Dairy Farmers of Britain Ltd, Re

The court determined that Part III (receivers and managers) of the Insolvency Act 1986 does not extend to industrial and provident societies registered under the Industrial and Provident Societies Act 1965, and in particular that section 72A(1) of the Insolvency Act 1986 (which restricts the appointment of administrative receivers by holders of qualifying floating charges) does not apply to such a society. The judge concluded that an IPS is not a "company" for the purposes of Part III unless a contrary intention appears, and that no such contrary intention is to be found in the statutory context, including the Enterprise Act 2002 and section 255 which contemplates separate treatment for societies. The court therefore granted declarations that the proposed out‑of‑court appointment of receivers and managers over Dairy Farmers of Britain Limited was not prohibited by section 72A, that those appointees would not be "administrative receivers" under section 29(2) of the 1986 Act, and that section 37 (personal liability of receivers appointed out of court) did not apply to them.

Background and parties: Dairy Farmers of Britain Limited (DFB), an industrial and provident society (IPS), and its subsidiaries owed substantial sums to HSBC and HSBC Invoice Finance (UK) Limited, secured by a debenture and by fixed and floating charges. After DFB defaulted, the board invited HSBC to appoint insolvency practitioners as joint receivers and managers. HSBC and HIF were willing but doubted whether they could lawfully appoint receivers because of the prohibition in section 72A(1) of the Insolvency Act 1986, which prevents holders of qualifying floating charges from appointing administrative receivers of a "company".

Nature of the application: An urgent application was made for a declaration that Part III of the Insolvency Act 1986 does not apply to the appointment of joint receivers and managers of DFB, and hence that the prohibition in section 72A does not prevent that appointment. The applicants also sought declarations that the persons so appointed would not be "administrative receivers" within section 29(2) and that section 37 would not apply to them.

Issues framed:

• Whether the term "company" in Part III of the Insolvency Act 1986 (including section 72A) includes a registered industrial and provident society;
• Whether the proposed receivers would thereby be "administrative receivers" under section 29(2);
• Whether section 37 applies, making receivers personally liable on contracts with an indemnity out of the assets.

Decision and reasoning: The judge examined the statutory definitions in the Companies Acts which define "company" as a body formed and registered under the Companies Acts, subject to any contrary intention. He found no contrary intention in Part III or section 72A that would include an IPS within the meaning of "company." The court noted that administration under Part II and schedule B1 is only available to Companies Act companies and that section 255 of the Enterprise Act 2002 contemplates separate treatment for societies unless the Treasury makes an order to apply those provisions. Section 55 of the IPSA 1965 and the separate registration of charges with the Financial Services Authority were also relied upon as evidence that Parliament intended separate regimes. The judge considered prior authorities: he treated In re International Bulk Commodities Ltd as distinguishable and of mixed force, but followed and relied on In re Devon & Somerset Farmers Ltd to support the conclusion that Part III provisions such as section 40 (and by analogy section 29(2) and section 37) do not apply to a registered IPS. On that basis the court made the declarations sought: Part III does not apply, the appointees would not be administrative receivers, and section 37 does not apply to receivers of an IPS.

Wider context: The judge observed that it would be anomalous and impractical for Parliament to have intended the prohibition in section 72A to apply where the statutory alternative of administration is not available to an IPS, and that dual reporting/regulatory obligations would arise if Part III were applied to societies.

The court granted the declarations sought. It held that Part III of the Insolvency Act 1986 does not apply to a registered industrial and provident society for the purposes relied upon, so section 72A(1) does not prevent the out‑of‑court appointment of receivers and managers of DFB; the proposed appointees would not be "administrative receivers" under section 29(2); and section 37 does not apply to receivers of an IPS. The reasoning rested on the Companies Acts' definition of "company", the separate statutory regime for societies (including section 55 of IPSA 1965 and section 255 of the Enterprise Act 2002), the purposive and contextual construction of Part III, and authority in In re Devon & Somerset Farmers Ltd.