Re M.T.B. Motors Limited

The administrators were appointed by the company under paragraph 22 of Schedule B1 to the Insolvency Act 1986 but failed to file the written consent required by section 362A(3) of the Financial Services and Markets Act 2000 with the notice of intention to appoint. The judge held that the failure to file the FSA consent rendered the original appointment invalid and that the defect could not be cured by Rule 7.55 of the Insolvency Rules 1986 or by paragraph 104 of Schedule B1, following the principle in Re G-Tech Construction Ltd and Pillar Securitisation.

However, the court had jurisdiction under paragraph 13(2) of Schedule B1 to make an administration order with retrospective effect. In the exercise of that discretion the judge made a retrospective appointment effective from the original appointment time and validated the administrators' acts and costs as administration expenses.

Background and parties: The joint administrators, Mr Andrew Poxon and Mr John Titley, were purportedly appointed by the company's directors on 7 October 2010. Subsequent enquiries revealed that the company was authorised by the Financial Services Authority and that FSA consent to the appointment should have been filed. The administrators applied on 23 November 2010 for declarations under rule 7.55 of the Insolvency Rules 1986 and paragraph 104 of Schedule B1 that the administration and acts since appointment should be treated as valid, and for further relief as the court saw fit.

Nature of the application: The application sought (i) a declaration that the administration and all acts by the administrators since 3.30pm on 7 October 2010 were valid despite failure to obtain and file FSA consent, and (ii) such further relief as the court considered appropriate.

Issues framed by the court:

• whether the failure to file the FSA consent required by section 362A(3) rendered the appointment void;
• whether the defect could be cured under Rule 7.55 of the Insolvency Rules 1986 or paragraph 104 of Schedule B1;
• whether the court could and should make an administration order under paragraph 13(2) of Schedule B1 with retrospective effect to validate the appointment and acts.

Arguments and reasoning: Counsel for the administrators argued that the FSA consent was not among the documents "prescribed" by paragraph 29(1)(b) of Schedule B1 and therefore the defect could be cured. The judge rejected that construction, holding that "such other documents as may be prescribed" was not limited to documents prescribed by the Insolvency Act or Rules and that section 362A(3) operated to prescribe filing of the FSA consent. The judge followed the principle in Re G-Tech Construction Ltd (as applied in Pillar Securitisation) that failure to comply with the prescribed formality made the appointment invalid and that Rule 7.55 and paragraph 104 could not assist where there was no valid administration.

Nevertheless, having regard to paragraph 13(2) of Schedule B1 and the court's established power to make retrospective administration orders, and in the exercise of judicial discretion given the administrators' lack of fault and the practical prejudice of requiring a fresh appointment, the judge made a retrospective administration order effective from the original appointment time and treated the costs of the application as expenses of the administration.

Subsidiary findings: The judgment records that the administrators had been unaware of the FSA registration because the FSA register was searchable only with a variant of the company name, and that the administrators had refrained from acting once the issue was discovered. The court also noted the public utility of highlighting the need to check variants of company names on the FSA register.

The court found that the original appointment was invalid because the written FSA consent required by section 362A(3) had not been filed and that the defect could not be cured by Rule 7.55 of the Insolvency Rules 1986 or by paragraph 104 of Schedule B1, following Re G-Tech Construction Ltd and Pillar Securitisation. Nevertheless, exercising its discretion under paragraph 13(2) of Schedule B1 the court made an administration order with retrospective effect appointing the joint administrators from 3.30pm on 7 October 2010 and validated their acts and expenses in the interim.