044. NatWest were permitted to vote in the sum of £537,058.
39. The Minutes of the Meeting record that Miss Temple who represented Mr Linfoot questioned whether BoS had been allowed to vote for the full amount of its shortfall even though Mr Linfoot disputed that there was a shortfall. The Supervisor, who was, of course, the Chairman of the meeting confirmed that BoS had been allowed to vote for the full amount. Mr Doyle advised that under the Insolvency Rules the Bank was entitled to do so.
40. The percentages arising out of these figures are, of course, a matter of arithmetic. However, it is worth summarising the position:
1. On the basis that both BoS and NatWest were entitled to vote in the sums allowed by the Supervisor 58% of the creditors voted in favour of the variation. The proposed variation was accordingly rejected.
2. If the Supervisor had disallowed both BoS and NatWest’s claims the percentage in favour of the variation would have risen to 79% and it would have been approved.
3. If the Supervisor had disallowed the BoS claim but allowed NatWest’s claims the percentage in favour of the variation would have risen to 74% and it would have been rejected.
4. If the Supervisor had allowed the BoS claim but disallowed NatWest’s claims the percentage in favour of the variation would have risen to 61% and it would have  been rejected.
41. These figures show that Mr Linfoot cannot upset the result of the vote unless he can successfully challenge the BoS valuation. Furthermore the BoS valuation is not sufficient. He needs in addition at least a partial success in relation to the NatWest valuation.
42. Mr Linfoot is critical of the conduct of the Supervisor after the meeting when he held an informal meeting of creditors. As the Supervisor asserts in his witness statement this informal meeting is not relevant to anything I have to decide and I do not therefore propose to refer to it any further.
7.1 The BoS claim.
43. BoS instructed Walker Morris to act on their behalf. On 25th April 2012 Walker Morris wrote to the Supervisor enclosing a proxy (to vote against the variation) and a proof of debt claim. The letter summarised the claim which estimated a shortfall of £2,514,044 based on a valuation of £2,000,000. The letter enclosed the report from Colleys but not the marketing appraisal signed by Mr Gilbertson.
44. The Claim followed the letter. It gave the amount of the claim as £4,514,044. It provided that the security was valued at £2,000,000 (estimate). 
45. Mr Sutcliffe, a Technical Manager for BoS has made a witness statement on behalf of BoS. In paragraph 12 he makes the point that BoS’s valuation was based on the advice of Colleys. He goes on to state that in fact the valuation did not take into account the costs of repossession and sale. He was aware of the offer made by Mudd & Co but states that BoS viewed it with some scepticism for 3 reasons. The offer did not reveal the identity of the purchaser. Investigations with Mudd & Co indicated that there would be no further information before the creditor’s meeting. The offer was at such a level that, when compared with the valuation, it seemed scarcely credible.
46. The Supervisor deals with his treatment of the offer in paragraph 10(b) and (c) of his witness statement. He makes a number of points. The valuation of BoS was supported by the Colleys valuation. Savills were marketing Ravenswick from late December and asking for offers in excess of £1.5million together with £1.145 million for the land. This was prior to the vandalism to which it was subsequently subjected. In the circumstances he viewed the offer of 20th April with scepticism. The figure offered appeared out of kilter with the valuation and the figure at which it had been marketed. The offerors were apparently based in Switzerland and wished to purchase Ravenswick through their trust. In the circumstances he was prepared to agree the value of the BoS claim for voting purposes at the figure of £2,514,044.
47. In his witness statement Mr Linfoot seeks to deal with these points. He suggests that the Supervisor was unaware of the recent marketing of Ravenswick. He points out that it is common knowledge that Switzerland is a country specialising in setting up trusts where anonymity is the key. Thus the anonymity of the offeror should not have made the Supervisor sceptical. Proof of funding was offered.
7.2 The NatWest claim
48. The NatWest claim form states that the sum due to it is £959,558.35 and the value of the security is £422,500. According to the Supervisor he sought an explanation of this figure and was told that it took account of costs of £65,000 and was the average of £315,000 and £530,000 which were the results of two calculations it had carried out over the past 6 months. He was prepared to accept that explanation and allowed NatWest to vote for £537,058.35
49. In his skeleton argument (paragraph 28) Mr Latimer has produced a slightly different calculation which demonstrates that a valuation of £422,500 is equivalent to a value for Bishopsthorpe Garth of £2,106,180.
