Sophie Rebecca Perhar v Louise Freestone & Ors

An appeal concerning the enforceability of a floating charge and the appointment of administrators should not determine heavily fact-dependent issues summarily where the evidence has not been tested by cross-examination. Whether a breach of trust occurred, whether contractual rights were waived or subject to estoppel, and the precise terms to be implied into defective security documents require an objective assessment of the relevant circumstances. A defective appointment will not be invalidated for formal irregularity unless the defect caused substantial injustice. Substantial injustice arising from the underlying entitlement to appoint administrators is distinct from injustice caused by technical defects in the appointment documents.

The claimant appealed from an order of Deputy ICC Judge Baister dated 11 August 2023 concerning the validity of administrators appointed over The Sustainable Bathroom Company Ltd. Synergy in Trade Ltd had appointed the administrators out of court under Insolvency Act 1986 Schedule B1 after a dispute concerning payments made into an incorrect account and subsequent payments to third parties.

The first-instance court was directed to determine two preliminary issues: whether the floating charge was enforceable when the administrators were appointed, and whether defects in the notice of appointment were incapable of cure. The claimant challenged findings concerning breach of trust, waiver or promissory estoppel, implication of contractual terms, and formal defects in the appointment process.

1. Grounds 1 to 3. The appeal was allowed to the extent that the findings concerning enforceability could not stand as summary determinations. The issues were to be determined at the forthcoming trial, where witness evidence could be tested by cross-examination.
2. The alleged breach of trust was not necessarily a finding of fraud or dishonesty. However, it was not appropriate to treat the issue as a purely technical or strict-liability matter. The effect of the contractual provisions, the circumstances in which money was received and paid out, and the parties’ dealings required factual determination.
3. Waiver and promissory estoppel were also fact-dependent. Although Closegate Hotel Development (Durham) Ltd v McClean recognised that undisputed oral statements could sometimes be considered summarily, contested statements and communications were unsuitable for summary disposal. The alleged communications and written plan therefore required consideration at trial.
4. The implication of an enforceability term into the debenture was critical. The debenture did not state when the floating charge became enforceable. The precise term, including whether events of default in the facility letter were incorporated and whether notice was required, depended on the contractual context and factual matrix. The objective assessment described in Re ARL 009 Ltd applied.
5. Ground 4. The appeal was dismissed in relation to the technical defects in the appointment documents. Under rule 12.64 of the Insolvency (England and Wales) Rules 2016, formal defects or irregularities did not invalidate the proceedings because they had not caused substantial injustice. Any injustice arising from Synergy’s underlying entitlement to appoint administrators remained capable of being argued at trial.

• High Court (Chancery Division): Appeal from the order of Deputy ICC Judge Baister dated 11 August 2023. Grounds 1 to 3 were allowed for determination at trial; ground 4 was dismissed.