On 29 December we reported that Norris J appeared to be starting the process of laying to rest the various legal issues to do with the validity of out of court administration appointments, which had so energised the profession in 2011. The case was Virtualpurple Professional Services, decided on 21 December (click here for our previous blogpost and details of the pivotal Minmar decision which created all this interest).
Little did we know at the time of writing that blog that we would subsequently receive a report of another judgment being handed down by another Judge in the very same Court on the very same day. We think it would be fair to say that the two Judges in question do not see entirely eye to eye on what for convenient shorthand we will call ‘the Minmar issue’ of what notices are required as a precondition for a valid appointment where there is no qualifying floating chargeholder, although on one view they could both be said to be pursuing the same aim of restoring certainty to this difficult area.
The second case was that of National Westminster Bank Plc v Msaada Group [2011] EWHC 3423 (Ch), involving a purported partnership administration appointment in the care homes industry being challenged by the bank inter alia because no prior notice was given to the supervisor of the pre-existing partnership voluntary arrangement. We had to review the judgment on a Sunday afternoon with a wet towel around our heads so we would certainly not recommend it for those seeking a clear exposition of the proper interpretation of paragraphs 26 and 28 Schedule B1 Insolvency Act 1986 or IR 2.20 but we will say this for Warren J’s examination; it is certainly thorough. Whereas some aspects of the Chancellor’s analysis in Minmar could perhaps fairly be criticised for lacking reference to prior authority and/or clarity as to whether issues discussed were obiter or part of the decision, no such criticism could apply to Warren J, who was clearly seeking to set out a very firmly founded proposition, including precisely why he was departing from the reasoning of HH Judge McCahill QC in the pre-Minmar decision of Hill v Stokes [2010] EWHC 3726 (Ch).
At the conclusion of a 100 paragraph judgment, Warren J ordered that the partnership’s purported out of court administration appointment was invalid for want of notice, rejected (on the facts) an Adjei v Law for All style application for a retrospective administration order for the partnership’s purported appointee and granted the bank’s application for the appointment of its own nominee.
What can most readily be taken from the judgment is the conclusion that the requirements of paragraph 26(2) and IR 2.20(1) are prescriptive and accordingly that a relevant enforcement officer, person distraining, any Supervisor and the company itself must be given reasonable notice of intention to appoint. The form and content of that notice is to be regarded as the same as for a qualifying floating chargeholder (had there been one), and reasonable notice would be constituted by giving notice in like manner (i.e. at least 5 days although the relevant parties may validly consent to short notice). When challenged by Counsel for the partners, the Judge said that in cases of absolute urgency, the appointors could make an application to Court for an administration order rather than relying on the out of court route.
For more information on this topic, please contact Mike Pavitt.