Strategic Advantage SPC v High Street Rooftop Holdings Limited

The court granted the applicant's application for an administration order under paragraph 35 of Schedule B1 to the Insolvency Act 1986 because the debenture constituted a qualifying floating charge and was enforceable. The Company had failed to repay two tranches due in December 2019 and January 2020 and the conditional waiver given by the applicant (the Waiver Letter) was properly revoked when the company did not meet the specified conditions.

The court rejected the Company's defences that the facility had been varied orally or that the applicant was estopped from enforcing the original repayment dates. The Facility Agreement contained a written no-oral-variation clause (clause 15) and there was no unequivocal representation amounting to a binding variation; the court applied the limits on promissory estoppel explained in MWB Business Exchange Centres Ltd v Rock Advertising Ltd and Actionstrength.

The court found that the applicant had to show a real prospect of achieving one of the statutory purposes of administration under paragraph 3 of Schedule B1 and that the proposed administrators had provided consents indicating their view that objective (c) (realising property to make a distribution to secured creditors) was reasonably likely. The company's post‑hearing financial material did not persuade the court that the applicant was fully secured or that administration would be inappropriate. The court therefore exercised its discretion in favour of making an administration order.

Background and nature of the application: This was an application by Strategic Advantage SPC (the Applicant) for an administration order in respect of High Street Rooftop Holdings Limited (the Company) under paragraph 35 of Schedule B1 to the Insolvency Act 1986. The Applicant relied on a debenture securing loans advanced under a facility agreement and on events of default arising from non‑payment of two capital tranches which fell due in December 2019 and January 2020.

Procedural history: The application notice was dated 10 July 2020. On 16 July 2020 HHJ Klein refused an immediate administration order, gave directions for evidence and ordered costs against the Applicant. The substantive hearing took place remotely on 28 August 2020 before Mr Andrew Sutcliffe QC and written submissions and further evidence were filed up to 11 September 2020.

Key factual issues:

• Whether the debenture was enforceable because events of default had occurred.
• Whether the parties had validly varied the Facility Agreement (or whether the Applicant was estopped from enforcing its original terms) so as to postpone repayment to the dates under onward lending agreements for certain development projects.
• Whether the Applicant (as a qualifying charge holder) had to demonstrate a real prospect that one of the statutory purposes of administration would be achieved.
• Whether the court should in the exercise of its discretion decline to make an administration order because the Company's assets and projected receipts would enable repayment in full or because making an order would cause disproportionate harm to the group.

Court's reasoning on the issues:

• Enforceability: the Debenture was a qualifying floating charge and, on the primary facts, enforceable because the capital repayments were not made. Clause 12 of the Facility Agreement and clause 13.1 of the Debenture made the security enforceable on the occurrence of an event of default.
• Variation / estoppel: clause 15 of the Facility Agreement required any amendment to be in writing and signed. Applying MWB and Actionstrength, the court held there was no written variation and no unequivocal representation or conduct giving rise to promissory estoppel sufficient to vary the contractual repayment dates. Contemporaneous documents and the Waiver Letter signed in January 2020 undermined the Company's account of an oral agreement to extend repayment to coincide with the onward lending agreements.
• Waiver Letter: although some conditions precedent in the Waiver Letter were not performed, the Waiver Letter itself was signed by both parties and the Applicant was entitled to revoke the conditional waiver when the payment conditions were not met; therefore events of default continued to subsist.
• Real prospect requirement: the court held that an applicant under paragraph 35 must still show a real prospect of achieving one of the statutory purposes in paragraph 3. The proposed administrators had provided consents to act and, on the material, the court considered there was a real prospect of achieving objective (c) (realising property to make a distribution to secured creditors) even if objective (a) or (b) might be unlikely.
• Discretion: the court weighed potential adverse consequences to the group against the Applicant's right to enforce its security. The Company had produced post‑hearing financial material but the court found that the Applicant's debt was not shown to be sufficiently secured and that licensed insolvency practitioners would be better placed to investigate intercompany flows and realisations. The court therefore exercised its discretion to make the administration order.

Relief sought and disposition: The Applicant sought an administration order; the court granted the application and made an administration order.

The court granted the application for an administration order. Rationale: the debenture was a qualifying floating charge and enforceable because repayment events of default had occurred; there was no valid written variation nor a promissory estoppel sufficient to alter repayment dates; the applicant demonstrated a real prospect that a statutory purpose (in particular objective (c), realisation for secured creditors) could be achieved; and on balance the court exercised its discretion in favour of making the administration order.

The application first came before HHJ Klein on 16 July 2020 who refused the Applicant's request for an immediate administration order, gave directions for filing evidence and ordered costs against the Applicant. The substantive application was then heard before Mr Andrew Sutcliffe QC on 28 August 2020 with further written materials filed thereafter.