Bootes & Ors v Ceart Risk Services Ltd

A failure to obtain the Financial Services Authority’s consent before appointing administrators under paragraph 22 of Schedule B1 to the Insolvency Act 1986 does not necessarily render the appointment incurably invalid. Applying the statutory-construction approach in R v Soneji, the court must consider the purpose of the requirement, the consequences of non-compliance and Parliament’s intended outcome.

Where the defect is curable, the appointment takes effect when the written consent is filed with the court, assuming the notice of appointment has already been filed. Paragraph 104 of Schedule B1 validates acts done by an administrator during the intervening period where the appointment was defective but capable of being cured.

The applicants comprised the company’s sole owner and director and two proposed joint administrators. The company, an FSA-authorised insurance intermediary, resolved on 19 January 2012 to enter administration and filed a notice of appointment under paragraph 22 of Schedule B1 to the Insolvency Act 1986.

The FSA’s consent, required by section 362A of the Financial Services and Markets Act 2000, was not obtained at that time. The FSA later gave written consent on 8 February 2012, which was subsequently filed with the court. The issues were whether the appointment was valid, when it took effect, and whether acts done before that date were valid under paragraph 104 of Schedule B1.

1. Curable defect. The requirement in section 362A(2) of the Financial Services and Markets Act 2000 to obtain the FSA’s consent was important, because it enabled regulatory vetting, consideration of creditors’ interests and communication of insolvency obligations. It did not, however, require prior consent as a condition whose breach caused incurable invalidity. The statutory language did not expressly require prior consent, and the statutory purpose did not support the damaging consequences of treating the appointment as irredeemably void. The failure was therefore a curable defect (paras [17]–[20]).
2. Effective date. Paragraph 31 of Schedule B1 provides that an appointment under paragraph 22 takes effect when paragraph 29’s requirements are satisfied. Reading paragraph 29(1)(b) together with section 362A(4)(b), the appointment took effect when the FSA’s written consent was filed with Croydon County Court, not when consent was given on 8 February 2012 (paras [21]–[24]).
3. Validation of prior acts. Paragraph 104 of Schedule B1 provides that an administrator’s act is valid despite a defect in appointment or qualification. The provision was apt to validate acts done during the period between the defective appointment and the filing of consent. The court preferred the reasoning of Re Care Matters Partnership Ltd and respectfully disagreed with G-Tech Construction Ltd on this issue (paras [25]–[29]).
4. The court declared that the administrators’ appointment took effect when the FSA’s consent was filed, and that their acts between 19 January 2012 and that filing date were valid. It was unnecessary to consider a retrospective appointment under the jurisdiction recognised in G-Tech Construction Ltd (paras [30]–[31]).