Note In The Petition Of Ultimate Invoice Finance Limited For An Administration Order In Respect Of Mcc Building Services Limited
| Jurisdiction | Scotland |
| Judge | Lady Wolffe |
| Neutral Citation | [2017] CSOH 72 |
| Docket Number | P266/17 |
| Date | 02 May 2017 |
| Court | Court of Session |
| Published date | 03 May 2017 |
OUTER HOUSE, COURT OF SESSION
[2017] CSOH 72
P266/17
NOTE BY LADY WOLFFE
In the petition of
ULTIMATE INVOICE FINANCE LIMITED
Petitioner
for an Administration Order in respect of
MCC BUILDING SERVICES LTD
Petitioner: Ower; Morton Fraser LLP
Respondent: No appearance
2 May 2017
Introduction
[1] The petitioner is an invoice finance company specialising in the provision of finance to small and medium-sized businesses. The petitioner entered into a debt purchase agreement with MCC Building Services Ltd (“the Company”). At the same time, the Company granted a floating charge in favour of the petitioner over its whole property comprised in its property and undertaking.
[2] The Company has since become insolvent.
[3] The petitioner in this case seeks an administration order in respect of the Company. Reference is made in the petition to paragraphs 3, 11, 12, 13, 42 and 44 of Schedule B1 to the Insolvency Act 1986 (“the Schedule” and the “Act”, respectively) and to rule 2.3 of the Insolvency (Scotland) Rules 1986 (“the Rules). The specified purpose for which the administration order is sought under paragraph 3 of the Schedule is for the realisation of property in order to make a distribution to one or more secured or preferential creditors, as provided for in paragraph 3(1)(c).
[4] However, by reason of the recent appointment of a provisional liquidator to the Company by Dunfermline Sheriff Court at the instance of the Company’s directors, an application made without notice to the petitioner, the petitioner is precluded by paragraph 17(a) of the Schedule from appointing an administrator. It therefore applies to the Court for this purpose. Had no provisional liquidator been appointed, the petitioner would have been able to make an out-of-court appointment under paragraph 14 of the Schedule.
[5] The petitioner referred in the petition to the fact of the appointment of the provisional liquidator. However, it was apparent from the submissions to the court that there was a degree of uncertainty as to the interaction between the administration order sought from this court and the liquidation proceedings in the sheriff court, and as to the rules to be applied and the appropriate orders to be granted. As it was stated in statement 6.1 of the petition:
“That the Company is unable to pay its debts. A petition has been presented to wind up the Company. In the circumstances, an insolvency procedure in relation to the Company is inevitable. It therefore requires to be determined whether the Company should enter liquidation or administration. The sheriff […] cannot make an order for the winding up of the Company pending the determination of this petition.”
[6] The purpose of this Note is to address these issues.
The Provisions Governing Appoint of an Administrator Where Company in Liquidation
[7] There are several routes by which a company may be placed in administration upon the appointment of an administrator. A floating charge holder may do so in terms of paragraphs 14 to 21 of the Schedule. A company or its directors may also appoint an administrator in certain circumstances, in accordance with paragraphs 22 to 34 of the Schedule. Further, the persons specified in paragraph 12(1) of the Schedule may also apply to the court for appointment by the court of an administrator. The application made by the petitioner does not fall within any of the foregoing provisions. Rather, an application for an administration order in circumstances where the company is in liquidation is one of the “special cases” provided for in paragraphs 35 to 39, and in particular in paragraph 37, of the Schedule, which governs an application by the holder of a floating charge for a court‑appointed administrator.
[8] It should be noted that, unless the court directs otherwise (under paragraph 13(2)(a)), the appointment of the administrator takes effect on the making of the administration order: paragraph 13(2)(b), and as applied to this type of special case by paragraph 37(3)(c) of the Schedule. Further, upon the making of the administration order, the court shall inter alia discharge the winding-up order (paragraph 37(2)(a)); it shall make provision for such matters as may be prescribed (paragraph 37(3)(b)); and it shall make other consequent provision (paragraph 37(3)(c)). Finally, it should be noted that rules 2.5 to 2.7 of the Rules provide as follows:-
“2.5— Application where company in liquidation
(1) Where an administration application is made under paragraph 37 or 38, the petition shall contain, in addition to those averments required in an application under paragraph 12, averments in relation to—
(a) the full details of the existing insolvency proceedings, including the name and address of the liquidator, the date he was appointed and by whom; and
(b) the reasons why administration has subsequently been considered appropriate,
and shall be accompanied by a copy of the order or certificate by which the liquidator was appointed and by such other documents as the petitioner considers might assist the court in determining the application.
(2) Where an administration application is made under paragraph 37, the petition shall contain, in addition to the averments required by paragraph (1) above, averments as to the basis upon which the petitioner is qualified to make an appointment under paragraph 14and shall be accompanied by a copy of the instrument or instruments by which the relevant floating charge was created, including any relevant instrument of alteration, and by such other documents as the petitioner considers might assist the court in determining the application.
2.6 Expenses
If the court makes an administration order, the expenses of the petitioner, and of any other party whose expenses are allowed by the court, shall be regarded as expenses of the administration.
2.7 Administration orders where company in liquidation
Where the court makes an administration order in relation to a company which is in liquidation, the administration order shall contain consequential provisions, including–
(a) in the case of a liquidator in a voluntary winding up, his removal from office;
(b) provisions concerning the release of the liquidator, including his entitlement to recover expenses and to be paid his remuneration;
(c) provision for payment of the costs of the petitioning creditor in the winding-up;
(d) provisions...
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