Re NMUL Realisations Limited

The court considered whether the failure to give notice to the holder of a prior qualifying floating charge under paragraph 15 of Schedule B1 to the Insolvency Act 1986 rendered an out-of-court appointment of administrators void ab initio or was a curable procedural irregularity. It was held that the certificate of satisfaction filed at Companies House by the chargor did not extinguish the underlying charge or the debt secured by it and that the prior charge survived the dissolution of the original charge holder. The court found that service should, with hindsight, have been on either the enforcement receiver or the Government Legal Department and that the failure to give paragraph 15 notice was an irregularity rather than a fundamental defect.

Applying the approach in Euromaster, Tokenhouse and Skeggs Beef, and exercising the court's remedial discretion under rule 12.64 of the Insolvency (England and Wales) Rules 2016, the judge declared the appointment of the applicants as joint administrators valid because no substantial injustice had been caused and the position could be and had been remedied in substance.

The company, NMUL Realisations Limited, had earlier granted a debenture to Tudor Capital Management Limited as trustee of a pension scheme which, although recorded as satisfied at Companies House by a notice filed by the company's director, in fact secured an outstanding indebtedness. Metro Bank plc subsequently registered a later debenture and, relying on the Companies House register, filed a notice of appointment of administrators without giving the prior notice required by paragraph 15 of Schedule B1 to the Insolvency Act 1986 to the holder of the earlier Tudor charge.

The applicants (Metro's appointed administrators) applied for a declaration that their appointment was valid despite the failure to give notice. The key issues before the court were (i) whether the mistaken filing of a notice of satisfaction by the chargor and the dissolution of Tudor meant there was no person on whom paragraph 15 notice could be served, (ii) whether the failure to give paragraph 15 notice was a fundamental defect rendering the appointment void, or (iii) whether it was a curable procedural irregularity under rule 12.64 of the Insolvency Rules.

The court reviewed authorities including Euromaster, Tokenhouse, Skeggs Beef and Eco Link, and concluded that Companies House entries of satisfaction are not conclusive as to the underlying liability and security. The beneficial interest in the Tudor loan was, after Tudor's dissolution, treated as part of the realisable property of two individuals under an enforcement receivership order; therefore service should, in retrospect, have been on either the enforcement receiver or the Government Legal Department. The enforcement receiver did not oppose the relief; the administration was successful, creditors benefited, and no representations were made when stakeholders were invited to comment.

On these facts the defect was not fundamental. The judge exercised the court's discretion under rule 12.64 to treat the omission as an irregularity which caused no substantial injustice and declared the administrators' appointment valid on 21 December 2020.

This first-instance application succeeded. The court declared that the appointment of the applicants as joint administrators was valid notwithstanding the failure to serve the paragraph 15 notice. The rationale was that the Companies House memorandum of satisfaction did not extinguish the underlying charge, the prior charge survived Tudor's dissolution and service should have been on the enforcement receiver or the Government Legal Department; the defect was an irregularity remediable under rule 12.64 and caused no substantial injustice in the circumstances.