Monte Developments Ltd v Court Management Consultants Ltd & Ors

A charging order under the Charging Orders Act 1979 requires an existing judgment or order requiring payment of a sum of money. It cannot secure unassessed costs or sums that may become payable only after a further judgment is entered. The court may discharge or vary a charging order where its continuation would give one creditor an improper advantage over creditors generally, particularly where a properly invoked administration is in progress and the company is insolvent. In assessing solvency, both cash-flow and balance-sheet considerations may be relevant. A creditor’s complaint that administrators are proceeding too slowly falls within paragraph 74(2) of Schedule B1 to the Insolvency Act 1986; the court need not impose detailed deadlines where the administrators understand their duties.

Monte Developments Ltd was in administration following claims brought by Court Management Consultants Ltd and the Jackson respondents in the Queen’s Bench Division. A master had granted the Company conditional permission to defend substantial claims, subject to payment into court, and had ordered an interim payment and costs. Before judgment was entered for the conditional claims, and before all costs were assessed, an interim charging order was made over the Company’s property and later made final.

The administrators applied to discharge the charging order. The respondents applied for relief under paragraphs 74 and 81 of Schedule B1 to the Insolvency Act 1986, principally seeking directions that the administration proceed more quickly. The central issues were whether the charging order was within the statutory jurisdiction, whether it should be discharged in the court’s discretion, and whether the administrators had failed to perform their functions as quickly or efficiently as reasonably practicable.

1. Charging-order jurisdiction. The charging order was outside section 1(1) of the Charging Orders Act 1979 insofar as it covered unassessed costs and sums for which no judgment had yet been entered. The order requiring payment into court created only a conditional entitlement to apply for judgment. The respondents still had to take the further step required by CPR 3.5. The sums therefore did not constitute money due or to become due under the existing order. The reasoning in A&M Records v Darakdjian [1975] 3 All ER 983 supported that conclusion.
2. There was a fundamental distinction between money inevitably payable in the future, such as instalments specified in an order, and money that might become payable only if a further step were taken. The charging order could therefore be sustained, at most, for the £11,500 actually ordered to be paid. The court nevertheless set it aside in full under section 3(5).
3. Discretion. Initiating an insolvency process to prevent a creditor gaining an advantage is not inherently improper, and a creditor may seek security. However, where an administration is appropriately invoked, that is a powerful factor against allowing a creditor to obtain priority over the general body of creditors. The principle in Roberts Petroleum v Kenny [1983] 2 AC 192 was applied.
4. Solvency was an important factor. Cash-flow insolvency was relevant, and the balance sheet could be particularly informative where the property was intended to be sold. The Company was insolvent on both approaches. Its contingent corporation-tax liability could not be reduced by earlier trading losses because section 12(7ZA) of the Income and Corporation Taxes Act 1988 ended the accounting period immediately before administration.
5. Respondents’ application. The complaint that the administrators had not proceeded quickly enough fell within paragraph 74(2) of Schedule B1. The evidence did not establish improper motive for paragraph 81, and the court considered it unnecessary to set deadlines. The respondents remained at liberty to apply if further unexplained delay occurred. The charging order was set aside, and no order was made on the respondents’ application.

First-instance decision. No prior appellate decision is stated in the judgment.