Harlow (Administrator of Blak Pearl Ltd) v Creative Staging Ltd

Where a qualifying floating charge holder appoints an administrator after a winding-up petition has been presented, the petition is suspended rather than dismissed. It remains in existence and revives when the administration ends. The court may then make a winding-up order on the existing petition under paragraph 79(4)(d) of Schedule B1 to the Insolvency Act 1986.

The court should consider the interests of creditors as a whole. Procedural objections should not defeat the substantive jurisdiction where the existing petition preserves the commencement date and the consequent operation of section 127. Procedural requirements may be waived where necessary to avoid needless cost and delay.

John Harlow, administrator of Blak Pearl Ltd, appealed against District Judge Williams’s refusal to terminate the administration and make a winding-up order on a petition presented by Creative Staging Ltd.

The petition had been suspended when a qualifying floating charge holder appointed the administrator. Creative Staging later sought to withdraw it, while other creditors considered substitution. The central issues were whether the suspended petition remained available after termination of the administration, whether the court had jurisdiction to make a winding-up order on it, and whether procedural objections or prejudice to creditors justified refusing relief.

1. Appeal allowed. The court ordered that Blak Pearl Ltd be wound up on the existing petition and waived procedural requirements that had not otherwise been complied with.
2. A winding-up petition presented before a qualifying floating charge holder appoints an administrator is suspended under paragraph 40(1)(b) of Schedule B1. Suspension removes the petition’s legal effect during the administration, but does not extinguish it. The petition revives when the administration ends.
3. The court followed the approach in Re J. Smiths Haulage Ltd [2007] BCC 135. Paragraph 79(4)(d) gives the court power, when terminating the administration, to make an order on the suspended petition, including a compulsory winding-up order.
4. The existing petition was not capable of withdrawal without the court’s consent. The court was seized of the petition and had to approach its disposal from the standpoint of the creditors as a class. The secured creditor’s interests were relevant even if it appeared likely to be the principal beneficiary.
5. The proposed course preserved the retrospective operation of section 127 of the Insolvency Act 1986 from the presentation of the original petition. Requiring a new petition would lose that advantage and create unnecessary substitution hearings and expense.
6. The earlier decisions in Brooke Marine Ltd [1988] BCLC 546 and Synthetic Technology Ltd [1900] BCLC 378, concerning the need for a properly presented petition, were not determinative. Any defects were procedural rather than substantive and could be waived under Rule 7.55.
7. The first-instance authorities beginning with Lancefield v Lancefield [2002] BPIR 1108, and applied in BTR (UK) Ltd [2012] BCC 864 and Marches Credit Union Ltd [2013] EWHC 1731 (Ch), reinforced the conclusion that section 122 provides the governing jurisdiction and that later procedural provisions are not absolute in their impact.

• High Court (Chancery Division): Appeal from the order of District Judge Williams dated 24 March 2014. The order was set aside and a winding-up order was made on the existing petition.