8. Subsequent events
8.1 Ravenswick
50. Subsequent to the meeting there was a further exchange of e-mails between Mr Gilbertson and Mr Mudd:
1. On 4th May 2012 Mr Gilbertson sent Mr Mudd an e-mail which included the Bank’s reaction. It stated the offer was of interest and the Bank would consider it before going to the open market. The Bank required relevant proof of funds and would like to avoid anonymity.
2. On 18th May 2012 Mr Mudd replied. He offered proof of funding subject to BoS confirming that the offer was acceptable subject to funding. He refused to identify his clients who were adamant that they should not be identified.
3. On 23rd May 2012 Mr Mudd sent a further e-mail. In it he repeated that cash was available but that his clients’ wish to remain anonymous was non-negotiable. The e-mail went on to state that the offer (subject to contract) stood until public marketing commenced and then was automatically withdrawn.

4. On 24th May 2012 Mr Gilbertson wrote in effect refusing the offer because of the lack of proof of funding and the failure to identify the purchaser. The e-mail stated that public marketing would commence shortly.
5. On 15th June 2012 (after public marketing had commenced) Mr Mudd wrote confirming ongoing interest in Ravenswick. The e-mail asked for the closing date for best offers. At that point he would advise on the level of the offer and provide proof of funding. Anonymity would be maintained.
51. According to Mr Sutcliffe an offer of £3,000,000 was received by BoS on 26th April 2012. The agent invited sealed bids by 12th July 2012 and I was told at the hearing that an offer of £3,100,000 has now been received from an identified purchaser. BoS is currently proceeding with that offer.
8.2 Bishopsthorpe Garth
52. There is no evidence before the court of any subsequent events relating to the sale of Bishopsthorpe Garth.
9. The function of the Court
53. Mr Linfoot’s application, as amended, is brought under ss 262 and 263 of the Insolvency Act 1986 (“the 1986 Act”) and Condition 64 of the Standard Conditions. Section 262 is concerned with the meeting of creditors which first approves the IVA. It accordingly has no direct application to this situation. 
54. Section 263 of the 1986 Act applies where an IVA has taken effect. It provides 
(3) Application to court re actions of supervisor If the debtor, any of his creditors or any other person is dissatisfied by any act, omission or decision of the supervisor, he may apply to the court; and on such an application the court may—
(a) confirm, reverse or modify any act or decision of the supervisor,
(b) give him directions, or
(c) make such other order as it thinks fit.
55. There was a significant difference between Mr Doyle and Mr French on the one hand and Mr Latimer on the other as to the scope of the court’s powers in this application.
56. Mr Doyle submitted that there was an analogy between section 263(3) and section 303(1) of the 1986 Act. Section 303(1) is concerned with bankruptcy and gives the bankrupt or any of his creditors the power to apply to court in respect of acts or omissions of the trustee. The wording of section 303 is in all material respects identical to that of section 263(3). The power under section 303 has been construed very narrowly. In effect the court will only interfere if it can be shown that the Supervisor has acted in bad faith or so perversely that no trustee properly advised could so have acted. The position is well summarised in the current (fifteenth) edition of Sealy and Milman’s guide to the Insolvency Legislation:
On such an application the court enjoys general discretion to deal with the matter. This is a useful reserve control power, but in practice, as the Cork Committee observed (Report, para.779), such applications rarely succeed: see, for an example of an unsuccessful application, Re a Debtor Ex p. The Debtor v Dodwell (The Trustee) [1949] Ch. 236. See also Canty v Boyden [2006] EWCA Civ 194; [2006] B.P.I.R. 624. In Osborn v Cole (above) this difficulty was exemplified by requiring proof that the trustee was acting in a manner in which no reasonable trustee would act. On the appropriate test to be applied by the court under s.303 see Bank of Baroda v Patel [2009] B.P.I.R. 255, a case where Osborne v Cole (above) was followed. In Supperstone v Hurst (No.3) [2006] EWHC 2147 (Ch); [2006] B.P.I.R. 1263 the strict test for interference with the actions of the trustee was applied by Warren J. In effect we are looking at Wednesbury unreasonableness.
57. Mr Doyle accordingly submitted that this application could only succeed if it can be shown that the decisions of the Supervisor were Wednesbury unreasonable. He furthermore submitted that the Court could not look at subsequent events to answer that question.
58. Mr Latimer submitted that the authorities on section 303 provided no guidance to the construction of section 263(3) and invited me not to follow them. He pointed to the wide words of the section and submitted that the Court had a wide general discretion which was not fettered in the way suggested by Mr Doyle. I cannot accept that argument. It is, of course, true that section 303 has no application to IVAs but the construction of that section is to my mind helpful in the construction of section 263(3). The rationale behind the restrictive construction of section 303 is set out in Osborne v Cole [1999] BPIR 254H – 255B:
Administration in bankruptcy would be impossible if the trustee must answer at every step for the exercise of his powers and discretions in the management and realisation of the property.
