Andrew Cawkwell
Partner
Watson Burton LLP
_________________________________
direct dial: +44 (0)191 244 4338
office no: +44 (0)191 244 4444
fax no: +44 (0)191 244 4500
mobile: +44 (0)7973 502809
_________________________________
Linked in Profile: http://uk.linkedin.com/in/andrewcawkwell1
Join North-East and Yorkshire Company Directors Forum: http://www.linkedin.com/groupRegistration?gid=2287271
Join North-East and Yorkshire Insolvency Professionals Group: http://www.linkedin.com/groupRegistration?gid=2223800
From: Insolvency Lawyers Association [mailto:ila@ilauk.com]
Sent: 27 May 2010 15:42
To: Andrew Cawkwell
Subject: ILA Technical Bulletin: Re Cornercare Limited - repeated notices of intention to appoint administrators
if this email displays incorrectly or you can not see it please click here
Re Cornercare Limited: repeated notices of intention to appoint administrators
Bulletin No 273
Case:
Re Cornercare Limited [2010] EWHC 893 (Ch); (HHJ Purle QC)Synopsis:
Where a notice of intention to appoint an administrator is filed, but no appointment is made within the prescribed time limit of ten business days, this does not prevent a fresh notice of intention to appoint from being filed and served, resulting in another appointment window during which a further interim moratorium is in place. The Court has adequate powers to deal with any abuse of the interim moratorium in appropriate cases.Topics Covered: Administration; Notice of Intention to Appoint Administrators; Interim Moratorium; Abuse of Process
The Facts
The directors of Cornercare Limited (“Cornercare”) had filed a notice of intention to appoint an administrator under paragraph 26 of Sch B1 IA 1986, but an appointment was not made within the prescribed ten business days of filing (paragraph 28(2) of Sch B1 IA 1986). The directors therefore applied to the Court for a declaration that they were at liberty to appoint an administrator out of court, by filing a new notice of intention to appoint in accordance with paragraph 27(1) of Sch B1 IA 1986, or alternatively an administration order.
The Decision
When the directors made the application, they intended to make an out of court administration appointment, subject to the Court’s blessing on the repeated notice of intention point. However, by the time of the hearing, the original plan had been overtaken by events and the directors instead requested that the Court make an administration order in respect of Cornercare, the SIP16 material having been annexed to the court report in relation to the proposed pre-pack administration sale. HHJ Purle QC obliged and made the administration order, but he also considered the question of repeated notices of intention to appoint.
The Judge focussed on the meaning of paragraph 28(2) Sch B1, which states:
“An appointment may not be made under paragraph 22 after the period of ten business days beginning with the date on which the notice of intention to appoint is filed under paragraph 27(1).”
The issue was whether this paragraph prevented a subsequent appointment by the directors in circumstances where the first notice of intention to appoint had expired without an appointment having been made.
The Judge was satisfied that there was a genuine reason why the original appointment by the directors of Cornercare was not made within the prescribed time limit. The reason was explained as funding difficulties for the purchase of premises to which the business was to be moved.
The Judge concluded that paragraph 28(2) of Sch B1 IA 1986 (quoted above) refers only to the particular notice of intention to appoint that triggered that notice period. The effect of the paragraph is that no appointment may be made out of time pursuant to that particular notice. In HHJ Purle QC’s view, the paragraph did not prevent a fresh notice of intention to appoint from being filed and served, resulting in a new ten business day appointment window. The contrary interpretation would have the effect of barring forever a second notice of intention to appoint, which would not be practical. The Judge thought that the directors of a company should not be barred from filing a notice of intention to appoint today if, for example ten years ago, they had filed such a notice that had expired without an appointment being made because a white knight had come to the company’s rescue. Although the directors would be able to apply to Court for an administration order, that would presuppose that they knew about (or had not forgotten about) the previous notice of intended appointment. A court application might also take longer, which could be critical in the context of a potential rescue.
Although paragraph 23(2) of Sch B1 IA 1986 bars a subsequent appointment of an administrator under paragraph 22 of Sch B1 IA 1986 unless a 12-month period has elapsed since an earlier appointment has ceased, HHJ Purle QC commented that this was not the same as barring forever a second notice of intention to appoint.
