National Westminster Bank Plc v (1) Msaada Group (A Firm) (2) Gary Steven Pettit and Others
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE WARREN,Mr Justice Warren |
| Judgment Date | 21 December 2011 |
| Neutral Citation | [2011] EWHC 3423 (Ch) |
| Docket Number | Case No: No 9612 of 2011 |
| Court | Chancery Division |
| Date | 21 December 2011 |
[2011] EWHC 3423 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
IN THE MATTER OF THE INSOLVENCY ACT 1986
AND THE INSOLVENT PARTNERSHIPS ORDER 1994
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Warren
Case No: No 9612 of 2011
Tina Kyriakides (instructed by Addleshaw Goddard LLP) for the Applicant
Bridget Williamson (instructed by Turner Parkins LLP) for the first and fourth Respondents
Hearing date: 28th November 2011
Introduction
On 28 October 2011, the fourth Respondent (" Mr Craig") was appointed as administrator for the first Respondent (" the Partnership"). The appointment (" theAppointment") was made out of court by the partners, Philip Henry Keet and Maureen Keet, his wife. There are three applications before me:
i) An application for a declaration that the Appointment is invalid.
ii) If the Appointment is invalid, an application for an administration order in respect of the Partnership and the appointment of Richard James Philpott and Jane Moriaty (" the Bank's Nominees") as joint administrators.
iii) If the Appointment is valid an application that Mr Craig be removed as administrator of the Partnership and that the Bank's Nominees be appointed in his place.
The Applicant (" the Bank") is a substantial creditor of the Partnership and of the various companies wholly owned directly or indirectly by either the Partnership or Mrs Keet as I shall explain in more detail later in this judgment.
The first application
The first application is for a declaration that the Appointment is invalid so that Mr Craig was not effectively appointed. The basis of this application is that paragraph 26 of Schedule B1 to the Insolvency Act 1986 as it applies to partnerships (" paragraph 26" and " Schedule B1") was not given with the result that an essential requirement for the appointment of an administrator was not complied with so that the Appointment was wholly invalid. To deal with that proposition, I need to refer to that paragraph and to other paragraphs of Schedule B1.
Paragraph 26 as it applies to partnerships (see article 11 of Schedule 2 to the Insolvent Partnerships Order 1994 (" IPO")) is in the following terms:
" 26.—
(1) A person who proposes to make an appointment under paragraph 22 shall give at least five business days' written notice to—
(a) any person who is or may be entitled to appoint an agricultural receiver of the partnership, and
(b) any person who is or may be entitled to appoint an administrator of the partnership under paragraph 14.
(2) A person who proposes to make an appointment under paragraph 22 shall also give such notice as may be prescribed to such other persons as may be prescribed.
(3) A notice under this paragraph must—
(a) identify the proposed administrator, and
(b) be in Form 1A in Schedule 9 to the Insolvent Partnerships Order 1994"
Paragraph 22 as it applies to partnerships (see article 6 of Schedule 2 to the IPO) provides power to the members of an "insolvent partnership" to appoint an administrator. There is no definition of "insolvent partnership" for the purposes of paragraph 22. It must have the same meaning as in section 420 Insolvency Act 1986 where, again, there is no definition. Certainly it would include a case where both (i) the partnership's liabilities exceed its assets at their realisable value and (ii) it is unable to pay its debts as they fall due. Indeed, it would seem to include a case where either of those situations exist: see Re Hough The Independent, 26 April 1990 (Warner J). It has not been suggested that the partners had no power to appoint an administrator and I proceed on the basis that they did.
Paragraph 27 as it applies to partnerships (see article 12 of Schedule 2 to the IPO) is in the following terms
"27.—
(1) A person who gives notice of intention to appoint under paragraph 26 shall file with the court as soon as is reasonably practicable a copy of—
(a) the notice, and
(b) any document accompanying it.
……………."
Paragraph 28(1) provides that an appointment may not be made under paragraph 22 unless the appointor has complied with "any of the requirements of paragraphs 26 and 27…". In addition, it is a requirement that "the period of notice specified in paragraph 26(1) has expired" or that everyone to whom a notice has been given under paragraph 26(1) has consented to the making of an appointment. Paragraph 28(2) then provides that an appointment may not be made under paragraph 22 after the period of 10 business days "beginning with the date on which the notice of intention to appoint is filed under paragraph 27(1)".
