Orton & Ors v Towcester Racecourse Company Ltd

Contractual requirements in a company’s articles which exist solely for the benefit of a particular shareholder or investor may be waived by that beneficiary. An administrator’s appointment is not invalid merely because the notice records the appointment by reference to the court’s endorsement of the date and time, rather than stating those details independently. Nor is the appointment defective because the notice does not record the precise second within a stated minute. The court may therefore declare that the appointment is valid where the form used does not create any substantive uncertainty.

The joint administrators and directors of a company in administration applied for declarations concerning the validity of the administrators’ appointment. The directors had resolved to appoint administrators, but an investor director had not provided the prior written consent required by the company’s articles. That consent was subsequently ratified.

The notice of appointment also stated that the appointment was made on the date and time endorsed by the court. The applicants sought declarations that these matters did not invalidate the appointment, together with any necessary protective order concerning the administrators’ acts. The respondent company did not appear. The court considered the effect of the articles, the statutory appointment procedure and a recent decision concerning similar appointment notices.

1. Application granted. The court declared that the administrators’ appointment was not invalidated by the absence of prior written consent from the investor director or by the form of the notice of appointment.
2. The articles constituted a contract between the shareholders. The requirement for the investor director’s prior written consent existed solely to protect the outside investor. Applying the contractual principles discussed in RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH [2010] 3 All ER 1 and Glencore Grain Ltd v Flacker Shipping Ltd, The Happy Day [2002] All ER (D) 219 (Jul), that benefit was capable of waiver. The investor director had in fact waived it by subsequently ratifying and agreeing to the appointment.
3. Under paragraphs 29 and 31 of Schedule B1 to the Insolvency Act 1986, the appointment takes effect when the prescribed filing requirements are satisfied. The court did not regard a notice stating that the appointment was made on the date and time endorsed by the court as defective. A referential description of the time of appointment was permissible, particularly where it brought the appointment and notification into close temporal proximity.
4. The court explained the reasoning in NJM Clothing Ltd, Ross & Higgins v Fashion Design Solutions Ltd and Asis Couture (case 318 of 2017). That decision did not establish that the relevant matters were defects; it had assumed them for the purpose of considering the remedial rule. In any event, failure to record the exact second within a stated minute was of no material significance.
5. The court declared that the appointment was not invalidated in any way by use of the notice form and indicated that any further declaration needed to protect the administrators’ position could be included in the order. The alternative application for an administration order did not arise.

First-instance decision. No prior appellate decision is stated in the judgment.