Twizell & Anor v Entrust & Ors

The Environment Credit Scheme did not displace the ordinary insolvency rules applicable to an approved body. Where administrators have power to sell an insolvent approved body’s land at the best reasonably obtainable price, an objection concerning the later application of the proceeds is not a reason to withhold authority for the sale. Entrust’s powers under the Landfill Tax Regulations 1996/1527 are supervisory. It may approve bodies, impose, vary or revoke conditions, and revoke approval. HMRC, not Entrust, may recover landfill-tax credit from the landfill-site operator. Entrust has no power under the Regulations to reclaim credit or bring proceedings to compel performance. Questions about sale proceeds being income derived from a qualifying contribution, and about any continuing duty to apply contributions, were left open. The appeal was dismissed.

Mr Twizell and Mr Martin, administrators of Groundwork Community Forests North East Developments Ltd, sought directions and authority to sell land acquired with grants funded through the Environment Credit Scheme. HH Judge Behrens authorised the sale of Skerningham Woods and declared that its proceeds were company assets, not held on trust for CDENT. Entrust, the scheme’s regulatory body, appealed although it was not a creditor, contributory or intervener. CDENT did not appeal. The issues were whether the sale should proceed, whether the proceeds were held on trust, and whether the regulatory obligations concerning qualifying contributions prevented the sale.

The appeal was dismissed.

1. Entrust accepted that ordinary insolvency rules applied to approved bodies and that the Regulations permitted an approved body to pay creditors whose debts had been incurred in carrying out approved objects. There was no evidence that the Company had pursued unapproved objects. The administrators were aware of their duty to investigate the consideration for debts before making payments.
2. Entrust did not challenge the conclusion that the proceeds of sale were assets of the Company and were not held on trust for CDENT. The challenge to that part of the order had apparently been included by mistake. The appeal against that declaration was therefore dismissed.
3. The Company was insolvent. The sale price was not challenged as less than the best price reasonably obtainable, and the administrators had power to sell under paragraph 60 of Schedule B1 and paragraph 2 of Schedule 1 to the Insolvency Act 1986. The objections concerned only the subsequent application of the proceeds. That was not a sufficient reason to challenge the authority to sell.
4. Entrust’s regulatory powers were supervisory. They included approval of bodies, the imposition, variation and revocation of conditions, and revocation of approval. HMRC, rather than Entrust, had the power to recover the credit from the landfill-site operator. Entrust was not authorised to reclaim the credit or to bring proceedings to compel performance by an approved body or operator. If further enforcement powers were required, they had to be conferred by legislation.
5. The court did not decide whether proceeds of sale were income derived from a qualifying contribution, or whether the obligation to apply qualifying contributions was continuing and attached to property representing them. Those questions should await a case in which they were relevant.

Entrust was ordered to pay the administrators’ appeal costs on an indemnity basis, subject to liberty to apply within 14 days.

• Court of Appeal (Civil Division): Dismissed Entrust’s appeal and ordered it to pay the administrators’ appeal costs on an indemnity basis, subject to liberty to apply within 14 days.
• High Court, Leeds District Registry: HH Judge Behrens authorised the administrators to exchange contracts for the sale of Skerningham Woods and declared that the proceeds were Company assets and not held on trust for CDENT. The remaining application was adjourned. Permission to appeal was given to Entrust and CDENT, but only Entrust appealed.