To my mind precisely similar considerations apply to the exercise of the Supervisor’s powers and discretions.
59. Mr Latimer also referred me to the recent decision of Norris J in NatWest Bank plc v Yadgaroff [2011] EWHC 3711 (Ch) [2012] BPIR 371 who cited the decision of the Court of Appeal in Revenue and Customs Commissioners v Maxwell and another [2010] EWCA Civ 1379 [2011] 2 BCLC 301. That case concerned the approach to be adopted by the Chairman of the Meeting when deciding on the votes to be accorded to a creditor of a company under Rules 2.38 and 2.39 of the Insolvency Rules 1986 (“the 1986 Rules”), and the approach to be adopted by the court on an appeal against his decision under Rule 2.39(2). Rule 2.39 is concerned with company administrations. However the provisions are in all material respects identical to those in Condition 64. Lord Neuberger MR set out the position in paragraphs 42 – 44 of the judgment:
42.	The first question it is convenient to address is the function of the Judge in this case, as a judge hearing an appeal under Rule 2.39(2). As to that there is no dispute between Mr George Bompas QC (who appears with Ms Ruth Jordan for HMRC) and Mr Richard Sheldon QC (who appears with Ms Blair Leahy for the Administrators). They agree that the judge should not merely review the decision of the chairman which is sought to be impugned: the judge should form his or her own view, based on the evidence and arguments advanced in court.
43.	In my opinion, that agreement correctly reflects the law. Rule 2.39(2) refers to an “appeal” as opposed to a “review”, which suggests that a fresh decision is envisaged. Further, as the facts of this case show, it would be unsatisfactory and unfair in some circumstances if the judge was confined to reviewing the chairman’s decision. The chairman will often be someone who can properly be privy to information and advice provided to the administrators or the company which is information and advice which could, equally properly, be denied to the court. If the court was confined to a reviewing function, it is hard to see how it could be fairly or satisfactorily performed in such circumstances.
44.	There is first instance authority which supports this view. In In re a Company (No 004539 of 1993), Blackburne J said this:  
“In my view, the task of the court, on an appeal under Rule 4.70(4) [the equivalent to Rule 2.39(4)]…, is simply to examine the evidence placed before it on the matter and come to a conclusion whether, on balance, the claim against the company is established and, if so, in what amount.  I would only add that, in considering the matter, the court is not confined to the evidence that was before the chairman at the time that he made his decision but is entitled to consider whatever admissible evidence on the issue the parties to the appeal choose to place before the court.”
45.	That analysis has been applied in a number of subsequent cases concerned with similar provisions of the 1986 Rules.
60. The matter does not quite end there because the passage in Lord Neuberger’s speech does not deal with the relevance of subsequent events in an appeal such as this. The point is considered in paragraphs 16 and 17 of the judgment of Lewison J (as he then was) in Re Power Builders (Surrey) Ltd; Power v Petrus Estates Ltd and others  [2008] EWHC 2607 (Ch) [2009] 1 BCLC 256. After citing the passage in Blackburne J’s judgment cited in paragraph 44 of Lord Neuberger’s judgment Lewison J said:
16. In an appropriate case resolution of the issue may depend upon oral evidence and cross-examination: Re Assico Engineering Ltd [2002] BCC 481. It is, however, important to be clear on what "the issue" is. As Blackburne J pointed out, the issue is whether, on balance, the claim against the company is established, and, if so, in what amount. Necessarily, the question whether the claim against the company is established will be judged as at the date of the meeting at which the chairman made the impugned decision. Thus in Re Shruth Ltd [2006] 1 BCLC 294, 302 Gloster J was, in my respectful opinion, quite right in saying: 
"I accept that a court can, on an appeal under r.4.70(4), look at all the evidence put before it, and is not confined to the evidence that was before the chairman of the meeting: see per Blackburne J in Re a company (No 004539 of 1993) [1995] 1 BCLC 459 at 466 and per Neuberger J in Re Philip Alexander Securities & Futures Ltd [1999] 1 BCLC 124 at 128. However, in both of those cases the court received evidence which showed what the position was, in fact, at the time of the meeting: in the first case that, as at the date of the meeting, the particular creditor's claim had been abandoned; in the second case, that, likewise, as at the date of the meeting, certain proxies had been lodged with the authority of certain creditors. In the present case, on the contrary, the evidence that subsequently a judgment was obtained clearly does not demonstrate that the claim was a liquidated claim at the time of the meeting."
