Saw (SW) 2010 Ltd and Another v Simon Wilson, Anne O'Keefe and Fraser Gray (as Joint Administrators of Property Edge Lettings Ltd) and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Briggs,Lady Justice Arden |
| Judgment Date | 25 July 2017 |
| Neutral Citation | [2017] EWCA Civ 1001 |
| Docket Number | Case No: A2/2016/0260 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 July 2017 |
[2017] EWCA Civ 1001
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MANCHESTER DISTRICT REGISTRY
HHJ Hodge QC sitting as a Judge of the High Court
2129 of 2012 and 3180 of 2013
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Arden
Lord Justice Briggs
Case No: A2/2016/0260
Mr Clive Wolman ( Direct Access) for the Appellants/Applicants
Ms Lesley Anderson QC (instructed by Addleshaw Goddard LlP) for the Respondents
Hearing date: 20 June 2017
Approved Judgment
Introduction
This appeal from the Order of HHJ Hodge QC sitting as a judge of the High Court in the Manchester District Registry raises a single issue of law, namely whether the purported appointment of the first respondents as joint administrators of Property Edge Lettings Limited ("PELL") on 27 January 2012 was, as the appellants allege and the respondents deny, invalid.
The appellants, SAW ( SW) 2010 Limited ("SAW") and Neil Wilson Accountancy Limited are respectively shareholders in and creditors of PELL. The joint administrators were purportedly appointed by the second respondents Nationwide Building Society ("Nationwide"), pursuant to a power to that effect contained in a debenture dated 9 May 2008 ("the Debenture") granted by PELL to Derbyshire Building Society ("DBS") to which Nationwide is the successor in title.
The issue as to the validity or otherwise of the appointment of the joint administrators depends upon two questions:
i) Whether the Debenture created a qualifying floating charge within the meaning of paragraph 14 of Schedule B1 to the Insolvency Act 1986 ("para 14"); and
ii) Whether, if so, the floating charge created by the Debenture was, or was not, enforceable on the date of their appointment.
The judge struck out the appellants' application for a declaration that the appointment of the joint administrators was invalid on the cross-application of the respondents, pursuant to CPR3.4(2)(a), on the basis that the Particulars of Claim disclosed no reasonable grounds for the relief sought.
The main grounds pleaded in the Particulars of Claim in support of the application for a declaration that the appointment of the joint administrators was invalid may be summarised as follows:
i) The Debenture was granted without the prior written consent of the holder of an earlier floating charge over PELL's property and undertaking granted to Capital Home Loans Limited ("CHL") on 18 December 2007 ("the CHL Charge") causing a simultaneous crystallisation of the floating charge contained therein.
ii) This meant that the Debenture could not itself constitute a floating charge (let alone a qualifying floating charge within the meaning of para 14) because there was not at the time of its grant any property of PELL to which it could attach, and the directors of PELL thereafter had no power to acquire any property for the company to which it could attach in future.
iii) The Debenture was not enforceable at the time of the appointment of the joint administrators because there remained no property of PELL to which, even then, it could attach.
iv) The Debenture was void for common mistake, namely the assumption by both PELL and DBS that PELL had title to grant a floating charge over any of its property.
In an extempore judgment the judge concluded that the Debenture was a qualifying floating charge and that it was enforceable at the time of the appointment of the joint administrators. In my judgment he was right to do so, although the way in which the argument has proceeded in this court requires me to explain why for reasons which differ to some extent from his. I mean no disrespect to his analysis by confining myself to my own reasons. But I must first summarise the relevant facts.
The Facts
PELL was acquired by SAW in December 2007. SAW granted PELL a long lease of a residential apartment block in Exeter known as Bartholomew House, and claims to be a creditor of PELL in relation to unpaid ground rents, and to loans made to PELL which have not been repaid. The second appellant is an accountancy firm which claims to be a creditor of PELL in respect of unpaid fees.
On 18 December 2007 CHL granted PELL a £1.25 million buy-to-let loan, secured by six fixed charges, in substantially identical terms, over each of the flats within Bartholomew House, and by a personal guarantee from a Mr Shaun Kelly, then a director of SAW. I will refer to the six charges collectively as the CHL Charge. By clause 2 of each of them, PELL charged the relevant apartment by way of fixed legal mortgage, the rental income by way of fixed charge, and the remainder of PELL's undertaking, property and assets by way of floating charge.
By clause 4.2 of Mortgage Conditions incorporated within the CHL Charge, PELL covenanted not to create or permit any security interest in the property subject to the charge without CHL's consent. Clause 9.11 of the Mortgage Conditions provided as follows:
"9.11. If, without the prior written consent of the Lender, the Borrower encumbers howsoever the property subject to the floating charge, or any person levies or attempts to levy any distress, sequestration or other process against the said property the said floating charge shall automatically without notice operate and have effect as a fixed charge instantly such event occurs."
The CHL Charge was duly registered.
PELL subsequently sought to finance the acquisition of development land in Bude, Cornwall for the purpose of constructing 23 residential apartments. The development site consisted of 3 titles, namely (i) the Strand Hotel, (ii) land constituting the hotel's car park and (iii) a ransom strip controlling access to the development site.
