Summary of Opinion — Judge Sandison

Factual and Procedural Background

The Petitioner sought an order under section 6(4)(a) of the Insolvency Act 1986 to revoke resolutions of creditors and the sole member of Company A approving a Company Voluntary Arrangement ("CVA") dated 30 January 2026. The CVA formed part of a wider sale transaction by which Company B would acquire Company A as part of a sale process instigated following the administration of Company C. Company A was in severe financial distress; the sale completion was subject to multiple conditions precedent, including compromise of a long‑running tax claim asserted by the Petitioner. Affidavit evidence was lodged by both sides. A hearing took place within two weeks of commencement and the judge refused the petition; this opinion explains that decision.

Legal Issues Presented

1. Whether the CVA unfairly prejudiced the interests of the Petitioner within the meaning of section 6(1)(a) of the Insolvency Act 1986, such as to justify revocation under section 6(4) of the 1986 Act.
2. Whether the CVA passed relevant comparative assessments (commonly addressed as "vertical" and "horizontal" comparisons) and, in particular, whether the votes of uncompromised or connected creditors produced unfair prejudice to the Petitioner.

Arguments of the Parties

Petitioner's Arguments

• The CVA unfairly prejudiced the Petitioner's interests and should be revoked under section 6(4) because it compromised the Petitioner's claim while being imposed by votes of creditors who were not compromised or who would benefit from the wider sale transaction.
• On a vertical comparison the CVA produced only a modest uplift over likely insolvency recoveries; the horizontal comparison failed because uncompromised and connected creditors had drowned out the Petitioner's votes to achieve a distribution advantageous to them.
• The secured creditors and other groups obtained advantages (including improved recoveries arising from the sale freed of debts) that were achieved at the Petitioner's expense; the proposer had not taken sufficient care to avoid prejudice to a drowned‑out creditor.

Respondent's Arguments

• Revocation would precipitate formal insolvency (administration or liquidation) in which unsecured creditors, including the Petitioner, would receive virtually nothing; the CVA facilitated a sale that produced materially better returns for compromised creditors than insolvency.
• The differential treatment of creditor groups was objectively justified by commercial realities (need to protect critical suppliers, contagion risk, legal limitations for certain foreign‑law debts, de minimis claims, and requirements of the purchaser Company B).
• The CVA was broadly supported by creditors including unsecured creditors who would be compromised; the Petitioner had no special status merely by virtue of being an involuntary creditor and the voting outcome supported the fairness of the CVA.

Table of Precedents Cited

Court's Reasoning and Analysis

The court framed the task as an equitable inquiry whether the CVA unfairly prejudiced the challenging creditor. While acknowledging the utility of vertical and horizontal comparisons, the court preferred an open‑ended assessment focused on whether it was equitable to impose the CVA bargain on an unwilling party.

Step‑by‑step analysis as applied to the facts:

• Background and alternatives: The judge accepted uncontroverted evidence that Company A faced imminent insolvency absent the CVA and that the sale to Company B was the realistic means of delivering any meaningful recovery.
• Vertical comparison: The court compared likely returns under the CVA (estimated typical return c.2.23%, minimum 0.45%) with likely returns in insolvency (prescribed part c.0.12%). The CVA exceeded the irreducible minimum; even the minimum CVA outcome was materially better than insolvency, so no unfair prejudice arose on the vertical comparator.
• Horizontal comparison and voting composition: The court examined the composition of creditor categories and voting (noting secured creditors and other categories would receive releases or payments under the sale). It accepted that votes of uncompromised and connected creditors outvoted the Petitioner but held that such voting is not automatically unfair; the question is whether the outcome was inequitable in all circumstances.
• Justification for differential treatment: The court accepted commercial explanations for excluding or protecting certain creditor groups (critical suppliers for operational continuity and contagion risk, de minimis claims, foreign‑law governed claims, ongoing trade liabilities), and accepted evidence that the secured creditors' recovery approximated what they would realise in insolvency and that their participation was essential to unlock the sale proceeds.
• Assessment of special features of the Petitioner's claim: The court noted the claim was long‑running and disputed but concluded the dispute did not warrant discounting the claim's voting value materially. The court also considered the involuntary nature of the debt but found it attenuated by delay in enforcement by the Petitioner.
• Conclusion of unfairness inquiry: Balancing the surplus offered by the CVA, the realistic alternative of insolvency, the commercial necessity of the wider transaction, and the nature of creditor positions, the court concluded there was no unfair prejudice to the Petitioner.

Holding and Implications

Holding: THE PETITION IS REFUSED; THE CVA IS NOT REVOKED

Implications:

• Direct effect: The decisions of the creditors and the sole member approving the CVA on 30 January 2026 remain effective; the CVA continues as part of the wider sale transaction.
• Consequences for parties: The Petitioner’s challenge was dismissed; Company A may proceed under the CVA/sale framework subject to completion of conditions precedent.
• Precedential note: The opinion applied established comparative principles (vertical/horizontal) but emphasised an open‑ended equitable assessment in the particular circumstances; the court did not purport to establish a new general rule.