My point here was really about the legal status of an IVA. It is the original modified Proposal agreed by the creditors' meeting that is given 'statutory binding' i.e. that all parties are bound to the arrangement by statute and not by contract. The point of the 'statutory binding' is that - unlike a contract - it also binds dissenting parties.
No one - not even the courts - can vary the terms of the original statutory arrangement. If, however, there is (preferably) a variation clause in the terms of the IVA then it is possible - with the agreement of the appropriate majorities - to vary the original terms as a 'separate contract' between the parties.
I know this sounds like double talk and it is an apparently bizarre legal contradiction but it relates to the different legal status given to an IVA because any agreed variations (e.g. lump sum early settlement) do not have the 'statutory binding' of the IVA agreed by the creditors meeting.
This is because the agreed variation terms become a consensual multilateral contract and, as with any normal contract, dissenting creditors are not bound by the variation. Strangely, dissenting creditors (and all parties) are still bound by the original statutory binding of the IVA.
If any individual creditor - or any other party - could show that they were losing out under the term of the new variation they could, if they wished, seek to enforce the original statutory terms by application to the courts under s.263 of the Insolvency Act. (Raja v Rubin)
It might also help to explain this by pointing out that,in conducting the terms of the new contract or variation, any party could (in theory)sue for breach of contract. As with all 'normal' contracts, this could raise the question of liability for damages.
The question of damages would not normally arise in relation to the conduct of the original IVA terms because it is not a contract. The courts would simply order any wrongs in the conduct of an IVA to be put right as a matter of equity.
In practice, this is of course all generally academic and will not effect the conclusion of most arrangements because creditors - and the debtor - will tend to go along with the new contract if a significant majority by value have supported the variation.
The interesting point, however, is that IPs are given a monopoly right to supervise statutory IVAs but, if the parties agree to a consensual variations outside the terms of the IVA, the continuation and supervision of the new contract is no more reliant upon an IP than any other contract.
In theory, there is therefore no reason why the parties - in accepting the variation - should not also agree to end the IVA (thereby saving on IP fees)and make their own arrangements for full and final settlement of the debt.
I also wonder - given some of the alarming stories about the conduct of creditors meetings and the drift away from the statutory timetables for IVAa - how many IVAs would (if tested in court) prove to be invalid as statutory arrangements. I suspect that many arrangements have actually simply drifted along to conclusion as multilateral contracts (rather than statutory IVAs) because no one wanted to rock the boat.
If this so, it would of course have quite a significant effect on the legal status of the arrangements in question, the validity of the fees charged and the status of funds held by IPs. It could, of course, also expose IPs to civil legal action from debtors and creditors alike.
