Duffy & Anor v Mederco (Cardiff) Ltd

A court may make a retrospective administration order where the company is not otherwise subject to an administration and the statutory conditions are satisfied. The retrospective order should ordinarily take effect no more than 364 days before the order is made, because an administration automatically ends after one year and cannot then be extended retrospectively.

Paragraph 77(1)(b) of Schedule B1 to the Insolvency Act 1986 limits the court’s jurisdiction. It prevents an order extending an administrator’s term from being made after that term has expired. The restriction cannot be avoided by backdating an extension or by making successive retrospective administration orders.

The applicants had been validly appointed as administrators of Mederco (Cardiff) Ltd on 17 January 2019. The administration was purportedly extended by creditor consent to January 2021 and then by a court order to January 2022. It later emerged that investors who might hold equitable purchasers’ liens had not consented to the first extension.

The applicants sought retrospective and prospective orders to regularise the administration and facilitate completion of a property sale. The court considered whether an expired administration could be retrospectively extended, whether successive retrospective administration orders could bridge the gap, the maximum permissible retrospective period, standing, and the applicable post-Brexit insolvency regime.

1. Validity of creditor extension. The initial appointment was valid. There was a real prospect that the creditor extension was invalid because investors with protected liens were secured creditors whose individual consent was required. The court declined to determine that issue on incomplete argument. It considered that validating the defect under r 12.65 of the Insolvency (England and Wales) Rules 2016 would present serious difficulties.
2. Retrospective extensions. Paragraph 77(1)(b) of Schedule B1 to the Insolvency Act 1986 clearly limits the court’s jurisdiction. An order under paragraph 76 extending an administrator’s term cannot be made after the term has expired. The word “may” does not confer a discretion to disregard that temporal limit. The relevant date is when the order is made, not the date from which it is retrospectively effective.
3. A retrospective administration order cannot be used indirectly to extend an earlier administration. The court rejected the submission that two successive retrospective orders could bridge the gap. That device would subvert paragraph 77(1)(b), and a fresh administration order addresses whether an administration should exist, rather than extending an earlier one.
4. Retrospective period and standing. The court followed the approach in Re G-Tech Construction Limited and Re Frontsouth (Witham) Ltd. A retrospective order should not ordinarily take effect more than 364 days before the order. The applicants had standing as creditors in respect of unpaid work carried out during the valid administration.
5. Orders. The court made an administration order taking effect 364 days before the order. It then extended that administration to midnight on 17 January 2022. The earlier November 2020 order was set aside as a nullity.
6. EU insolvency regime. On the court’s preliminary view, proceedings opened when the retrospective order was made, rather than on the retrospective effective date. The order therefore proceeded under the post-transition regime. The court stated that, if that view were wrong, the proceedings would nevertheless be main proceedings under the applicable EU Regulation.

First-instance decision. No appellate history was stated in the judgment.