Cornercare Ltd, Re

Expiry of the ten-business-day period following a notice of intention to appoint administrators prevents an appointment pursuant to that particular notice. It does not prevent the company or its directors from serving and filing a fresh notice, creating a new appointment window. The court may control repeated notices that are abusive. An administration order may be made even where an out-of-court appointment remains available, provided the statutory conditions are met. A proper pre-packaged sale may support administration where it preserves goodwill and avoids employee termination costs.

The directors of Cornercare Limited applied for a declaration that the company could appoint administrators out of court, or alternatively for an administration order. A notice of intention to appoint administrators had been filed on 5 February 2010, but no appointment was made within ten business days because of funding difficulties concerning proposed premises. Those difficulties had been resolved.

The central issues were whether the expired notice prevented a fresh notice and later out-of-court appointment, and whether the court could make an immediate administration order notwithstanding the availability of that procedure.

1. Effect of the expired notice. Paragraph 28(2) of Schedule B1 to the Insolvency Act 1986 refers to the particular notice of intention to appoint filed under paragraph 27(1). It prevents an appointment under paragraph 22 pursuant to that notice after ten business days have elapsed. It does not impose a permanent bar on a fresh notice and a fresh appointment window.
2. Abuse control. Repeated notices could potentially be used to engineer a continuing moratorium. That possibility did not justify the broader construction of paragraph 28(2). If abuse occurred, the court could restrain further notices unless followed by an appointment and, in an extreme case, remove an abusive notice and make a blanket order for permission during the unexpired moratorium.
3. Administration order. The company was, or was likely to become, unable to pay its debts, and administration was likely to produce a better result for creditors as a whole than liquidation. The proposed pre-packaged sale of goodwill was, in the circumstances, an entirely proper transaction. Avoiding employee termination costs and preserving goodwill materially contributed to the better result.
4. Disposition. The conditions in paragraph 11 of Schedule B1 were satisfied. The court therefore made an immediate administration order. The availability of an out-of-court procedure did not prevent that order.