The Court also dealt with the potential for abuse from filing repeated notices of intention to appoint. Members will be aware that filing a notice of intention to appoint an administrator gives rise to an interim moratorium under paragraph 44(4) of Sch B1 IA 1986, which subsists until either an administrator is appointed, or the ten business day period expires, whichever happens first. The Judge addressed the concern that by filing repeated notices of intention to appoint, directors could engineer consecutive interim moratoria, to the detriment of creditors. He thought that such conduct could amount to abuse, but he considered that the Court already had the power to deal effectively with it, by restraining the lodgement of further notices unless followed by an actual appointment. In extreme cases, the Judge thought that the court could, using its inherent jurisdiction, vacate and remove from the court file an abusive notice of intention to appoint and make a blanket order for permission under paragraph 44 (Interim moratorium) for the remaining period of the illicit moratorium. The potential for abuse was therefore not a reason to prevent a company filing repeated notices of intention to appoint an administrator for genuine reasons where there was no abuse.
Comment
Strictly speaking HHJ Purle QC’s comments on the repeated notices point could be considered obiter because, having made an administration order, he did not need to decide the point. However, his opinion is nevertheless useful and will be of at least persuasive authority in future cases where there are genuine reasons for filing more than one notice of intention to appoint.
The judgment in this case gives only the briefest description of the circumstances leading to the delay in making the appointment, describing them as “funding difficulties for the purchase of premises to which the business was to be moved”, which suggests that the purchaser of the business was unexpectedly delayed from completing. There is very little discussion of what would amount to a genuine reason for filing more than one notice of intention to appoint, or what would amount to an abuse. This will have to be addressed in subsequent cases.
One concern for practitioners is likely to be the extent to which it is permissible to file a notice of intention to appoint when there is a real possibility that the appointment may not be able to be made within the next ten business days. For example, there may be pressure to file a notice to prevent distress or forfeiture by a landlord, or the recovery of retention of title stock by a supplier. The creditor whose self-help remedy is prevented by the interim moratorium might seek to challenge a second notice. Advisers to the directors may wish to recommend that the directors formally consider the effect of second and subsequent notices on creditors, and formally minute detailed reasons for filing the notice, in case any challenge is made.
The Judge’s comments on the court’s ability to deal with any abusive repeated notices of intention to appoint will likewise clarify the remedies for any creditor who feels that his interests are being affected by such abusive conduct. In particular, the suggestion that the court has an inherent jurisdiction to remove an abusive notice from the court file may provide the most appropriate way for a challenge to be made.
Finally, it is worth pointing out that the case is an example of an administration order involving a pre-pack sale, where the applicants seem to have successfully followed the approach laid down by JJH David Cooke in Re Kayley Vending [2009] EWHC 904 (Ch) (See our bulletin # 210: www.ilauk.org/docs/bulletins/bull210.pdf)
If you wish to be removed from the ILA mailing list and not receive any further updates please click here
------------------------------------------------------------------------------------------------ WATSON BURTON LLP 1 St James' Gate, Newcastle upon Tyne, NE99 1YQ | Tel: +44 (0) 191 244 4444 | Fax: +44 (0) 191 244 4500 1 City Square, Leeds, LS1 2ES | Tel: +44 (0) 113 235 5455 | Fax: +44 (0) 113 235 5450 Floor 29, 30 St Mary Axe, London EC3A 8BF | Tel: +44 (0) 20 7337 8300 | Fax: +44 (0) 20 7337 8350 enquiries@watsonburton.com | www.watsonburton.com ------------------------------------------------------------------------------------------------ Confidentiality: This email and its attachments are intended for the above named only and may be confidential. If they have come to you in error you must take no action based on them, nor must you copy or show them to anyone; please reply to this email and highlight the error. Quality Control: It is the policy of this firm to review and approve outgoing communications using a process of tiered authority. Please note that the originator of the above message may differ from the ultimate sender as a result of this process. Security Warning: Please note that this e-mail has been created in the knowledge that Internet e-mail is not a 100% secure communications medium. We advise that you understand and observe this lack of security when e-mailing us. Viruses: Although we have taken steps to ensure that this email and attachments are free from any virus, we advise that in keeping with good computing practice the recipient should ensure they are actually virus free. Watson Burton LLP is a limited liability partnership, registered in England with registered number OC306105. A list of members' names is available for inspection at the registered office, 1 St James' Gate, Newcastle upon Tyne, NE99 1YQ. ------------------------------------------------------------------------------------------------ Consider the environment. Please do not print this email unless essential. |
No comments:
Post a Comment