Glint Pay Ltd v Jason Daniel Baker

Hearing dates: 5 November 2020

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.

CHJ – 18/11/20

I.C.C. JUDGE Jones

A) The Applications

The proposition underlying the three Applications before me is that the Respondents were not discharged from liabilities owed to the Applicants in respect of their actions as administrators of those three companies by the Orders for discharge (“the Orders”) made on 6 December 2019 under paragraph 98 of Schedule B1 of the Insolvency Act 1986 (to be referred to as “ Paragraph 98”, “ Schedule B1” and “ the Act” respectively) pursuant to the Respondents' applications. Alternatively, that they should not have been and should not now be discharged insofar, at least, as the discharge would prevent the Applicants' claims.

The Applications produce the following issues:

(i) whether the Applicants' claims that the Respondents were not validly appointed because their appointments were prohibited by paragraph 16 of Schedule B1 fall outside the ambit of Schedule B1 and, therefore, Paragraph 98 because such appointments would be void;

(ii) if so, whether there are alternative claims based upon the case that the appointments were valid and, therefore, Paragraph 98 applies;

(iii) if the primary and/or alternative claims are subject to Paragraph 98, whether these are claims which should proceed under paragraph 75 of Schedule B1 pursuant to the one exception to discharge provided expressly by Paragraph 98;

(iv) if the primary and/or alternative claims are subject to Paragraph 98, whether paragraph 74 of Schedule B1 is relevant to a decision of discharge;

(v) if, or to the extent that discharge under Paragraph 98 applies to the Applicants' claims, whether the Orders should be construed as excluding those claims from discharge by reason of their notification to the Respondents and/or the issuing of a claim form before the specified date of discharge; and

(vi) if not, whether the date specified in the Orders for discharge to take effect should be extended to exclude the Applicants' claims until they are determined, whether that extension is by variation or discharge permitted by the Orders or by a decision to rescind, vary or review the Orders under Rule 12.59 of the Insolvency (England and Wakes) Rules 2016 (respectively to be referred to as “ Rule 12.59” and “ the Rules”) or otherwise.

All this arises in the context of claims valued by the Applicants at about £21.4 million.

B) Paragraph 98 – An Introduction

Paragraph 98 provides that when a person ceases to be an administrator he will be discharged from all liabilities “in respect of any action of his as administrator”accrued before the discharge. This will occur whenever an administrator vacates office (by reason of resignation, death or otherwise) or is removed from office or because the appointment ceases to have effect.

There is only one express exception to that discharge within Paragraph 98. It applies to an application under paragraph 75 of Schedule B1 for the examination of the administrator to investigate and potentially establish liability for specified acts of misfeasance and for misfeasance generally. The application can still be made despite discharge but only with permission of the court.

Otherwise, the remainder of Paragraph 98 is concerned with when the discharge will take effect. It deals with that in the context of three circumstances:

a) The first being that following the death of an administrator, discharge will occur the day the notice of death is filed with the court. The automatic effect of this provision is attributable to the fact that the appointment as office holder is a personal one. The administration will therefore cease unless there is another administrator or, as is to be expected, the administration is continued by a replacement office holder pursuant to paragraphs 90 to 95 of Schedule B1.

b) The second concerns vacation of office of an appointment under paragraph 14 or 22 of Schedule B1 (i.e. by the holder of a qualifying floating charge, the company or the directors). For those appointments, the date of discharge will be decided by those who have an interest in the outcome of the administration. Namely: (i) if the administrator stated in the proposals the belief that there is sufficient property to result in a distribution to the unsecured creditors, the creditors' committee or the creditors should there not be a committee; alternatively (ii) if the proposals state the belief that there is insufficient property to achieve that result (other than by virtue of section 176A(2)(a) of the Act, applying the prescribed part), the secured and potentially preferential creditors. That is because they are the only relevant creditors with an interest in the outcome of the administration,

c) The third is when there is discharge by court order, which can be made “in any case”. In other words, whether the other two circumstances would otherwise apply or not. Discharge will take effect at a time specified by the court.

It is apparent from this scheme that a court order may specify the effective date if no notice of death is filed or no decision is made for an appointment under paragraph 14 or 22 of Schedule B1. It is also to be implied that any date of discharge provided under the first two circumstances can be superseded by order of the court. Subject to the need for finality, the court's unfettered discretion presents an element of flexibility whenever a court is to specify the date for discharge, recognising that liabilities may not be foreseeable or for good reason may not be raised or considered when the application for discharge is heard. It is an element which exists in the context of the administrator no longer being in office and, therefore, no longer having control over the assets of the company for the purposes of the administration including the payment of costs and expenses. An administrator who vacates office is protected to a degree by the statutory charges prescribed by paragraph 99 of Schedule B1. These secure remuneration and expenses in priority to floating charges but not in priority to any statutory charge under paragraph 99(4) of Schedule B1 for sums payable in respect of a debt or liability arising out of a contract entered into before the administrator's appointment ceased including liabilities arising under adopted contracts of employment as specifically provided for in paragraph 99(5) of Schedule B1.

C) The Facts

The Applications being determined on written evidence and this hearing being for the specific purpose of addressing discharge, the general approach must be that disputed facts will not be determined subject to the usual exceptions. Equally, this judgment will only address matters specifically relevant to the Applications.

The Applications are made, the Applicants submit as their primary case and the Respondents as the sole case (a matter to be addressed below), on the basis that the appointments of the Respondents were invalid because the floating charge on which the appointments relied was unenforceable. Ms Hilliard Q.C. on behalf of the Respondents has challenged the “bizarre” nature of this claim but the reality is that it cannot be decided at this hearing that the claim has no merit or insufficient merit to satisfy a strike out or summary judgment test. This decision must be made on the basis that the case as pleaded is an arguable case.

It might nevertheless appear strange to an observer that such claim exists when the administrations produced successful exits, namely the Applicants' rescue as going concerns. The Respondents through Ms Hilliard Q.C. emphasise that point. There may be much to be said on this topic should the claims continue but for these purposes it is sufficient to refer to the following passages from the witness statement of Mr Cozens, who describes himself as “the Chief Executive Officer and founder of the Applicants”, in support of the Applications as the Applicants' explanation:

“9. … By the time of its Administration, Glint had over 35,000 account holders, had just launched in the United States, and had raised over £15m from investors including Sprott, TOCOM, Bray Capital and NEC Capital Solutions Limited. At the time that the matters below occurred, Glint was seeking further investment at a sum which would have valued it conservatively at that point at between £30m–£45m.

10. Despite this, each of the Companies were placed into administration on 18 September 2019 (“the Administration”). The Respondents were appointed as administrators of the Companies by NIVEN Alpha Pte Ltd (“ Niven”), a purported creditor of the Companies. It is the Applicants' case that the circumstances under which those Companies were placed into administration establish a clear prima facie case of wrongdoing on the part of the Administrators, along...