Secure Mortgage Corporation Limited (Main Judgment)

The claim challenged an extra-judicial appointment of an administrator under Paragraph 14 of Schedule B1 to the Insolvency Act 1986 on the basis that the appointers were not the holder of the relevant 1998 charge and that the procedural requirements for appointment in Paragraph 18 had not been complied with.

The court held that the respondents failed to prove that the 1998 Charge was comprised in the estate of the late Mr Nolan or that his personal representatives had a vested right to appoint. The notice of appointment was defective because it did not identify the natural person or persons who made the appointment or provide their address as required by the Insolvency Rules and Schedule B1. For these reasons the purported appointment could not take effect.

The court declined to determine the separate question whether the floating charge was enforceable under Paragraph 16 because the evidence on enforceability and alleged assignments was incomplete; that issue therefore remains for further investigation. The judge refused certain procedural applications by the respondents, including a stay and relief from sanction for late evidence.

This case concerned a challenge by Secure Mortgage Corporation Limited (SMC) and H Commercial Capital Limited (HCC) to the extra-judicial appointment of Mr Peter Harold as administrator of SMC under a purported qualifying floating charge dated 12 May 1998 (the 1998 Charge).

Background and parties:

• SMC had been dissolved in 1999 and restored to the register in June 2019. The Property subject to the 1998 Charge remained registered in SMC's name.
• The respondents relied on the estate of the late Mr Peter Nolan, and two named individuals (Messrs Tierney and Bamber) as his personal representatives, as the purported holders of the 1998 Charge who appointed Mr Harold as administrator on 30 August 2019.
• SMC and HCC sought declarations and relief challenging the validity of that appointment and contended that a later charge to HCC might have priority.

Procedural posture: The claim was heard at first instance before His Honour Judge Halliwell. The respondents applied for an adjournment pending an application to set aside the order restoring SMC; that application and a request for relief from sanction to admit late witness evidence were refused.

Issues framed by the court:

1. Who was the holder of the 1998 Charge at the time of the appointment and, relatedly, whether the respondents had lawfully exercised the power to appoint an administrator?
2. Whether the 1998 Charge was enforceable at the time of appointment in the sense relevant to Paragraph 16 of Schedule B1.
3. Whether the procedural requirements in Paragraph 18 of Schedule B1 and Rules 3.16–3.18 of the Insolvency Rules 2016 had been complied with.

Court's reasoning and decision:

• Title and standing — the respondents relied on the contention that the 1998 Charge had become comprised in Mr Nolan's estate and that Messrs Tierney and Bamber, as personal representatives, were therefore entitled to appoint. The court concluded they had not proved that contention: no satisfactory documentary evidence of assignment or vesting was produced and no grant of representation had been exhibited. The judge applied established authorities that a grant of representation is required to prove title before a court in such circumstances.
• Procedural compliance — the notice of appointment failed to comply with Paragraph 18 and the Insolvency Rules because it did not identify the natural person(s) who made the appointment nor provide the appointer's address; it named an "Estate" which is not a legal person for these purposes. As Paragraph 19 makes clear, an appointment under Paragraph 14 does not take effect until the Paragraph 18 requirements are satisfied.
• Enforceability — while the Court of Appeal's guidance in SAW (SW) 2010 Ltd v Wilson was noted and the judge accepted the general principle that a floating charge is enforceable if a condition precedent to enforcement has been satisfied and there remains a debt secured, on the facts before him the evidence about enforceability and alleged assignments was incomplete. The court therefore did not determine enforceability under Paragraph 16, leaving factual investigation open.

Disposition: The judge indicated he was minded to declare the appointment void on the grounds identified and ordered the parties to file submissions on the precise form of declaration and consequential orders including costs.

At first instance the court concluded that the respondents had failed to establish that the power to appoint an administrator vested in them as holders of the 1998 Charge and that the notice of appointment did not comply with the procedural requirements of Paragraph 18 of Schedule B1 and the Insolvency Rules. For these reasons the court was minded to declare the appointment of Mr Harold void. The court did not finally determine the separate question of enforceability under Paragraph 16 because of incomplete factual evidence and made directions for further submissions on form of order and costs.