Lee Andrew Causer v NMUL Realisations Ltd ((in Administration))
| Jurisdiction | England & Wales |
| Judge | Frith |
| Judgment Date | 20 January 2021 |
| Neutral Citation | [2021] EWHC 94 (Ch) |
| Date | 20 January 2021 |
| Docket Number | CR-2020-000641 |
| Court | Chancery Division |
[2021] EWHC 94 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
The Rolls Building
The Royal Courts of Justice
7 Rolls Building, Fetter Lane
London EC4A 1NL
DEPUTY INSOLVENCY AND COMPANIES COURT JUDGE Frith
CR-2020-000641
In the Matter of NMUL Realisations Limited
And in the Matter of the Insolvency Act 1986
Mr Hugh Sims QC and Mr Stefan Ramel (instructed by Eversheds Sutherland (International) LLP) appeared on behalf of the Applicants.
The Respondent did not appear and was not represented.
Hearing date: 21 December 2020
APPROVED JUDGMENT
Introduction
There have been a number of cases concerning the correct approach the Court ought to adopt when dealing with potential defects in the procedure for appointing administrators out of court. This is a case which raises a novel point arising from the inappropriate filing of a notice of satisfaction of a qualifying floating charge on behalf of the Company that created the charge to secure its borrowing in circumstances where in fact, at all material times, a substantial balance remained due. This resulted in a failure to give notice to the holder of a prior security pursuant to paragraph 15 of Schedule B1 of the Insolvency Act 1986 (the “Act”).
The issue raised is whether such a failure was a fundamental defect which rendered the appointment void ab initio or whether it was not fundamental, caused no substantial injustice and could be remedied by an order of the court made pursuant to the provisions of rule 12.64 of the Insolvency (England and Wales) Rules 2016 (the “Rules”).
On 21 December 2020, I made a declaration that the appointment of Lee Andrew Causer, Danny Nicolaas William Dartnaill and Ryan Kevin Grant (the “ Applicants”) as the joint administrators of NMUL Realisations Limited (the “Company”), is valid, notwithstanding a failure on the part of the appointing charge holder to give notice to a prior chargee of its intention to do so under the provisions of paragraph 15 of Schedule B1 of the Act. These are the reasons why I did so.
The Applicants were represented before me by Mr Hugh Sims QC and Mr Stefan Ramel. I was assisted greatly by their concise, but comprehensive skeleton argument and their helpful oral submissions.
The Facts
The Applicants were appointed the joint administrators of the Company following a notice of appointment to that effect filed by Metro Bank Plc (“ Metro”) on 29 January 2020 pursuant to powers contained in a debenture created in its favour on 5 June 2019 (the “ Metro Debenture”). Before it went into administration, the Company operated as a motorcycling manufacturer producing motorcycles bearing the well-known brand of Norton.
The factual matrix commences on 9 October 2008, when a Mr Stuart Garner was appointed as the sole director of the Company. He was also nominated as the person with significant control, not only of the Company, but also its parent company Norton Motorcycle Holdings Limited (“ NMHL”). On the same day, the Company, and pursuant to its powers as the trustee of the Moya Pension Scheme (“ MSIPP”), a company known as Tudor Capital Management Limited (“ Tudor”) entered into a loan agreement pursuant to which Tudor, as trustee of MSSIP, lent the Company a sum not exceeding £1 million at an annual rate of interest of 8% (compound). To secure the performance of its obligations under the loan agreement, the Company granted a debenture to Tudor in its capacity as the trustee of MSIPP (the “Tudor Debenture”), a role that was acknowledged by Tudor when its directors executed the debenture on its behalf in that capacity. The Tudor Debenture was duly validly registered in the Companies Register in accordance with the usual statutory provisions.
