Re M.T.B. Motors Ltd ((in Administration))

This is my extemporary judgment in the matter of M.T.B. Motors Ltd (No. 2290 of 2010). By an ordinary application issued in the Manchester District Registry of the Chancery Division on 23 ^rd November 2010, Mr Andrew Poxon and Mr John Titley, the joint administrators of M.T.B. Motors Ltd, apply for a declaration pursuant to rule 7.55 of the Insolvency Rules 1986, and paragraph 104 of Schedule B1 to the Insolvency Act 1986 (as amended), that the administration of the company, and that all acts undertaken and all decisions made by the joint administrators since 3.30pm on 7 ^th October, should be deemed to be valid, notwithstanding the failure to obtain consent from the Financial Services Authority to the proposed appointment at the relevant time. The application also seeks such further or other relief as the Court sees fit.

The application is supported by the witness statement of Mr Andrew Poxon, one of the joint administrators, dated 23 ^rd November 2010, together with exhibit 'AP1'. I have been considerably assisted by a helpful and detailed skeleton argument filed on behalf of the applicant administrators by Mr Louis Doyle, of counsel, and dated 24 ^th November 2010. The application comes on before me in the applications list in Manchester this Friday 26 ^th November.

The administrators were appointed at 3.30pm on 7 ^th October 2010 under paragraph 22 of Schedule B1 by the company's directors. The factual background to the administrators' appointment has no significance to the present application. At the time of the administrators' appointment, and as a result of professional insolvency advice they had received, the directors had ceased to trade the company, and all employees had been made redundant. On 27 ^th October 2010, in response to a letter circulated to all known creditors of the company giving notice of their appointment, the administrators were contacted by email by a representative of the Financial Services Authority indicating that the company was still authorised by the FSA, and was in breach of its regulatory requirements to submit a return. The email went on to state that the administrators would need to apply to the FSA to cancel its permission. It was said that that would simply end the FSA authorisation of a firm that was no longer trading, and that it had no bearing on the liquidation process itself. This was the first indication to the administrators that the company, then in administration, had been registered with the FSA. The administrators made inquiries, and they were advised that the company had been registered with the FSA in order to sell products such as warranties, protected payment policies, and insurance GAP policies, as part of its ongoing business of running car-sale showrooms. The administrators had apparently, and prior to their appointment, made a search of the FSA register to establish whether the company was registered with the FSA. Not unnaturally, they had searched against the correct name of the company, M.T.B. Motors Ltd (with full-stops after each of the capital letters 'M' 'T' and 'B'). That search, conducted in the correct name of the company, had found no matches. It is only if one searches against MTB Motors Ltd (without including full-stops after each of the initials 'M' 'T' and 'B') that one would have ascertained that the company was indeed registered with the FSA.

Following discussion with the FSA, the administrators received a letter from the FSA dated 3 ^rd November 2010. That letter referred to the circular to creditors of 20 ^th October 2010 from the administrators; and it continued as follows,

'M.T.B. Motors Ltd is authorised by the FSA to carry on insurance mediation activities including holding insurance mediation client money. I understand that the directors of the company wish to place the company into administration and that they ask you, the addressee, Mr Poxon, and Mr J M Titley to act as joint administrators under paragraph 22 of Schedule B1 to the Insolvency Act 1986. You and Mr J M Titley have confirmed to us your suitability to act as such and belief that it is reasonably likely that administration will achieve a better result for the company than would be likely if it were wound up. For the purpose of Section 362A of the Financial Services and Markets Act 2000, and having considered the information provided by the administrators, the FSA gives consent to the appointment.'

That letter of consent, signed on behalf of the FSA, was filed at court by the administrators' solicitors yesterday, 25 ^th November 2010. The difficulty that has arisen as a result of those background facts is as follows: Section 362A of the Financial Services and Markets Act 2000 is headed, 'Administrator appointed by company or directors'. It is common ground that it applies to the company in administration, M.T.B. Motors Ltd. By subsection (2), an administrator of the company may not be appointed under paragraph 22 of Schedule B1 to the 1986 Act without the consent of the Authority. By subsection (3), consent under subsection (2) must be in writing, and must be filed with the Court along with the notice of intention to appoint under paragraph 27 of that schedule. No consent was obtained prior to the filing of the notice of intention to appoint, and thus no written consent from the FSA was filed with that notice.

The administrators have therefore issued the present application to determine whether or not the appointment of them as administrators is capable of being cured under either Rule 7.55 of the Insolvency Rules, or paragraph 104 of Schedule B1; or whether their appointment is, in fact, a nullity. If it is a nullity, they seek to establish what steps might be taken to cure, and regularise, the position in the face of the FSA's consent to their appointment, and the fact that the administrators have taken steps in the administration since being appointed; although, on advice, they have refrained from doing so since the problem came to light. In his written skeleton submissions, Mr Doyle has taken me to the decision of Mr Justice Hart in the case of Re G-Tech Construction Ltd [2007] BPIR 1275. In that case, Mr Justice Hart held that use of the prescribed form stipulated by the Insolvency Act, and the Rules made under it, was a necessary pre-requisite of an appointment; and that if the prescribed form was not used, the appointment was void from the very beginning. That decision has subsequently been followed by Mrs Justice Proudman in the case of Pillar Securitisation SARL & Ors v Spicer & Anor (Court Administrators) [2010] EWHC 836 (Ch). In that case, the judge considered the validity of the appointment of administrators in circumstances where the wrong form had been used; the form appropriate for a company had been completed whereas the appropriate form should have been that prescribed in relation to a partnership. Mrs Justice Proudman indicated that she would not depart from the principle established by Mr Justice Hart in the earlier G-Tech Construction decision. At paragraph 55, she declined to distinguish the decision in G-Tech on the basis of the fact that there were differences between the prescribed forms in the two cases; she indicated that it would open a can of worms, and would lead to great uncertainties, to say that some forms were, in effect, more 'prescribed' than others. If a principle was to be found to distinguish which forms were essential to validity and which were not, it was, in her view, for a higher court to identify it.

Mr Doyle has drawn my attention to the fact that G-Tech has an added significance in the context of the present application, in that Mr Justice Hart there also concluded, first, that the proceedings were not 'insolvency proceedings', because the...