17. In my judgment therefore, events subsequent to the meeting will not lead to an appeal against the chairman's decision being allowed. 
61. It is thus clear that whether this application is treated as an appeal under Condition 64 or an application under section 263(3) the court is confined to events as at the date of the meeting and is not entitled to look at subsequent events.
62. Although the amended application refers specifically to Condition 64 Mr Latimer did not refer to it in the course of his submissions or skeleton argument. In my judgment he was right not to do so. Condition 64 is concerned with the admission of claims by unsecured creditors who have submitted claims under Condition 63(1). The debtor has a right of appeal in such a case under Condition 64(2). However these claims are claims by secured creditors governed by Conditions 63(3) and 39. Condition 39 gives no such right of appeal.
63. It follows that I agree with Mr Doyle and Mr French that this case is governed by section 263(3) and that my function is limited in the manner set out in the authorities on section 303.
64. It is, to my mind, curious that a different test should be applied to a challenge to the right of a secured creditor to vote from the test applied in a challenge to the right of an unsecured creditor. However, I agree that that is the effect of the Standard Conditions.
10. The merits of the application.
10.1 BoS
65. I agree with Mr French and Mr Doyle that Condition 39 is of central importance in determining this appeal. It is for the secured creditor to value the security. In this case BoS valued Ravenswick at £2,000,000 and supported the valuation with a professional valuation from Colleys. In addition the Supervisor was aware that Ravenswick had been marketed by Savills for some time but this had not resulted in a sale. He was also aware that the vandalism to Ravenswick had taken place since the marketing by Savills.
66. Under condition 39(4) the Supervisor had the right to require a professional valuation by a person agreed between himself and BoS. However, he already had a valuation by a professional valuer.
67. Apart from the offer dated 20th April 2012 there can be no criticism of the Supervisor’s decision to value Ravenswick at £2,000,000. The crucial question is whether, as at 26th April 2012, it was Wednesbury unreasonable of the Supervisor to accept BoS’s valuation in those circumstances and not to have adjourned the meeting to investigate it further. As at 26th April 2006 there were good grounds to be sceptical of the offer. It came from an unidentified source, proof of funding had not been provided even though it had been asked for in the e-mail of 24th April 2012. The offer was in an unusual sum; it was subject to contract and was for a figure more than double the current valuation of Ravenswick. Both BoS and the Supervisor shared these concerns.
68. The offer was not raised at the meeting before the votes were counted and although Mr Linfoot was legally represented at the meeting there was no application for the meeting to be adjourned. It is not in dispute that Mr Linfoot was aware of the offer as copies of it were sent by Ward Hadaway to the Supervisor on 24th April 2012. Any such adjournment would necessarily have increased the costs of the meeting
69. It has not been suggested that the Supervisor’s decision was made in bad faith. In my view it cannot possibly be said that the decision was so perverse that no supervisor properly advised could have acted in that way. Nor can it be said that the decision was so absurd that no reasonable person could have acted in that way. I would accordingly dismiss the challenge to the BoS valuation.
70. I should perhaps add that if I had had to apply the more generous test under Condition 64 I would still have come to the same conclusion. The factors outlined above would, in my view, ignoring the events that happened after the meeting, have justified the decision that was taken.
10.2 The NatWest claim.
71. In the light of my views on the BoS claim my views on the NatWest claim are academic. As the figures demonstrate the effect of disallowing the NatWest claim would only be to increase the percentage of the votes in favour to 61%.
72. I have to confess that I have concerns about the Supervisor’s actions in relation to NatWest and that if it had been material to the result I would have been sympathetic to Mr Linfoot’s application. My concerns are:
1. The explanation given to the Supervisor by NatWest for their valuation demonstrates an error of law. NatWest were required to value their security as at the date of the meeting. That is not in my view achieved by taking the average of two very different valuations obtained over the preceding 6 months.
2. The Coutts debt was known to be £1,689,584. Thus a valuation of £422,500 equates to a value for Bishopsthorpe Garth in the sum of £2,112,084. Even if one adds costs of £60,000 this is over £100,000 less than the offer of £2,275,000. There was no reason to think that offer would not proceed.
3. The new offer of £2,600,000 was from an identified purchaser. Whilst it is true that this offer was made only shortly before the meeting there was no other reason to be suspicious of it. 
73. The Supervisor had the right to require a valuation. If it had been material to the result of the vote I think that the above factors would have been sufficient for a successful challenge even on the strict test to be applied under section 263(2).
11. Conclusion
74. In the result this application is dismissed.