Blights Builders Ltd, Re

For the purposes of the statutory restriction on appointments, a winding-up petition is presented when delivered to or filed at court, not when sealed and issued for service. An appointment made after presentation is therefore invalid, even if the petition was issued later.

A procedural regularisation rule cannot validate an appointment made without satisfying a statutory condition of power. The court may nevertheless validate acts carried out by the purported administrators, indemnify them for liabilities arising solely from the defective appointment, and make a fresh administration order where the statutory requirements are met.

Blights Builders Limited ceased operating after the death of its effective manager and was insolvent. A creditor presented a winding-up petition, but before the petition was issued the deceased shareholder’s executors appointed joint administrators under Schedule B1 to the Insolvency Act 1986.

The court had to determine whether presentation occurred on delivery of the petition to court or only on issue, whether the defective appointment could be regularised, what protection should be given to the purported administrators, and whether the creditor could obtain an administration order.

1. Presentation of petition. Presentation and issue are separate stages. Under Rule 4.7 of the Insolvency Rules, filing involves delivery of the petition to court, while issue is the later sealing and issuing of copies for service. The reference to presentation in paragraphs 22 and 25 of Schedule B1 to the Insolvency Act 1986 therefore means delivery or filing. The petition was presented when delivered on 5 July, although it was issued on 25 July.
2. Invalid appointment. Because an undisposed-of winding-up petition already existed, the company lacked power to appoint administrators under paragraph 22. The appointment of Mr O’Sullivan and Mr Tailby was consequently invalid.
3. Regularisation. Rule 7.55 could not cure the defect. An out-of-court appointment under paragraph 22 is part of the statutory procedure for obtaining administration relief, but is not itself an insolvency proceeding. In any event, failure to satisfy a statutory condition of the appointment was a fundamental flaw, not a formal defect or irregularity. The reasoning in Re A Debtor [1992] 2 WLR 1026 and Re Awan [2000] BPIR 241 supported that conclusion. Re TT [2006] BPIR 597 did not assist because it concerned a different question of timely adjudication.
4. Consequential orders. Under paragraph 34 of Schedule B1, the purported administrators were entitled to an indemnity from the persons who made the appointment for liabilities arising solely from its invalidity. Their remuneration was not such a liability. Under paragraph 104, their acts as administrators were to be treated as valid despite the defective appointment.
5. Fresh administration order. The petitioning creditor was entitled to apply for an administration order. The company was insolvent, and the proposed administrators reasonably believed that the purposes of administration were likely to be achieved, including a better and more cost-effective realisation for creditors. An administration order was made and the winding-up petition dismissed.