ProMep v Henry – CVA claim against creditor not discharged despite set-off provision

This case concerned a number of construction projects in which Henry was contractor and ProMep subcontractor.

ProMep proposed a CVA and Henry proved for and was admitted as a creditor in the CVA for losses on three of the projects. ProMep thereafter brought a claim in relation to a fourth project that had not been mentioned in the proof of debt. Henry defended the claim, inter alia, on the ground that ProMep had owed Henry a significant sum when ProMep entered into a CVA (Henry's claim being for £3.457 million, which had been accepted by the CVA supervisors, but Henry had only been paid £242,000 on that claim through the CVA procedure). The CVA (as is common with CVA proposals) through its standard terms had incorporated the procedure for proofs of debt applicable for CVLs, including the rules on mandatory set off, and that any debt owed by Henry to ProMep on the fourth project had been mandatorily set off against Henry’s claim on the other three projects.

ProMep argued that the purpose of the CVA was to perform a "hard reset" on ProMep at a point where it had liquidity issues so that, on its terms, all its debts were to be dealt with in the CVA with a defined fund to settle those debts and, other than that defined fund, by one of its clauses all other assets were expressly excluded from the CVA. This exclusion extended to ProMep’s potential future claims against Henry on the fourth project.

The judge preferred the submissions of ProMep, holding that the CVA had not discharged ProMep’s claim.

Re: Henry v ProMep [2024] EWHC 1825 (TCC)