Walker & Anor v National Westminster Bank Plc & Anor

The claimants, former administrators of Sunnyside Holiday Park Ltd, sought an order charging the unpaid balance of their remuneration and expenses on a provisional FCA redress payment of £62,646.06 said to be payable by NatWest to the dissolved company, and alternatively an order that the bank pay that redress directly to them. The court held the provisional redress sum was not yet due to the company and therefore was not an asset subject to the para 99(3) charge in Schedule B1 to the Insolvency Act 1986. The court also held that the para 99 charge does not vest legal or beneficial ownership in the administrators and that any rights created by that statutory charge must be enforced by court process (for example by appointment of a receiver or by a liquidator acting after restoration) rather than by the former administrators acting unilaterally.

In consequence, the application for direct payment was dismissed: there was no present jurisdiction to order the bank to pay until a binding entitlement or settlement arose; any redress payment payable following restoration would vest in the Crown as bona vacantia until the Crown chose to act; and it was appropriate that the company be restored and wound up so a liquidator could pursue and distribute any redress having regard to competing claims (including the prescribed part and any agreement with the debenture holder).

Background and parties. Sunnyside Holiday Park Ltd entered into two interest rate swaps with NatWest in 2003. The company granted security to Lancashire Mortgage Corporation, and the claimants were appointed administrators in 2008. Their appointment expired in 2012. The company was dissolved in November 2013, vesting remaining assets as bona vacantia in the Crown. Under the FCA review scheme a provisional redress assessment of £62,646.06 was communicated after dissolution.

Nature of the application. The former administrators applied for an order that their unpaid remuneration and expenses be charged on the provisional redress payment under paragraph 99(3) of Schedule B1 of the Insolvency Act 1986, and alternatively for an order that NatWest pay the redress amount directly to them.

Issues framed by the court.

• Whether the provisional FCA redress amount constituted an asset or proceeds of assets in existence and therefore within the para 99 charge that attached to property under the administrators' control when their appointment ceased.
• Whether the para 99 charge conferred on former administrators any right to deal with the charged asset (for example to accept an offer of redress) so as to create an immediate entitlement.
• Whether the court had jurisdiction to order NatWest, or to direct the Crown (as holder of bona vacantia), to make direct payment to the administrators rather than require restoration and winding up.
• How competing interests (debenture holder, unsecured creditors and the prescribed part) should be protected and by whom.

Court's reasoning. The court found (i) the bank's letter was only a provisional assessment and not an offer capable of acceptance; no binding entitlement to pay had yet arisen and so there was no present asset to be charged; (ii) the para 99 statutory charge does not itself vest ownership in the chargee and rights under it require enforcement by court process (appointing a receiver or by a liquidator acting after restoration), so former administrators lacked power to accept an offer on the company's behalf; (iii) the Crown, as holder of bona vacantia, would receive any redress payment unless the company were restored, and the Treasury Solicitor's published policy limited discretionary grants; the court could not direct the Crown to exercise discretionary powers; and (iv) distribution issues (including any agreement with the debenture holder and sums caught by a floating charge or the prescribed part under s.176 Insolvency Act 1986) required consideration by a liquidator or other proper office-holder who could investigate and represent competing interests. The court therefore dismissed the claim and directed that restoration and winding up were the appropriate route to resolve entitlement and distribution.

Wider context. The judgment notes the limited and exceptional nature of any remedy that would bypass restoration and emphasises that the court should not substitute itself for the statutory insolvency distribution procedures.

Application dismissed. The court found the provisional FCA redress assessment did not create a present entitlement or asset within the meaning of paragraph 99(3) of Schedule B1 to the Insolvency Act 1986; the statutory para 99 charge does not give former administrators power to deal with charged assets without court enforcement; the court had no jurisdiction to order the bank or the Crown to pay directly to the administrators; restoration and winding up so a liquidator can pursue and distribute any redress is the appropriate course.