Bezier Acquisitions Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Norris |
| Judgment Date | 12 December 2011 |
| Neutral Citation | [2011] EWHC 3299 (Ch) |
| Docket Number | Case No: 09917/2011 |
| Court | Chancery Division |
| Date | 12 December 2011 |
[2011] EWHC 3299 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Norris
Case No: 09917/2011
And In The Matter Of The Insolvency Act 1986
Mr William Trower QC and Mr Stephen Robins (instructed by Linklaters LLP) for the Applicant Directors
Hearing dates: 17 November 2011
APPROVED JUDGMENT
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Norris…………………………12 December 2011
This is one of two applications that came before me on successive days in the Applications Court. (The other was Re Virtualpurple Professional Services Ltd argued by Mr Collings QC). Each was argued within the constraints imposed by that list and raised related points of some controversy. I decided not to deliver an extempore judgment in either case but to reflect upon the thorough arguments of Mr Collings QC and Mr Trower QC respectively. Although the points have been argued on one side only the presentation was in each case fair to the weight of the argument on either side. I am grateful for the help I was given.
Bezier Acquisitions Limited ("Bezier") was the holding company for six trading and three non-trading subsidiaries operating in the field of advertising, marketing and promotions. During the course of 2011 Bezier was involved in negotiations for refinancing and restructuring. It retained Linklaters LLP as its solicitor in relation to all aspects of the refinancing and the restructuring.
Bezier was in jeopardy because an Event of Default had occurred under its Senior Term Loan Agreement and its Senior Revolving Facilities Agreement. This senior debt was secured by a fixed and floating charge over all of the Bezier Group assets. The lender under these agreements was therefore the holder of "a qualifying floating charge" for the purposes of paragraph 14(3) of Schedule B1 to the Insolvency Act 1986 ("Schedule B1"). Bezier was at risk of an immediate demand for payment being made. In consultation with its senior lender Bezier negotiated the sale of its undertaking and assets, the intended mechanism being by way of a "pre-pack administration". It was forecast to run out of funds by the end of August. On the 18 August 2011 the directors of Bezier were warned that a Notice of Demand would be served the following day. So that evening they resolved, subject to the service of the Notice of Demand, that the appointment of administrators would be in the best interests and to the advantage and benefit of Bezier and its creditors. To that end the directors approved a Notice of Intention to appoint an administrator in Form 2.8B. At that same meeting they also approved a Notice of Appointment in Form 2.9B recording the appointment of Mr Smith and Mr Edwards of Deloitte LLP as joint administrators.
The Notice of Demand was duly received on 19 August 2011. Mr Barfield, a director and the company secretary of Bezier, states that (as authorised by the directors)
"I swore the Notice of Intention in the presence of a solicitor…I then handed the completed document to a trainee solicitor from Linklaters who was present at the time. He took the original signed document back to Linklaters office with him. I understand that on the same day a scanned copy of the original Notice of Intention was sent by Linklaters LLP by e-mail to the Security Trustee……..
I also executed the Notice of Appointment in Form 2.9B. The appointment of the Administrators was effected by Linklaters filing at Court on [Bezier's] behalf, the Notice of Intention, the Notice of Appointment and the requisite notices from the Administrators…"
The Notice of Appointment indicates that it was filed at Court at 4:30pm on the 19 August 2011. Immediately upon their appointment taking effect the Administrators sold Bezier's business and assets to the purchaser who had emerged in the pre-administration negotiations. Since the consideration for the sale consisted principally of the assumption of responsibility for debt the key events in the administration occurred immediately after the appointment of the administrators. The entire process was consensual; indeed all of the ordinary share holders in Bezier were aware in advance of the director's intentions and consented to the adoption of the intended course (either because they were themselves directors or because their consent had been specifically sought and received). But notwithstanding the knowledge and the consent of all directors and all shareholders, an issue has arisen about the validity of the appointment of administrators.
In appointing Mr Smith and Mr Edwards to be administrators of Bezier the directors were exercising the power conferred upon them by paragraph 22(2) of Schedule B1. Paragraph 26(1) of Schedule B1 required them to give notice to the holder of any qualifying floating charge. Paragraph 26 (2) of Schedule B1 states that they "shall also give such notice as may be prescribed to such other persons as may be prescribed". Insolvency Rule 2.20(2) says that
"A copy of the notice of intention to appoint must, in addition to the persons specified in paragraph 26, be given to…(d) the company, if the company is not intending to make the appointment".
So where Notice of Intention to appoint is given to a qualifying chargeholder (and an interim moratorium comes into effect for at least five business days under paragraph 44(4) of Schedule B1 to enable the qualifying chargeholder consider whether to make its own appointment (if entitled)) a copy of the Notice of Intention must in such case be given to the company.
As to the giving of notice to the company, IR2.20(3) declares that the provisions of IR2.8(2) ff. apply to the giving of Notice of Intention in the same way as they apply to service of an administration application. IR2.8(2) (which deals with service of an administration application) provides that
"Service shall be effected… on the company… by delivering the documents to its registered office".
IR2.8(3) then provides that if delivery to a company's registered office is not practicable then service may be effected by delivery to its last known principal place of business.
In the instant case the Notice of Intention was not delivered to Bezier at its registered office (although it could easily have been so served). Does this invalidate the appointment of Mr Smith and Mr Edwards as administrators of Bezier?
I would answer that question in the negative for two reasons.
First, in my judgment IR2.8(2) and (3) do not upon their true construction contain a complete and exhaustive code as to the mode of service upon a company. Thus:
(a) IR12A.5 provides that where a document is required "to be given, delivered or sent to a person" it may be so communicated "to a solicitor authorised to accept delivery on that persons behalf":
(b) IR13.4 also says that where under the Act or the Rules a notice or other document is to be given to a person it may "if he has indicated that his solicitor is authorised to accept service on his behalf" be given instead to the solicitor:
(c) IR2.8(2) is plainly...
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