MTB Motors Ltd, Re

Failure to obtain and file a statutorily required regulatory consent before appointing administrators invalidates the purported appointment. The defect cannot be cured under rule 7.55 of the Insolvency Rules 1986 or paragraph 104 of Schedule B1 where there is no valid administration or valid administrator’s act. However, the court may use paragraph 13(2) of Schedule B1 to make a retrospective administration order. Where appropriate, that order may validate acts undertaken in the intervening period and avoid the expense and uncertainty of a fresh application.

Joint administrators applied for declarations under rule 7.55 of the Insolvency Rules 1986 and paragraph 104 of Schedule B1 to the Insolvency Act 1986. They sought validation of their appointment and acts after being appointed by the company’s directors without the Financial Services Authority’s prior written consent under section 362A of the Financial Services and Markets Act 2000.

The consent was subsequently obtained. The central questions were whether the original appointment was void, whether the defects could be cured under the insolvency legislation, and whether the court could instead make a retrospective administration order.

1. The purported appointment under paragraph 22 of Schedule B1 was invalid. Section 362A(3) of the Financial Services and Markets Act 2000 required the FSA’s written consent to be filed with the notice of intention to appoint. That requirement was a prescribed filing requirement for the purposes of paragraph 29(1)(b) of Schedule B1, notwithstanding that it was contained in a different Act.
2. The court rejected the submission that the omission was merely administrative. Giving effect to the statutory purpose required the failure to file the consent to invalidate the purported appointment.
3. Rule 7.55 of the Insolvency Rules 1986 and paragraph 104 of Schedule B1 could not cure the defect. The reasoning in Re G-Tech Construction Ltd [2007] BPIR 1275, followed in Pillar Securitisation SARL v Spicer [2010] EWHC 836 (Ch), applied. A defect preventing a valid administration or valid administrator’s appointment is outside those saving provisions.
4. Paragraph 13(2) of Schedule B1 conferred jurisdiction to make an administration order taking effect retrospectively. Unlike CPR 40.7, it contained no temporal restriction preventing retrospective effect.
5. In the circumstances, it was appropriate, convenient and expeditious to appoint the administrators retrospectively from 3.30 pm on 7 October 2010. Their activities in the interim were validated insofar as necessary, and the costs of the application were treated as an expense of the administration.

Not an appeal. No prior decision is stated in the judgment.