Jcam Commercial Real Estate Property XV Ltd v Davis Haulage Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice David Richards,Lord Justice Flaux,Lord Justice Jackson |
| Judgment Date | 11 April 2017 |
| Neutral Citation | [2017] EWCA Civ 267 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2016/1685 |
| Date | 11 April 2017 |
[2017] EWCA Civ 267
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY
His Honour Judge Bird
EWHC 772 (CH)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Jackson
Lord Justice David Richards
and
Lord Justice Flaux
Case No: A2/2016/1685
Jonathan Lopian (instructed by Forsters LLP) for the Appellant
The Respondent did not appear and was not represented
Hearing date: 30 March 2017
Introduction
Schedule B1 to the Insolvency Act 1986 makes provision for the administration of a company that is insolvent or likely to become so. The primary purpose of an administration, as stated in the legislation, is to rescue the company as a going concern. An administrator is appointed to manage the company's affairs, business and property. He is an officer of the court and he in effect supersedes the board of directors as regards the management of the company.
One effect of the appointment of an administrator, essential to the fulfilment of the purposes of an administration, is a moratorium on alternative insolvency proceedings and other legal process for which paragraphs 40 to 43 of schedule B1 make provision. The moratorium extends to the enforcement of security over the company's property, the repossession of goods in the company's possession under hire purchase agreements, the exercise of rights of forfeiture of leasehold premises, and the institution or continuation against the company or its property of any legal process, including legal proceedings, execution and distress. Paragraph 44 makes provision for an interim moratorium to which I will refer below.
When the administration procedure was first introduced in 1986, an administrator could be appointed only by an order of the court made on an application by the company, its directors or a creditor. The extensive amendments to the procedure introduced by the Enterprise Act 2002 included provisions for the appointment of an administrator out of court. An appointment may still be made by the court, but an appointment out of court may be made by the holder of a "qualifying floating charge" (as defined in paragraph 14 (2)), the company or the directors.
The holder of a qualifying floating charge has the right to appoint an administrator in priority to the exercise of that right by the company or its directors. Accordingly, paragraph 26 provides that where the company or its directors propose to make an appointment of an administrator, they must give at least five business days' written notice to the holder of any qualifying floating charge. The purpose of such notice self-evidently is to give the holder of the floating charge an opportunity to exercise its right of appointment. Where such a notice of intention to appoint is given under paragraph 26, the company or its directors are required by paragraph 27 to file with the court as soon as is reasonably practicable a copy of the notice and any document accompanying it. Paragraph 28 provides that the company or its directors may not appoint an administrator without first complying with those requirements and either the period of notice of at least five business days has expired or the persons to whom the notice has been given consent in writing to the appointment. Paragraph 28(2) further provides that an appointment of an administrator may not be made by the company or its directors more than ten business days after filing a copy of the notice with the court.
Under paragraph 44, an interim moratorium on alternative insolvency proceedings and other legal process arises as soon as a copy of the notice of intention to appoint an administrator is filed with the court under paragraph 27 and lasts until either the appointment of the administrator takes effect or the end of ten business days after the notice is filed with the court.
This is the statutory background against which the issue on this appeal arises. Is it open to a company or its directors to give a notice of intention to appoint an administrator under paragraph 26, and file a copy of it with the court under paragraph 27, thereby triggering the interim moratorium for a period of up to ten business days, without a fixed intention to appoint an administrator? The judge below, HH Judge Bird, put the issue as follows in paragraph 1 of his judgment:
"The issue before me is this: in order to file a notice of intention to appoint an administrator and so cause the statutory interim moratorium to come into effect, does a director need to have at the point of filing a settled intention to appoint an administrator, or is it sufficient that the director sees the appointment of an administrator as a second best choice in the event that other schemes he is contemplating do not work out?"
The judge held that it was not necessary for the company or its directors to have, at the point of filing a copy of the notice, a settled intention to appoint an administrator. He granted permission to appeal.
The judge's decision was made on an application issued by the appellant against Davis Haulage Limited (the company) on 11 March 2016. The appellant sought an order that a copy of a notice of intention to appoint an administrator dated 4 March 2016 filed by the company "be vacated and removed from the court file". The basis of the application was that, when giving the notice and filing a copy with the court, the company did not have a settled intention to appoint an administrator but, at best, proposed to do so only if its proposal for a company voluntary arrangement was not approved. The appellant also sought retrospective permission under paragraph 43(6) of schedule B1 for the issue of a possession claim and for permission to continue the possession proceedings.
The facts
The material facts may be summarised as follows.
The appellant is the registered proprietor of warehouse premises in Crewe of which the company is the tenant under a lease made on 28 June 2012 with the appellant's predecessor in title.
Due to the company's rent arrears, a payment plan was agreed in March 2015 for settlement of the arrears in instalments but the company failed to pay rent falling due on subsequent dates and by January 2016 the arrears amounted to over £261,000 plus interest. By a letter dated 18 January 2016, the appellant notified the company of its intention to take steps to recover possession of the premises if payment in full was not received within seven days. On 28 January 2016, in the absence of payment, the appellant issued possession proceedings in the County Court at Crewe.
Meanwhile, and unknown to the appellant, on 22 January 2016 the sole director of the company, Mr Davis, filed a copy of a notice of intention to appoint an administrator (the first notice) in the Manchester District Registry of the High Court. The notice had been given to Close Brothers Limited as the holder of a qualifying floating charge.
The notice was in the form prescribed pursuant to rule 2.20 of the Insolvency Rules 1986. It stated that the directors (in fact, Mr Davis was the only director) of the company intended to appoint Steven Muncaster and Sarah Helen Bell of Duff & Phelps Limited as administrators of the company and that the notice was being given to Close Brothers as a person entitled to appoint an administrator under paragraph 14 of schedule B1. The information contained in the notice was verified by a statutory declaration made by Mr Davis.
As required by the terms of the prescribed form, there was attached to the notice "a record of the decision of the directors to appoint an administrator". The record, signed by Mr Davis, stated that he had carefully considered and discussed the financial position of the company and noted his opinion that the company was insolvent and that it was "appropriate that the Director should seek the immediate appointment of administrators to the Company as soon as is reasonably practicable." It recorded that "[i]n the circumstances, and with a view to preserving the value of the Company's assets, the Director resolved that, among other things that the Director "shall notify on Form 2.8B Close Brothers Limited (Security Holder) of their [sic] intention to appoint joint administrators of the Company" and shall complete and sign such other documentation as may be required "in order to effect the director's appointment of the administrator [sic] of the Company".
Under cover of an email dated 2 February 2016, a copy of the first notice was sent to the appellant's agent by Matthew Peat of Duff & Phelps Limited. Mr Peat stated that the notice had been filed in view of the appellant's proposal to bring possession proceedings against the company and the threat of the presentation of a winding-up petition by HMRC for unpaid VAT, PAYE and national insurance contributions. Mr Peat stated that his firm were currently working with the company's management and its invoice discount provider:
"to find a feasible solution to secure the business going forward. It is the intention for D&P to undertake a marketing exercise this week with a possibility of completing a sale of the business and assets of the Company as a going concern having been given an authority to do so by the Company's director, Damion Davis."
The interim moratorium that arose as a result of filing the copy of the first notice on 22 January 2016 expired at the end of Friday 5 February 2016 by operation of paragraphs 44(4) and 28(2) of schedule B1.
On 5 February 2016, a copy of a further notice of intention to appoint an administrator (the second notice) was filed by Mr Davis at the Manchester District Registry. The filing of this notice had...
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