Cartwright & Anor v The Registrar of Companies

The court interpreted paragraph 83 of Schedule B1 to the Insolvency Act 1986 purposively to permit a gapless transition from administration to a creditors' voluntary liquidation by treating the registration effected under paragraph 83(4) as taking effect from the date the Registrar received a properly delivered notice. The court held that the First Notice, hand-delivered and received on 14 December 2010, met the requirements of proper delivery under the Companies Act 2006 and related insolvency rules. It rejected the Registrar's practice of treating registration as occurring only once internal administrative steps were completed and rejected the alternative of treating paragraph 83(6)(a) as extending the administrators' term of office. The court ordered removal of the incorrect entries on the public register and declared that the First Notice ought to be registered with effect from 14 December 2010.

Background and parties: The applicants were the joint administrators (and former administrators) of Globespan Airways Limited. The respondent was the Registrar of Companies. This was a first instance application to correct the public register and to obtain a declaration about the effect of a paragraph 83 notice under Schedule B1 to the Insolvency Act 1986.

Facts: Administrators of Globespan delivered a paragraph 83 notice in Form 2.34B by hand on 14 December 2010 (the First Notice). The Registrar rejected that notice on 16 December for an asserted omission and only later registered a subsequent notice on 4 February 2011, producing a registered record that the administration ended and liquidation commenced on 4 February. The administrators contended the First Notice had been duly delivered before their term expired and should be treated as registered with effect from 14 December, preventing any gap between administration and liquidation.

Nature of the application: The administrators sought declarations and orders to correct the register so that the First Notice is treated as registered with effect from 14 December 2010 and removal of the later, incorrect entries. They relied on the Companies Act 2006 provisions about proper delivery, and on the court's powers under the Companies Act to correct the register.

Issues framed: (i) whether the First Notice was duly delivered despite minor form issues; (ii) whether registration under paragraph 83 takes effect on receipt by the Registrar or only when the Registrar completes administrative registration steps; (iii) whether, if registration cannot be treated as taking effect on receipt, paragraph 83(6)(a) extended the administrators' appointment until the administrative completion of registration; and (iv) what relief the court could grant to correct the position on the public register.

Reasoning and decision: On delivery, the court held that the First Notice satisfied the content requirements of Form 2.34B because the proposed liquidators' addresses were reasonably ascertainable from the document as a whole. Under the Companies Act 2006, a document is properly delivered if it meets the content requirements and the court rejected the Registrar's routine policy to refuse incomplete forms without exercising the discretion permitted by statute. On interpretation of paragraph 83 the court adopted a purposive approach. It concluded that the primary purpose of the provision is to enable a seamless, gapless move from administration to creditors' voluntary liquidation and that best effect was given by treating registration as effective from the date of receipt. The court rejected the alternative of construing paragraph 83(6)(a) as extending administrators' tenure because that would be inconsistent with the wider scheme in Schedule B1 and would permit administrators to extend their appointments by notice. As a result the court declared that the First Notice ought to be registered with effect from 14 December 2010, ordered removal of the incorrect registered entries, and gave permission to apply within six months by anyone wishing to contend otherwise. The court relied on the Companies Act 2006 corrective powers (section 1096) to remove and correct the register.

Legal consequences noted: The judgment explained the importance of a gapless transition for the continuity of officeholders and for application of insolvency provisions including those on transactions at an undervalue and preferences (sections 238 and 239 and section 240(3)(d)), preferential debts (section 387(3)(ba)), and rules about cut-off dates for provable debts and interest (Insolvency Rules as amended, Rules 13.12 and 4.93(A1)). The court also noted the earlier authority Re E Squared Ltd [2006] EWHC 532 (Ch) had left the 'gap problem' unresolved and that the present decision addressed that issue.

The application succeeded. The court held that the First Notice delivered on 14 December 2010 was properly delivered and that, for the purposes of paragraph 83 of Schedule B1 of the Insolvency Act 1986, registration takes effect from the date of receipt by the Registrar. The court ordered removal of the incorrect register entries showing a transition on 4 February 2011 and declared the First Notice ought to be registered with effect from 14 December 2010. The rationale was a purposive construction of paragraph 83 to preserve a gapless transition and the statutory purposes of Schedule B1, while rejecting the Registrar's administrative-completion interpretation and the alternative that paragraph 83 extended the administrators' appointment.