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CVA Construction and Interpretation - EH3

Whether the terms of a CVA are fair and sensible has a bearing on their meaning, according to the Court of Appeal in Re Energy Holdings (No 3) Ltd (in liquidation) [2009] EWCA Civ 173 CA.

The EH3 proposals included the following term at para 23.5:

"Claim Forms must be lodged with the CVA Supervisors of the relevant CVA Company on or before the Claims Date. If a Claim Form is lodged after the Claims Date, a CVA Claim will not rank for Distributions unless the CVA Supervisors of the relevant CVA Company or the Court determines either that the failure to lodge the Claim Form earlier did not result from a wilful default or lack of reasonable diligence on the part of the CVA Creditor, or that the CVA Creditor:

(a) did not have notice of the Creditors' Meeting of the relevant CVA Company; and

(b) within 28 days of becoming aware that the Creditors' Meeting of the relevant CVA Company had taken place it lodged its Claim Form with the CVA Supervisors."

At first sight you may very well think that a creditor who did not have notice and did not make a claim within 28 days of becoming aware of the creditors' meeting cannot be entitled to a distribution.

However, this construction creates an anomaly in that a creditor with notice has 45 days to claim (para 4.2), but a creditor who has no notice and becomes aware of the meeting the day after it took place would have to submit his claim within 29 days of the meeting.

The judgement examines the CVA terms' construction in detail and supports the view of the creditor in question, Gold Fields Mining LLC ("GFM"), with Mummery LJ concluding:

"In sum, the Supervisors' suggested construction of paragraph 23.5 as imposing an absolute bar on claim forms lodged by a creditor without notice more than 28 days after becoming aware of the creditors' meeting is (a) conceded not to be absolute in practice and (b) makes less than absolute sense. Like the Chancellor I prefer GFM's construction: it fits more comfortably into the scheme, structure and language of the paragraph and it makes good sense."



Date: 18th May, 2009
Author: Chris Laughton


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