PELL identified the commercial lending arm of DBS, trading as Salt Commercial, as a suitable lender and on 9 April 2008 received a facility letter from DBS offering to lend £3.9 million. Under clause 2.1, the facility was subject to the following conditions precedent:
i) A first ranking mortgage debenture.
ii) A first fixed charge over the development property.
iii) A personal guarantee by Mr Kelly, limited to £1 million.
Relying on fresh evidence submitted on this appeal (to which we had regard during the hearing de bene esse) the appellants say that PELL acquired the ransom strip using its own money on 30 April 2008. The remainder of the transaction, including both the acquisition of the hotel and car park sites, the execution of the fixed charge, the guarantee and the Debenture (by way of purported floating charge) all occurred at different times on 9 May 2008. The fixed charge was executed in the morning and the Debenture in the afternoon. The hotel and car park sites were acquired with funding provided by DBS under the facility.
Clause 3.1.3 of the Debenture was, together with the relevant opening words of clause 3.1, as follows:
"The Company with full title guarantee as a continuing security charges to the Lender for the payment and discharge of the Liabilities in favour of the Lender:
by way of floating charge all the Assets present and future not otherwise effectively mortgaged, charged or assigned by this Clause (and paragraph 14 of Schedule B1 of the Insolvency Act 1986 applies to the floating charge so created)."
By clause 3.4 provision was made for the automatic crystallisation of the floating charge in events which (as is common ground) had occurred by the time of the appointment of the joint administrators. Clause 3.12 provided that para 14 would apply to the floating charge created by the Debenture. By clause 19 PELL warranted that it had good and marketable title to the assets charged, and "full power and authority to grant to the Lender the security interest in the Charged Assets pursuant to this Debenture …".
Neither PELL nor DBS obtained the consent of CHL to the grant of the legal charge or of the Debenture, with the result that the consequences provided for in clause 9.11 of the Mortgage Conditions incorporated in the CHL Charge (quoted above) were thereby triggered, although this does not appear to have been appreciated by either PELL or CHL (let alone DBS or, later, Nationwide) at the time.
Nationwide became successor in title to DBS in relation to the facility, the legal charge and the Debenture in December 2008. Then or not long thereafter PELL began to experience financial difficulties. I need not recite the steps thereafter taken by Nationwide to realise its fixed charge security over the Bude development site, or an abortive attempt by Nationwide to appoint administrators in relation to PELL on 24 January 2012. It is sufficient to note that Nationwide obtained CHL's consent (pursuant to paragraph 15 of Schedule B1) to its appointment of administrators as qualifying floating charge holders on or about 26 or 27 January 2012, and appointed the first respondents as administrators on 27 January. The application challenging the validity of that appointment was launched on 24 June 2015.
The Appellants' Case for Invalidity
Mr Clive Wolman for the appellants did not suggest that there was anything about the language of the Debenture which, as a matter of construction, made it inapt to create a floating charge over the assets and undertaking of PELL. Nor did he rely upon any of the provisions in para 14 of Schedule B1 for a submission that, if the Debenture created a floating charge recognisable by the general law, it was not a qualifying floating charge for the purposes of Schedule B1.
Rather, his submissions depended entirely upon the consequences of the triggering of clause...
To continue reading
Request your trial
-
Secure Mortgage Corporation Ltd v Peter John Harold
...not enforceable and there remains an issue as to whether this was the case at the time of appointment. 28 In SAW (SW) 2010 Ltd v Wilson [2018] Ch 213, the Court of Appeal have provided some guidance about the operation of Paragraph 16, albeit in a case heard by two appellate judges only, A......
-
Diablo Fortune Inc. v Duncan, Cameron Lindsay
...v Sculptor Finance (MD) Ireland Ltd [2014] 1 SLR 733 (refd) Murphy v Wright (1992) 5 BPR 11, 734 (distd) Property Edge Lettings Ltd, Re [2018] 1 BCLC 291 (refd) Smith v Bridgend County Borough Council [2002] 1 AC 336 (refd) Spectrum Plus Ltd, Re [2005] 2 AC 680 (refd) Tagart, Beaton & Co v ......
-
Dolliver (Andrew) and Charleton (Joseph) (as joint administrators of Cloghogue Enterprises Limited, in Administration) v O'Callaghan (Eileen), SPOC (NI) Limited and Murphy (Derek)
...then by the Court of Appeal in England in Saw (SW) (2010) Ltd v Wilson & Ors (as joint administrators of Property Edge Lettings Ltd) [2017] EWCA Civ 1001. [32] Re Croftbell Limited is a case which deals with the appointment of an administrative receiver, rather than an administrator. The co......
-
Sophie Rebecca Perhar v Louise Freestone
...“The power to appoint administrators is…itself a means of enforcement” ( per Briggs LJ, as he then was, in SAW(SW) 2010 Ltd v Wilson [2017] EWCA Civ 1001, [2018] Ch 213, at paragraph 35); and the word “enforceable” means “capable of being enforced” ( ibid at paragraph 24 He goes to deal w......