Paragraph 29, as it applies to partnerships, provides that a person who appoints an administrator under paragraph 29 must file a notice of appointment with the court. Paragraph 29(5) as currently drafted provides that the notice of appointment must be in Form 1B.
Paragraph 30 has been relied on by Miss Williamson on behalf of the Partnership and Mr Craig. It commences with these words:
"30. In a case in which no person is entitled to notice of intention to appoint under paragraph 26(1) (and paragraph 28 does not therefore apply)……"
The suggestion made by Miss Williamson is, of course, that the words in parenthesis show that paragraph 28 is applicable only where a notice has to be given to a person falling within paragraph 26(1) but is not applicable if the only person on whom a notice has to be served is a person who has been prescribed for the purposes of paragraph 26(2). I shall come to that suggestion in due course.
Paragraph 44 has also played some part in the argument. Paragraph 44(4) provides for an interim moratorium from the time when a copy of notice of intention to appoint an administrator is filed under paragraph 27(1) until the appointment of the administrator takes effect or the period under paragraph 28(2) expires without the appointment of an administrator.
It is also necessary to consider Rule 2.20 of the Insolvency Rules 1986 (" Rule 2.20" and "the Rules"). Rule 2.20 is as follows:
"2.20.—
(1) The notice of intention to appoint an administrator for the purposes of paragraph 26 shall be in Form 2.8B.
(2) A copy of the notice of intention to appoint must, in addition to the persons specified in paragraph 26, be given to—
(a) any enforcement officer who, to the knowledge of the person giving the notice, is charged with execution or other legal process against the company;
(b) any person who, to the knowledge of the person giving the notice, has distrained against the company or its property;
(c) any supervisor of a voluntary arrangement under Part I of the Act; and
(d) the company, if the company is not intending to make the appointment….
…………………"
Under article 18 of and Schedule 10 to the IPO, the Rules apply to partnerships as they apply to companies with such modifications as the context requires. A modified form is now relevant for the purposes of Rule 2.20(1), namely Form 1A found in the Schedule to the Insolvent Partnerships (Amendment) Order 2006. That form includes the following:
"This notice is being given to the following person(s), being person(s) who is/are or may be entitled to appoint an agricultural receiver of the partnership or an administrator of the partnership under paragraph 14 of Schedule B1 to the Insolvency Act 1986."
That is similar to the equivalent rubric in the Form 2.8B used for a company. The persons there referred to are the persons to whom notice must be given under paragraph 26(1)(a) and (b). Form 1A has nothing to say about being given to any other person.
Form 1B in that Schedule is the notice of the actual appointment of an administrator. In the case of companies, there are separate forms for use where notice of intention to appoint has, or has not, been issued, namely Forms 2.9B (described in its heading as one "(where a notice to appoint has been issued)") and 2.10B (described in its heading as one "(where a notice to appoint has not been issued)"). Consistently with that, Form 2.9B refers to the notice given "in accordance with paragraph 26(1)…." but Form 2.10B contains no such reference. Form 1B is described in its heading a "Notice….. (where a notice of intention to appoint has not been issued)". There is, apparently, no prescribed form where a notice of intention to appoint has been issued and yet paragraph 29(1) requires a notice of appointment to be filed in all cases with paragraph 29(5) providing that the notice of appointment must be in Form 1B.
Mr and Mrs Keet did not give notice to anybody before appointing Mr Craig as administrator of the Partnership by the Appointment. There was no person who was or might have been entitled to appoint an agricultural receiver and no person who was or might have been entitled to appoint an administrator of the partnership under paragraph 14 (relating to holders of qualifying agricultural floating charges). There was therefore no person on whom notice had to be served under paragraph 26(1).
Rule 2.20(2)(c), if it applies, requires, as we have seen, that a copy of the notice of intention to appoint must be served on the persons specified, one of which is any supervisor of a voluntary arrangement. At the time of the Appointment, the Partnership was subject to a Partnership Voluntary Arrangement under which the third and fourth Respondents were joint supervisors. They were not given notice of the intended...
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