NMUL Realisations Ltd, Re

A mistaken filing recording satisfaction of a registered charge does not extinguish the underlying debt or security. Failure to notify a prior charge-holder under paragraph 15 of Schedule B1 to the Insolvency Act 1986 is ordinarily a procedural irregularity, rather than a fundamental defect automatically invalidating an out-of-court administration appointment. The court must assess the circumstances and decide whether substantial injustice has resulted. Where the defect is not fundamental and causes no substantial injustice, the appointment may be preserved by an order under rule 12.64 of the Insolvency (England and Wales) Rules 2016. The discretion is fact-sensitive and may be refused in cases involving an egregious failure to comply.

The joint administrators of NMUL Realisations Limited applied for a declaration that their appointment was valid. Metro Bank plc had appointed them under a qualifying floating charge. A prior Tudor charge had mistakenly been recorded at Companies House as satisfied, although a substantial secured debt remained outstanding. Metro therefore did not give notice to the relevant prior charge-holder under paragraph 15 of Schedule B1 to the Insolvency Act 1986.

The prior charge-holder had been dissolved, and the benefit of the debt and security was claimed by an enforcement receiver or, alternatively, the Government Legal Department. The central issues were to whom notice should have been given and whether the failure to give notice rendered the appointment void ab initio or could be remedied under rule 12.64 of the Insolvency (England and Wales) Rules 2016.

1. The court granted the application and declared that the administrators had been validly appointed notwithstanding the failure to give notice under paragraph 15 of Schedule B1 to the Insolvency Act 1986.
2. The filing of a certificate of satisfaction under section 859L of the Companies Act 2006 was not conclusive. It did not extinguish the underlying debt or charge. The prior security therefore continued to exist, and the obligation to give notice remained.
3. Notice should have been given either to the enforcement receiver, in light of the receivership order, or to the Government Legal Department on behalf of the Crown. The dissolution of Tudor did not mean that there was nobody to whom notice could be given.
4. Non-compliance with paragraph 15 was a procedural irregularity and not a fundamental defect. The paragraph assumes that the appointing charge-holder has the power to appoint; it regulates the procedure for exercising that power. The court adopted the approach in Euromaster Limited and Re Skeggs Beef Limited, distinguishing defects which invalidate the power itself from procedural defects capable of cure.
5. Under rule 12.64, the court had to consider whether substantial injustice had been caused and, if so, whether it could be remedied. No substantial injustice had been shown. The enforcement receiver did not object, the position had been reported to stakeholders, no representations had been received, and the administration had successfully benefited the creditors.
6. The court therefore exercised its discretion under rule 12.64 and made the declaration. The remedy remains fact-sensitive and may be refused where the failure to comply is egregious or substantial injustice cannot be remedied.