Armstrong Brands Ltd, Re

The court declared that the appointment of administrators by J.B. Armstrong & Co. Ltd as the holder of a qualifying floating charge was valid because the debenture creating the charge had been validly executed in compliance with section 44 of the Companies Act 2006. The critical issue was whether the debenture was signed by an authorised signatory when signed; the judge concluded on the balance of probabilities that the documents were signed in early June 2008 when Mr Armstrong was still a director and by the company secretary, satisfying the statutory execution requirements.

The court rejected an alternative attack based on the dating and later delivery of the documents, holding that later delivery or dating did not invalidate prior valid execution and that board minutes or an escrow/acceptance condition authorised later delivery. Because the charge was valid, JB had power under paragraph 14 of Schedule B1 to appoint administrators, the appointments and subsequent acts (including extension under paragraph 76(2)(b)) were valid, and the indemnity claim under paragraph 21(2) did not arise.

Background and parties: Armstrong Brands Ltd (the Company) was placed into administration by appointment dated 17 April 2014 by J.B. Armstrong & Co. Ltd (JB) as holder of a qualifying floating charge. The administrators sought declarations that the appointment and subsequent acts (including extensions under paragraph 76(2)(b) of Schedule B1 to the Insolvency Act 1986) were valid. As alternative relief, an indemnity was sought from JB under paragraph 21(2) of Schedule B1 if the appointments were invalid.

Nature of the application: The administrators applied for declarations as to the validity of the appointment and of acts done by them. The central legal question was whether the debenture constituting a qualifying floating charge had been validly executed by the Company.

Issues framed by the court:

• Whether the debenture and loan agreement were validly executed in accordance with section 44 of the Companies Act 2006, so as to create a qualifying floating charge within paragraph 14 of Schedule B1.
• Whether JB qualified as a purchaser under section 44(5) so as to be protected despite any defect in execution, and whether any knowledge of the defect was attributable to JB.
• Whether later dating or delivery of the documents invalidated execution, and whether board minutes or an escrow/acceptance condition authorised later delivery.
• As an alternative, whether a subsequent block transfer order (8 December 2014) establishing replacement of one administrator affected the outcome.

Court's reasoning: The judge examined the evidence, notably board minutes dated 4, 5 June and 1 September 2008 and a written resolution of JB dated 15 September 2008. On the balance of probabilities the court concluded that the documents had been signed (though not dated) in early June 2008 when Mr Armstrong was a director and the company secretary also signed. That satisfied section 44 execution requirements. The later date of 15 September 2008 reflected JB's authorisation to lend and did not negate prior valid execution; delivery could be authorised by board minutes or be subject to an escrow/acceptance condition which was satisfied on 15 September. The court further considered but did not need to rely upon the December 2014 block transfer order substituting an administrator. Because the appointment was valid, the administrators' acts were valid and the indemnity claim did not arise.

Procedural posture: First instance High Court (Chancery Division) determination of the administrators' application for declarations; hearing dated 29 June 2015 with judgment given 18 November 2015. The administration was extended further on 30 September 2015 to 12 October 2016 to permit realisations and consideration of distributions.

The court declared that the appointment of administrators by JB as holder of a qualifying floating charge was valid and that all acts by the administrators, including the extension under paragraph 76(2)(b) of Schedule B1, were valid. Rationale: on the balance of probabilities the debenture and loan agreement had been signed in early June 2008 by Mr Armstrong (then a director) and the company secretary, satisfying Companies Act 2006 section 44; later dating/delivery did not invalidate execution and the board minutes or an escrow/acceptance condition authorised delivery. Because the appointment was valid, the alternative indemnity claim under paragraph 21(2) did not arise.