Simon Carvill-Biggs v Ashley Valentine Reading

Section 234 of the Insolvency Act 1986 is a summary procedural power. It creates no new proprietary rights and cannot give an administrator a better right to property than the company possessed.

Where a mortgagee has appointed fixed-charge receivers and asserted its right to possession, the mortgagor’s remaining equity of redemption does not entitle it to recover possession of the charged land. The land is not, for that purpose, property to which the company appears to be entitled under section 234(2). An administrator cannot use section 234 to obtain possession from occupiers in those circumstances.

A mortgagor’s own right to sue third parties for possession also ends when the mortgagee gives notice of its intention to take possession under section 98(1) of the Law of Property Act 1925.

The appellant was the sole director of a company which owned residential land. The company granted a legal mortgage over the land to TFG Capital No.2 Ltd. After default, the mortgagee appointed receivers under the Law of Property Act 1925 and brought County Court possession proceedings against the company and the appellant.

The mortgagee later appointed the respondents as administrators under a floating charge. The administrators applied in the High Court for an order under section 234 of the Insolvency Act 1986 requiring the appellant and other occupiers to deliver possession. HHJ Klein granted that order and rejected the appellant’s challenge to the administrators’ office.

The appellant appealed. The central issue was whether, despite the prior appointment of the mortgagee’s receivers and its possession claim, section 234(2) empowered the administrators to obtain possession of the land.

1. Appeal allowed unanimously. The order requiring the occupiers to deliver possession to the administrators was set aside.

2. Section 234 is a summary means of assisting an insolvency office-holder to perform existing functions. It creates no new rights and does not give the office-holder better rights to property than the company had. Although “property” can include land or an interest in land, section 234(2) did not apply merely because the occupiers physically occupied the land.

3. A legal mortgage under section 87(1) of the Law of Property Act 1925 leaves the mortgagor with its legal estate, but subject to the mortgagee’s rights. Once the mortgagee had appointed receivers, the company could not revoke their appointment or interfere with their management of the charged land. Its relevant remaining property was its equity of redemption, not the mortgaged land free of the mortgagee’s prior rights.

4. Administration did not improve the company’s position. Paragraphs 1(1) and 67 of Schedule B1 to the Insolvency Act 1986 did not enable the administrators to take custody or control of property which a receiver appointed under the fixed mortgage was already entitled to manage. The limited statutory route for an administrator to sell fixed-charge property was paragraph 71 of Schedule B1, subject to its conditions.

5. Further, under section 98(1) of the Law of Property Act 1925, the mortgagor’s right to sue third parties for possession ended when the mortgagee commenced the Bromley possession proceedings. The administrators could stand in no better position. Accordingly, the company’s equity of redemption did not support a section 234 order for possession.

6. The court expressed only provisional views on the remaining grounds. If section 234 had been available, CPR 55 applied through the Insolvency Rules, subject to necessary modifications; procedural non-compliance had caused no prejudice. The court also inclined to regard the administrators’ duplicative application, brought solely for the mortgagee’s benefit while its possession claim continued, as a misuse of section 234. The decision did not affect the Bromley proceedings or their merits.

• Court of Appeal (Civil Division) Allowed the appeal and set aside the possession order: [2025] EWCA Civ 619.
• High Court of Justice, Business and Property Courts in Leeds HHJ Klein, sitting as a High Court judge, on 16 May 2024 ordered the occupiers to deliver possession of the land to the administrators under section 234 of the Insolvency Act 1986.