Leyland Printing Company Ltd v Leyprint Ltd

Under the pre-Enterprise Act 2002 administration regime, an administration order does not stop limitation time running against creditors. The regime does not create a trust in favour of creditors, and the court-authorised procedure for distributing assets on discharge does not assimilate administration to liquidation.

A statute-barred claim cannot be admitted to proof without the consent of creditors and members whose interests would be adversely affected. Silence, failure to object, or consent to an application for directions does not amount to that consent. An administrator’s composite reference to notified claims may amount to acknowledgment only where extrinsic evidence identifies the particular debt within the composite sum.

Leyland Printing Company Limited and Leyprint Limited had been in pre-Enterprise Act administrations since 22 May 2002. Their administrator applied for directions on whether creditors’ claims that had become statute-barred during the administrations could be admitted to proof and paid from realised assets.

The administrator also sought authority under the Insolvency Act 1986 to agree and pay creditors’ claims as part of discharging the administrations. The application was made without any creditor or shareholder being formally joined, although creditors and members had been invited to make representations.

1. Limitation during administration. The application was determined on the basis that, under the pre-Enterprise Act regime, administration did not stop time running under the Limitation Act 1980. Unlike liquidation, an old-style administration created no trust in favour of creditors. The procedure recognised in Re Lune Metals Limited did not change that position or assimilate administration and liquidation for limitation purposes.
2. Admission of statute-barred claims. The authorities established that a statute-barred claim could be proved only with the consent of the creditors and members whose position would be adversely affected. The absence of objections to a progress report, and an indication that there was no objection to the administrator seeking directions, could not be elevated into such consent. Accordingly, neither the administrator nor a subsequent liquidator could admit the claims on the evidence then available.
3. Acknowledgment. By analogy with Jones v Bellgrove Properties Ltd, a composite acknowledgment in an administrator’s progress report might suffice if extrinsic evidence showed that the particular debt was included. The reports here merely recorded notification of aggregate claims and did not acknowledge the debts. Under section 29(7) of the Limitation Act 1980, a right of action could not be revived after it had become barred.
4. Further directions. The administrator was permitted to communicate the judgment and order to the shareholders and seek their written consent. If consent was obtained, he could re-apply for discharge and ancillary authority to agree and pay creditors. Otherwise, the relevant company was to be placed into liquidation. The order and judgment were to be served on creditors, who were given permission to apply to vary or set aside the order.