Christine Mary Laverty & Ors v Caversham Finance Limited

Defects in notices seeking creditors’ consent to extend an administration do not necessarily invalidate the extension. The court must distinguish fundamental requirements, such as obtaining the required creditor consent, from procedural defects capable of cure under Insolvency Rules 2016, rule 12.64. The court must then consider whether substantial injustice was caused and whether it can be remedied. Information omitted from a notice may be immaterial where creditors had adequate access to it and suffered no prejudice. A court extending an administration should consider the interests of creditors as a whole, whether the administration’s purpose remains reasonably achievable, possible prejudice, creditor views and all relevant circumstances.

The joint administrators of Caversham Finance Limited and Caversham Trading Limited sought declarations that consensual extensions of the companies’ administrations had been validly made until 29 March 2022. They also sought a further one-year extension by court order.

The applications arose because notices sent to preferential creditors omitted reasons for the proposed extensions and statements concerning certain voting rights under the Insolvency Rules 2016. The central issues were whether the notices were defective, whether any defects were curable under rule 12.64, whether substantial injustice had resulted, and whether a further extension was justified.

1. The court declared that the administrations had been validly extended by creditor consent until 29 March 2022. The alternative applications for retrospective administration orders therefore did not need to be considered.

2. The omission from the notices of reasons for the proposed extensions breached rule 3.54(2) of the Insolvency Rules 2016. The court treated that requirement as procedural rather than fundamental. Obtaining the required consent under paragraph 76(2)(b) of Schedule B1 to the Insolvency Act 1986 was fundamental, but failure to state reasons in the notice did not have the same consequence.

3. The alleged breach of rules 15.8(3)(f) and (g) was probably no breach because there were no creditors within the relevant categories. In any event, those requirements were procedural and did not affect the fundamental power to extend the administrations.

4. Under rule 12.64, the defects were formal defects or irregularities. No substantial injustice had been caused. The reasons were available in the progress report, the creditors could seek clarification, the resolutions had been passed by overwhelming majorities, and the evidence showed no creditor prejudice.

5. A further extension was granted under paragraph 76(1) of Schedule B1. Applying the approach in Re Nortel Networks UK Limited [2017] EWHC 3299, the court considered the continuing realisation of the loan book, the supporting role of the second company, the likelihood that the administration purpose remained achievable, the absence of creditor objection and the disadvantages of liquidation or dissolution.

Not stated in the judgment.