On 5 March 2013, the two duly appointed directors of Tudor, namely Mr Andrew Meeson and Mr Peter Bradley were convicted of conspiracy to cheat the public revenue and sentenced to terms of imprisonment. On 29 September 2014, confiscation orders were made against them under the provisions of the Proceeds of Crime Act 2002. This course of events followed an investigation by the Pensions Regulator who, on 4 October 2011, gave notice that an order had been made to the effect that Tudor should be suspended from acting as a trustee in relation to trust schemes pursuant to section 4 of the Pensions Act 1995. The effect of such a notice was that Tudor was prohibited from exercising any functions as a trustee of the trust schemes. It is the understanding of the Applicants that these actions were prompted by the initiation of the criminal proceedings against Messrs Meeson and Bradley which ultimately resulted in their conviction, imprisonment and subsequently, the imposition of confiscation orders over their realisable property.
Tudor was dissolved on 6 December 2016. On 28 March 2018, the Tudor Debenture was noted as being satisfied at Companies House by virtue of a notice given by Mr Garner in his capacity as the director of the Company as the Chargor. It is this notification that caused the circumstances giving rise to this application.
Initially, it appears that Mr Garner, having not heard from either the trustee or anybody on behalf of the MSIPP for some time concluded (wrongly, as it transpired) that the loan had been discharged and the debt due to MSIPP in relation to which security was provided by the Tudor Debenture had been satisfied. Acting pursuant to that conclusion and apparently having taken oral legal advice, he caused the Company to file the notice of satisfaction at Companies House. Such notification having been provided, the Tudor Debenture was recorded as having been satisfied by the Registrar of Companies. In fact, it subsequently transpired that the Company still owed the sum of approximately £1.5 million to Tudor as trustee of MSIPP which was secured by the Tudor Debenture.
Mr Garner initially then negotiated a refinancing of the Company by way of a facility offered by Santander Bank UK plc. This in turn led to a further and final refinancing of the Company's liabilities by Metro under the terms of the Metro Debenture.
It therefore follows that at the time of the filing of the notice of intention to appoint the Applicants as joint administrators, the only charge showing on the Company's register as being unsatisfied was the Metro Debenture. Both the Santander Debenture and Tudor Debenture were shown as being satisfied in full.
Metro served a formal demand for repayment on the Company on 21 January 2020. Having received no satisfactory response, it instructed its solicitors to file a notice of appointment of the Applicants as the joint administrators of the Company which is recorded as having been filed with the court with effect from 10.30 am on 29 January 2020.
It can therefore be seen that when the notice of appointment was filed, the Companies Register did not reflect the true position concerning the existence of the outstanding liability still owing on the Tudor Debenture. There was therefore a prior unsatisfied charge which ranked in priority to the Metro Debenture. Consequently, notice of an intention to appoint should have been served pursuant to paragraph 15 of Schedule B1 of the Act. Whilst the checks were made with Santander in relation to any security it held over NMHL and its subsidiary due to the fact that its charge was noted as being unsatisfied in the register, no such checks were made in respect of the Company as to the existence of any continuing debt secured by the Tudor Debenture.
At the time of the appointment, it was by no means clear upon whom notice could be served. Tudor as the debenture holder had, after all been dissolved some four years previously. Indeed, in his submissions before me, Mr Sims QC invited me to consider whether this uncertainty disengaged paragraph 15 of Schedule B1 of the Act altogether on the grounds that there was no person upon whom such notice could be given. I will deal with this submission later.
In evidence filed before me, the representative of Metro made it clear that it was completely unaware of the outstanding amount due. Had it been so aware, it would have insisted on a deed of priority to ensure that its outstanding debt would be discharged first, notwithstanding the fact that the debenture it relied upon post-dated the unsatisfied Tudor Debenture.
The issue as to who was entitled to the benefit of the Tudor Debenture came to light on 30 January 2020, the day after the appointment of the Applicants, when it was discovered that on 6 September 2019, Ms Louise Brittain was appointed as the enforcement receiver (the “Enforcement Receiver”) over the realisable property of Messrs Meeson and Bradley for the purpose of enforcing the confiscation orders made against them. The Enforcement Receiver asserted that the benefit of the Tudor Debenture, and the underlying loan made by Tudor as trustee of MSIPP to the Company that was secured by it, formed part of their realisable property that she was appointed to realise. She was supported in this assertion by the terms of the Receivership Order (the “ERO”). Paragraph 10 of the ERO defined the Defendant's assets as:
“…any property in which the Defendant has any interest or to which the Defendant has any right and any property held by any...
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