Lumineau v Berlin HYP AG

Applications for administration require the court to be satisfied that the company is, or is likely to become, unable to pay its debts and that administration is likely to achieve a statutory purpose. A serious question about the applicant director’s standing does not automatically defeat an urgent application. The court should treat standing as a discretionary consideration, while taking account of the company’s interests and the risk that delay may frustrate administration. Potential formal defects or irregularities in insolvency proceedings should ordinarily be addressed under Rule 12.64 of the Insolvency (England and Wales) Rules 2016, unless substantial injustice has been caused which cannot be remedied by court order.

Mr Emmanuel Lumineau applied for administration orders in respect of four companies in the BrickVest group. The applications were made under Schedule B1 to the Insolvency Act 1986. The court was satisfied that the companies were, or were likely to become, unable to pay their debts and that administration was likely to achieve a statutory purpose.

A difficulty arose because BrickVest Limited’s articles appeared to require at least three directors, while Mr Lumineau was its sole remaining director. The central issue was whether that irregularity deprived him of standing to apply for an administration order, or whether the court could nevertheless exercise its discretion to make the order.

1. Administration jurisdiction. The court was satisfied that the requirements in paragraph 11 of Schedule B1 to the Insolvency Act 1986 were met. The companies were or were likely to become unable to pay their debts, and administration was likely to achieve an administration purpose. The proposed administrations offered a better prospect for creditors than liquidation.
2. Effect of the director’s irregular position. The articles appeared to require a minimum of three directors, and the quorum provisions generally required more than one director. Although article 11.2 stated that the quorum was one where there was only one director, it was difficult to construe that provision as authorising a sole director to act where the minimum number of directors had not been maintained.
3. The distinction between court appointments and out-of-court appointments was material. In the latter context, the internal rules governing company management had to be properly followed, as established in Re BW Estate Limited (No.2), [2017] EWCA Civ 1201. The present application was an urgent court application, and the standing issue did not automatically require refusal.
4. Where there was a serious question about the applicant’s standing, the court should approach the matter as discretionary. It should take full account of the standing issue but also consider the company’s interests, the urgency of insolvency protection, the risk of insolvent trading and the possibility that delay would frustrate the administration’s purpose.
5. In the circumstances, refusing the orders would risk grave injustice to the companies, particularly because the loss of the other directors was through no fault of the applicant or BrickVest Limited. The administration orders were therefore made.
6. Potential irregularities should not be conclusively determined on an urgent application made without notice to all interested parties. The appropriate procedure, if an objection arose, was Rule 12.64 of the Insolvency (England and Wales) Rules 2016, under which proceedings are not invalidated by a formal defect or irregularity unless substantial injustice has resulted and cannot be remedied by court order. Time for service on the administrators was abridged.

The judgment records an earlier interlocutory application involving Berlin Hyp AG, determined in [2019] EWHC 2662 (Ch). No appeal from that decision is stated.