Secure Mortgage Corporation Ltd & Anor v Harold & Ors

A company may challenge an extra-judicial administration appointment through its directors where the appointment’s lawfulness is itself in issue. Only the holder of a qualifying floating charge may appoint an administrator under Schedule B1 to the Insolvency Act 1986. A person claiming through a deceased charge-holder must prove both that the charge forms part of the estate and that the claimant has title to act as personal representative. The appointment takes effect only when the prescribed requirements for the notice of appointment are fully satisfied. The notice must identify the person making the appointment and provide that person’s address. Describing an estate as the appointer does not satisfy those requirements.

Secure Mortgage Corporation Limited challenged the purported extra-judicial appointment of Peter Harold as its administrator. It argued that the respondents were not the holder of the qualifying floating charge relied upon, that the charge was not enforceable, and that the statutory appointment procedure had not been followed. H Commercial Capital Limited joined as co-applicant. The respondents claimed to act as representatives of the estate of the deceased alleged charge-holder, but produced no grant of representation and the appointment documents named the estate rather than the individuals making the appointment. The central issues were standing, title to the charge, enforceability, and compliance with Schedule B1 to the Insolvency Act 1986.

1. Standing. The company had standing to challenge the administrator’s appointment because the challenge directly concerned the lawfulness of that appointment. The respondents’ objection therefore begged the question in issue. The approach in Closegate Hotel Development v McLean [2013] 3237 was followed.
2. Holder of the charge. Only the holder of the qualifying floating charge could exercise the power under paragraph 14(1) of Schedule B1. The respondents failed to prove that the 1998 charge had become part of the deceased’s estate. They also failed to prove their title as personal representatives. Although an executor derives title from the will rather than the grant, a grant of representation had to be produced to establish that title in court proceedings. The principles in Chetty v Chetty [1916] AC 603, Re Crowhurst Park [1974] 1 WLR 583 and Redwood Music Ltd v Feldman & Co [1979] RPC 1 were applied.
3. Enforceability. The court accepted the guidance in SAW (SW) 2010 Ltd v Wilson [2018] Ch 213 that a floating charge will generally be enforceable where any condition precedent has been satisfied and a debt remains secured. The factual issues concerning limitation, demand and the existence of a secured debt were left unresolved.
4. Procedure and disposal. The requirements of paragraphs 18 and 19 of Schedule B1 and rules 3.16–3.18 of the Insolvency (England and Wales) Rules 2016 had to be satisfied in full. The notice did not identify the person making the appointment, give that person’s address, or name the second alleged personal representative. The appointment therefore had not taken effect and was void. The precise form of declaration and consequential matters, including costs, were reserved for written submissions.

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