Alastair R Massey and Geoffrey Paul Rowley (as Joint Administrators of E Realisations 2020 Ltd ((in Administration)))
| Jurisdiction | England & Wales |
| Judge | Curl |
| Judgment Date | 24 June 2022 |
| Neutral Citation | [2022] EWHC 1575 (Ch) |
| Docket Number | Case No: CR-2020-002595 |
| Court | Chancery Division |
[2022] EWHC 1575 (Ch)
DEPUTY ICC JUDGE Curl QC
Case No: CR-2020-002595
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF E REALISATIONS 2020 LIMITED (IN ADMINISTRATION)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Timothy Harry (instructed by Osborne Clarke LLP) for the Joint Administrators
Hearing dates: 1 June 2022
APPROVED JUDGMENT
Deputy ICC Judge Curl QC:
Two applications made by the joint administrators of E Realisations 2020 Limited (in administration) (“Company”) came before me on an urgent basis in the interim applications list on 1 June 2022. I granted the declaratory and other relief sought on that occasion and indicated that I would give my reasons in writing at a later date. This judgment sets out those reasons. I am grateful to Mr Harry of counsel and those instructing him for their written and oral submissions.
The Company was known during its trading life as Everest Limited and was formerly the main trading company in the Everest windows and home improvements group. Its directors appointed the administrators on 8 June 2020. As recorded in their proposals dated 15 June 2020, the administrators decided to pursue the objective in para.3(1)(b) of Schedule B1 to the Insolvency Act 1986 (“Act”), namely to achieve a better result for the company's creditors as a whole than would be likely if the Company were wound up without first being in administration. This decision was based on the maximum prescribed part being available to the unsecured creditors following the pre-packaged sale of certain business and assets of the Company, which had taken place on 9 June 2020.
Both applications before the court concern the administrators' terms of office. The first was issued on 28 April 2022 (“Application 1”) and sought a 12 month extension of the administrators' appointment to 7 June 2023 under para.76(2)(a) of Schedule B1 to the Act. The second was issued on 26 May 2022 (“Application 2”) and sought, primarily, a declaration that the terms of office of the administrators had been effectively and validly extended to 7 June 2022 by consent under para.76(2)(b) of Schedule B1 and that any defects in compliance with the notice provisions under r.3.54(2) of the Insolvency (England and Wales) Rules 2016 (“Rules”) were remedied under r.12.64 of the Rules. In the alternative, Application 2 sought a retrospective administration order under para.13(2) of Schedule B1 such that there would be no intervening period of time between the appointment of the administrators on 8 June 2020 and the present time.
Application 1 was issued in the High Court but was transferred to the County Court at Central London by the order of Chief ICC Judge Briggs on 28 April 2022. At a hearing on 24 May 2022, and having been shown the recent decision of Mr Justice Michael Green in Re Caversham Finance Limited (in administration) [2022] EWHC 789 (Ch), District Judge Hart identified a possible issue in relation to the previous consensual extension of the administration to 7 June 2022. This concerned the notices required by r.3.54 of the Rules to be given to the secured and preferential creditors in order to obtain their consent to the extension of the administrators' appointment under para.76(2)(b) of Schedule B1 to the Act. District Judge Hart transferred Application 1 back to the High Court for an urgent hearing, recording in the order “…that a declaration may be required as to whether there has been a breach of rule 3.54(2)…which may be remedied pursuant to rule 12.64…” Application 2, seeking such a declaration or a retrospective appointment in the alternative, was issued two days later.
The concern over compliance with r.3.54(2) of the Rules arises in this way. So far as relevant, paras.76 to 78 of Schedule B1 provide as follows:
“76
(1) The appointment of an administrator shall cease to have effect at the end of the period of one year beginning with the date on which it takes effect.
(2) But—
(a) on the application of an administrator the court may by order extend his term of office for a specified period, and
(b) an administrator's term of office may be extended for a specified period not exceeding one year by consent.
77
(1) An order of the court under paragraph 76—
(a) may be made in respect of an administrator whose term of office has already been extended by order or by consent, but
(b) may not be made after the expiry of the administrator's term of office.
…
78
(1) In paragraph 76(2)(b) “consent” means consent of—
(a) each secured creditor of the company, and
(b) if the company has unsecured debts, the unsecured creditors of the company.
(2) But where the administrator has made a statement under paragraph 52(1)(b) “consent” means—
(a) consent of each secured creditor of the company, or
(b) if the administrator thinks that a distribution may be made to preferential creditors, consent of—
(i) each secured creditor of the company, and
(ii) the preferential creditors of the company.
(2A) Whether the company's unsecured creditors or preferential creditors consent is to be determined by the administrator seeking a decision from those creditors as to whether they consent.
(4) An administrator's term of office—
(a) may be extended by consent only once,
(b) may not be extended by consent after extension by order of the court, and
(c) may not be extended by consent after expiry.
(5) Where an administrator's term of office is extended by consent he shall as soon as reasonably practicable–
(a) file notice of the extension with the court, and
(b) notify the registrar of companies.
(6) An administrator who fails without reasonable excuse to comply with sub-paragraph (5) commits an offence.”
In this case, the administrators made a statement under para.52(1)(b) of Schedule B1 in their proposals dated 15 June 2020 and “consent” for the purposes of para.76(2)(b) had the meaning in para.78(2)(b), i.e. the consent of each of the secured creditors and the preferential creditors of the Company.
Rule 3.54 of the Rules makes procedural provision for extensions under para.76 of Schedule B1. So far as relevant, it provides:
“3.54—Application to extend an administration and extension by consent (paragraph 76(2) of Schedule B1)
(1) This rule applies where an administrator makes an application to the court for an order, or delivers a notice to the creditors requesting their consent, to extend the administrator's term of office under paragraph 76(2) of Schedule B1.
(2) The application or the notice must state the reasons why the administrator is seeking an extension.”
Under cover of letters dated 4 August 2020, the administrators sought a number of decisions from the secured and preferential creditors. At that time, the secured creditors of the Company were Barclays Bank Plc (“Barclays”) and BECAP12 GP Limited (“BECAP12”) and the preferential creditor was the Secretary of State for Business, Energy and Industrial Strategy (“BEIS”). Those letters each included a voting form, on which the creditors were asked, among other things, to give their consent “[t]hat the period of Administration be extended by up to twelve months, if required.” By the same form, the creditors' consent was also sought to four other matters, including fee approval. The letters to the secured creditors enclosed a copy of the administrators' report and proposals dated 15 June 2020. Although the letter to BEIS did not include those documents, it identified a website where they could be viewed and downloaded.
It is accepted by the administrators that no reasons for the contemplated extension were stated in the letters of 4 August 2020 or on the voting form completed by the creditors providing their consents to the extension of the administration, despite the requirement in r.3.54(2) of the Rules that such reasons be given.
Each of the creditors provided their consents within a couple of weeks of 4 August 2020. The administrators completed and filed a notice of the extension with Companies House dated 9 April 2021. It will be noticed that this is a gap of around eight months.
Rule 12.64 of the Rules provides as follows:
“12.64 Formal defects
No insolvency proceedings will be invalidated by any formal defect or any irregularity unless the court before which objection is made considers that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by any order of the court.”
The issue for determination on Application 2 is whether these matters give rise to a defect amounting to a procedural irregularity or a defect going to the fundamental validity of the extension of the administration. Given that Application 2 goes to the question of whether the Company remained in administration at all after 7 June 2021, I will consider Application 2 before considering the request for a further extension of the administrators' terms of...
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