Petitionof Gary Fraser &c For An Order Re Prestonpans Trading Limited
| Jurisdiction | Scotland |
| Judge | Lord Malcolm |
| Neutral Citation | [2012] CSOH 184 |
| Year | 2012 |
| Published date | 04 December 2012 |
| Date | 04 December 2012 |
| Court | Court of Session |
| Docket Number | P785/12 |
| OUTER HOUSE, COURT OF SESSION [2012] CSOH 184 | |
| P785/12 | OPINION OF LORD MALCOLM in the Petition of GARY STEVEN FRASER and another as the Joint Administrators of Prestonpans (Trading) Limited Petitioners; for an order under and in terms of sections 242(4) and 243(4) of the Insolvency Act 1986 ________________ |
Petitioners: Mrs Gillies, Solicitor Advocate; Pinsent Masons LLP
Respondents: Wolffe QC, Delibegovic-Broome; Simpson & Marwick
4 December 2012
[1] In this petition the joint administrators of Prestonpans (Trading) Limited ask the court to reduce an assignation granted by the company in favour of Alexander Inglis & Son Limited dated 10 and 14 November 2011. Only the assignees have entered appearance in opposition to the petition. The petitioners claim that the assignation amounted to a gratuitous alienation in terms of section 242 of the Insolvency Act 1986, failing which it was an unfair preference in terms of section 243.
[2] Mr Wolffe QC has moved the court to dismiss the petition as incompetent. He argued that the remedy of reduction is available only by way of summons, not petition. Mrs Gillies, the solicitor advocate for the petitioners, relied upon the terms of rule of court 74.15, which provides as follows:
"An application or appeal under any provision of the Act of 1986...during an administration shall be -
(a) where no previous application or appeal has been made, by petition, or
(b) where a petition for an order in respect of an administration has been lodged, by note in the process of that petition."
[3] Mr Wolffe submitted that the term "application" in the rule refers to incidental applications connected with the administration process itself, for example those arising under schedule B1 to the Act. Challenges involving third parties brought under sections 242/3 are not applications within the meaning of the rule. The rule was amended to introduce a reference to petitions after the introduction of "out of court" administration procedure by the Enterprise Act 2002. Thereafter it could no longer be assumed that incidental applications relating to an ongoing administration could be made by way of a note in an existing process. (The present case involves an administration which began without any formal court procedure.)
[4] Mr Wolffe submitted that the structure of the rule suggests that it allows petition procedure for the kinds of applications which would otherwise be brought by way of a note in an existing administration process. He acknowledged that there is a recent example of a challenge of the current nature being brought by way of petition and granted by the Lord Ordinary, cf Joint Administrators of Questway Limited v David Simpson [2012] CSOH 107. However the competency of the procedure was not raised as an issue in that case.
[5] Mr Wolffe readily accepted that, in the present case, the adopted procedure is unlikely to cause any unfairness, injustice or practical problems. However he referred to recent Inner House cases which were disposed of on grounds of competency raised only by the appeal court judges themselves. He made no apology for taking what might otherwise be seen as a somewhat technical point. He was doing so in order to avoid potential complications down the line.
[6] Mrs Gillies stressed that the petition was brought under sections 242 and 243 of the 1986 Act. It relates to an application under the 1986 Act, and hence is covered by rule 74.15. It is an application relating to or incidental to the administration. Mrs Gillies relied upon the concession that no injustice or unfairness is being caused, nor is likely to be caused by the use of petition procedure. In short it was submitted that a straightforward interpretation of the rule supports the course adopted by the administrators. If it becomes necessary, a commercial action will be commenced, but this would only cause delay and extra expense.
Discussion
[7] Mr Wolffe cited a large number of examples of proceedings of the current nature being raised by way of ordinary action. That this is the appropriate procedure is supported by references in various textbooks. Mrs Gillies did not mount any real challenge to Mr Wolffe's submission as to the general practice. She did refer to Questway as a precedent in her favour, though she acknowledged that the point at issue was not raised for consideration and decision. Both counsel proceeded on the basis that the question turns on the correct interpretation of rule of court 74.15.
[8] Before the 2002 Act, rule 74.15 was in the following terms:
"(1) An application or appeal under any of the following provisions of the Act of 1986 or the Insolvency Rules shall be made by note in the process of the petition for an administration order which is in force;
(a) section 13(2) (application for appointment to fill a vacancy in office of administrator);
(b) section 14(3) (application by administrator for directions);
(c) section 15(2) (application by administrator for power to dispose of property subject to a security);
(d) section 18(1) (application by administrator for discharge or variation of administration order);
(e) section 19(1) (application for removal from office of administrator);
(f) section 22(5) (application for release from, or extension of time for, obligation to submit statement of affairs);
(g) section 27(1) (application for protection of interest of creditors and members);
(h) rule 2.6(2) (appeal against decision of administrator as to expenses of submitting statement of affairs);
(i) rule 2.16(3) (application by administrator for increase of remuneration); and
(j) any other application under a provision relating to administration orders not specifically mentioned in this part.
(2) An application by an administrator to extend the period for sending an abstract of his...
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