Bevan v Paul Walker the Company & Anor

A failure to notify the holder of a qualifying floating charge does not invalidate a members’ special resolution to wind up a company voluntarily. The charge remains a qualifying floating charge even if it was not presently enforceable. The notice requirement protects the charge holder’s opportunity to assess enforceability and consider appointing an administrator. Its breach may give rise to other remedies, but does not deprive the resolution of its legal effect where the resolution was otherwise passed in accordance with the company’s articles.

Domestic & General Insulation Ltd entered members’ voluntary liquidation after a declaration of solvency. The liquidation was later converted into a creditors’ voluntary liquidation following an increase in HMRC’s claim, and new joint liquidators were appointed.

No written notice of the winding-up resolution had been given to HSBC, the holder of a qualifying floating charge. The applicants sought confirmation that the original liquidator’s appointment, the resolution and the subsequent appointments were valid. The central issue was whether the failure to give notice under the Insolvency Act 1986 invalidated the special resolution and the resulting appointments.

1. Validity of the charge and notice requirement. The HSBC charge was a qualifying floating charge within the meaning adopted by section 72A of the Insolvency Act 1986, satisfying the formal requirements in paragraph 14 of Schedule B1. The fact that the charge appeared not to be enforceable when the resolution was passed did not remove the obligation to give notice. The charge holder was entitled to form its own view on enforceability, which might depend on the charge terms and the proposed resolution.
2. Effect of the notice failure. Although section 84(2A) required written notice and section 84(2B) restricted the timing of the resolution, non-compliance did not make the special resolution ineffective. Once passed in accordance with the company’s articles, the resolution placed the company into liquidation. The charge holder might have other remedies, including seeking a compulsory winding-up or a stay to enable an administrator to be appointed, but the resolution’s validity was not thereby impugned.
3. Authorities concerning administration. Re Eco Link Resources Ltd [2012] BCC 731 and related authorities concerning administrators’ appointments were of no or limited assistance. Voluntary winding-up was a members’ statutory power, governed by legislation predating administration and requiring a special resolution. The court was reluctant to infer that Parliament intended a notice requirement to nullify an otherwise valid resolution, particularly where the charge holder was unaffected and did not object.
4. Plain statutory language. The court adopted the approach in Re Centrebind Ltd [1967] 1 WLR 377, giving effect to the plain language requiring the relevant resolution. Section 166 of the Insolvency Act 1986 qualified the practical effect of that decision in relation to abusive applications, but recognised its correctness.
5. The initial appointment on 16 December 2014 and the applicants’ subsequent appointment were valid.

First-instance decision. No appellate history was stated in the judgment.