Trident Fashions Plc v Bairstow & Ors

A court has jurisdiction under Part 40.20 of the procedural rules to make a binding declaration even where no other remedy is claimed. Such relief requires caution, but may proceed where a live legal issue exists between the parties. A potential statutory priority claim concerning remuneration paid to former administrators supplied a sufficient issue. It justified retaining them as parties despite the expiry of the administration, the absence of substantive relief, and a possible alternative claim in the liquidation. The Court of Appeal restored the declaration application without deciding the underlying priority question.

Trident Fashions plc entered administration, during which Exeter City Council claimed that non-domestic rates were administration expenses under Insolvency Rules 1986 Rule 2.67(1)(a) or (f). The Council also relied on the potential priority of those claims over the administrators’ remuneration under Rule 2.67(1)(h).

The administration ended on 17 March 2005. Two days earlier, the Council had applied for declarations, but no substantive relief was pursued when the application came before Sir Donald Rattee in the Chancery Division. The former administrators were removed as parties and the claim against them was struck out. The central issue in the appeal was whether the Council nevertheless had a sufficient live issue to pursue declaratory relief against them.

1. Appeal allowed. Sir Martin Nourse gave the judgment of the court. Lord Justice Maurice Kay and Lord Justice Rix agreed. The orders removing the Begbies Administrators as respondents and striking out the claim for declaratory relief were set aside.
2. The court accepted that it had jurisdiction under Part 40.20 of the procedural rules to make a binding declaration whether or not another remedy was claimed. A declaration unaccompanied by substantive relief must be approached with caution, since it will usually form part of a claim for substantive relief. That is a matter of proper judicial scrutiny, not an absolute jurisdictional bar.
3. At the relevant date, the Council had a potential right under Insolvency Rules 1986 Rule 2.67(1), alternatively under paragraphs (2) and (3), to claim or be awarded priority over the administrators in respect of the remuneration they had taken. The asserted priority dispute concerned the Council’s claimed rates and the statutory order governing administration expenses. The court did not determine the ultimate ranking or entitlement.
4. That potential priority dispute was an issue between the Council and the former administrators. It was therefore sufficient to justify retaining them as parties to the declaration application, notwithstanding that the administration had ended and no substantive relief was then coupled with the declaration.
5. The administrators’ undertaking to repay their remuneration did not remove the basis for the application while the money remained unpaid. Nor did the possibility that the Council might have an alternative claim in the liquidation. The court noted the possible statutory charge under paragraph 99 of Schedule B1 to the Insolvency Act 1986, but held that competing priorities could be addressed when the declaration issue was determined. The underlying priority question was left for the High Court.

1. Court of Appeal (Civil Division): allowed the appeal and set aside the orders removing the former administrators as parties and striking out the declaration claim: [2006] EWCA Civ 203.
2. Chancery Division: Sir Donald Rattee removed the former administrators as respondents and struck out the claim for a declaration. He later dismissed the Council’s written application for permission to appeal.