JCAM Commercial Real Estate Property XV Ltd v Davis Haulage Ltd

This appeal concerned the circumstances in which a company or its directors may give and file a notice of intention to appoint an administrator under paragraph 26 of Schedule B1 to the Insolvency Act 1986 and so invoke the interim moratorium in paragraph 44. The Court of Appeal held that, in this context, the word "proposes" in paragraph 26(1) is to be read as meaning that the company or its directors must have a settled intention to appoint an administrator at the time the notice is given and filed. A merely conditional intention (for example to appoint only if a company voluntary arrangement fails) is not sufficient to justify giving the notice and invoking the interim moratorium.

The court emphasised the limited and specific purpose of the notice and the interim moratorium: to enable any person with a prior right to appoint (typically the holder of a qualifying floating charge) to decide whether to exercise that right and to protect the company and its assets while that decision is taken. Allowing notices based on conditional intentions would permit companies to obtain an effective moratorium in circumstances where the statute restricts such protection (for example, in relation to CVA proposals) and would frustrate the statutory scheme.

Background and factual matrix:

• The appellant was landlord seeking possession of premises let to the respondent company, Davis Haulage Limited, which was in substantial rent arrears.
• The company filed a series of notices of intention to appoint administrators (in the form prescribed by the Insolvency Rules) and thereby repeatedly triggered interim moratoria under Schedule B1. The director's stated rationale included pursuing a company voluntary arrangement (CVA) or, if that failed, appointing administrators and pursuing a pre-pack sale.
• No administrators were appointed at the time; a CVA was proposed and circulated and the fourth notice was given while the CVA process was under way. The appellant applied for the fourth notice to be vacated and removed from the court file.

Procedural posture: The application was heard in the High Court (Chancery Division, Manchester) before His Honour Judge Bird, who held that a director need not have a settled intention to appoint an administrator in order to file a paragraph 26 notice and obtain the interim moratorium. The appellant obtained permission to appeal to the Court of Appeal.

Issues framed:

• Whether, to give and file a notice of intention to appoint an administrator under paragraph 26 of Schedule B1, a director must have a settled/unconditional intention to appoint an administrator at the time of filing, or whether a conditional intention (for example, to appoint only if a CVA fails) suffices.
• How the purpose and statutory context of the moratorium provisions bear on the construction of paragraph 26 and related provisions (paras 27, 28 and 44).
• Whether the filing of a notice without a settled intention was an abuse of process and whether the notice should be removed from the court file.

Reasoning and decision:

• The Court of Appeal rejected the judge below's construction that "proposes" could mean merely considering or keeping open a possibility. The repeated statutory references to a "notice of intention to appoint" and the prescribed form and statutory declaration supported treating "proposes" as synonymous with "intends".
• The court emphasised the limited statutory purpose of the paragraph 26 notice and the interim moratorium: to give any person with a prior right to appoint (notably the holder of a qualifying floating charge) the genuine opportunity to exercise that right and to protect the company and assets while that occurs. If conditional proposals sufficed, companies proposing CVAs could obtain a moratorium indirectly even where the statute restricts moratoria to eligible companies under Schedule A1, subverting the statutory scheme and policy choices made by Parliament.
• Accordingly the court concluded that a settled intention to appoint an administrator is required when giving and filing a paragraph 26 notice. The fourth notice was invalidly given and the court ordered it removed from the court file. The court did not need to stigmatise the conduct as deliberate abuse, noting there was no reason to suppose the director and advisers honestly believed they were acting unlawfully.

Appeal allowed. The Court of Appeal held that a company or its directors must have a settled intention to appoint an administrator at the time they give and file a notice under paragraph 26 of Schedule B1; a merely conditional intention (for example, to appoint only if a CVA fails) does not suffice. The notice filed on 4 March 2016 was therefore invalidly given and was ordered removed from the court file.

Appeal from the High Court of Justice, Chancery Division, Manchester District Registry (His Honour Judge Bird) (reported below as EWHC 772 (Ch)); the judge's reserved judgment was handed down on 31 March 2016. Permission to appeal was granted and this Court delivered judgment on 11 April 2017 ([2017] EWCA Civ 267).