BXL Services, Re

A failure to give prescribed notice of an intended appointment of administrators under Schedule B1 of the Insolvency Act 1986 does not invalidate the appointment, even assuming that notice was required. A first-instance judge should ordinarily follow a later first-instance decision which has fully considered conflicting authorities, unless and until the Court of Appeal reverses it. Where a later first-instance authority has adopted one side of a conflict after considering the competing reasoning, that decision settles the position at first instance.

The directors of an insolvent charitable company limited by guarantee appointed joint administrators out of court under paragraph 22 of Schedule B1 of the Insolvency Act 1986. No prescribed notice of the intended appointment was given to the company. The directors sought a declaration that the appointment remained valid.

The court considered conflicting first-instance decisions concerning the effect of failures to give notice or obtain consent under Schedule B1, including Re Virtualpurple Professional Services Ltd, National Westminster Bank plc v Msaada Group, and Re Ceart Risk Services Ltd. The central issues were whether notice to the company was required and, if so, whether its omission invalidated the appointment.

1. Disposition. The court declared that the appointment of the joint administrators was valid.
2. Effect of failure to give notice. The court accepted the reasoning in Re Virtualpurple Professional Services Ltd that prior notice to the company was unnecessary and that, even if notice under paragraph 26(2) of Schedule B1 was required, failure to give it did not invalidate the appointment. That approach had been preferred and approved in Re Ceart Risk Services Ltd after consideration of the conflicting authorities.
3. Approach to conflicting first-instance decisions. Following Colchester Estates (Cardiff) v Carlton Industries plc and Re Cromptons Leisure Machines Ltd, a first-instance judge should ordinarily follow a later first-instance authority which has fully considered the earlier authorities, leaving any correction to the Court of Appeal. The court was therefore required to follow Re Virtualpurple Professional Services Ltd in light of Re Ceart Risk Services Ltd, even apart from the judge’s own preference for that reasoning.
4. Purposive construction. The court treated the purposive construction of Schedule B1, rather than the literal approach adopted in Re M.T.B. Motors Ltd and G-Tech Construction Ltd, as settling the law at first instance. The contrary reasoning in National Westminster Bank plc v Msaada Group was not followed.