Pillar Securitisation SARL & Ors v Spicer & Anor (Court Administrators)

For insolvency jurisdiction, a body’s centre of main interests is presumed to be at its registered office. The presumption may be rebutted by objective factors ascertainable by third parties, including the apparent location of business conducted on the body’s behalf.

Where legislation prescribes a form for an out-of-court appointment of administrators, the prescribed form must be used. A materially wrong form makes the appointment invalid and cannot be corrected retrospectively under provisions that presuppose the existence of insolvency proceedings.

Administrators must act in the interests of creditors as a whole. Where a surplus is a real possibility, they may also consider the interests of contributory investors, provided the statutory creditors’ duty remains paramount.

The applicants were the principal unsecured creditors of a Guernsey limited partnership placed into administration after its general partner purported to appoint administrators out of court.

They challenged the court’s jurisdiction and the validity of the appointment. The court also considered applications concerning a retrospective appointment, removal and replacement of the administrators, continuation of the administration, interim distribution, statutory interest, joinder of investors and remuneration.

The central issues were whether the partnership’s centre of main interests was in England, whether the company form or partnership form had to be used, and what consequences followed from use of the wrong form.

1. The court held that Master’s centre of main interests was in England. Although its registered office and declared principal place of business were in Guernsey, the presumption was rebutted because the partnership’s business was conducted in London on its behalf and that fact was objectively apparent to creditors and others dealing with it. The court applied the principles stated in Re Eurofood IFSC Limited [2007] BCLC 150 and explained in Re Stanford International Bank Limited [2010] EWCA Civ 137.

2. The appointment was invalid. Schedule B1 to the Insolvency Act 1986, as modified by the Insolvent Partnerships Order 1994, required an insolvent partnership to use Form 1B. Form 2.10B was the company form. Master was a partnership, not a company, despite having separate legal personality. The court rejected the suggested hybrid characterisation.

3. The error was substantive rather than merely one of heading. The completed form stated that Master was a company and the annexed resolution incorrectly described the general partner as the sole member. The court followed the reasoning in Re G-Tech Construction Limited [2007] BPIR 1275. The conflicting entries concerning the EC Regulation and the description of the general partner did not independently invalidate the appointment, but the use of the wrong form did.

4. The invalidity could not be waived or corrected. Rule 7.55 of the Insolvency Rules 1986 and paragraph 104 of Schedule B1 presupposed that insolvency proceedings had begun. Since the appointment itself was invalid, there were no such proceedings. The court relied on Re New Cedos Engineering Co Limited [1994] 1 BCLC 797, applying Morris v Kanssen [1946] AC 459, and contrasted Re Blights Builders Limited [2008] 1 BCLC 245.

5. A fresh appointment could not be backdated to October 2008 and continued beyond the statutory period. Nor could successive orders be used to circumvent the prohibition on extending an administrator’s term after expiry. The question of a possible 364-day appointment was left for further consideration.

6. On the alternative assumption that the appointment was valid, the administrators had not misconducted themselves. They were entitled to reject an offer for assets where they considered the market untested and the price too low. Creditors’ views carried considerable weight, but creditors could not dictate the administration and the court would review the administrators’ approach rather than substitute its own decision. Where a surplus was a real possibility, the administrators could consider contributory investors’ interests while maintaining the statutory duty to creditors as a whole.

7. The investors were not joined. Disputed liability for calls did not establish a sufficient interest, and there was no concrete evidence of a surplus. The other applications were dealt with on the assumption of validity: an interim distribution would have been authorised, but creditors would not have been deprived of statutory interest. Remuneration, indemnity and ancillary matters were adjourned.