Waypark Commercial Mortgage 1 Limited v Vanguard Number 1 Limited (in liquidation)

The statutory stay imposed by Insolvency Act 1986, s 130(2), is directed to actions and proceedings which may disrupt the winding-up or confer an advantage on individual creditors. It does not prevent a secured creditor exercising a power of sale under a fixed legal charge where the secured property and sale proceeds are outside the fund available for pari passu distribution, unless the security is impugned. A sale of that kind is not an “action or proceeding” within the provision. If necessary, the court may grant leave to proceed on the same basis.

Waypark Commercial Mortgage 1 Limited applied urgently for declaratory relief concerning its proposed sale of Oak House under powers contained in a debenture granted by Vanguard Number 1 Limited. Vanguard had subsequently been wound up by the court, and the purchaser’s solicitors questioned whether the winding-up stay under s 130(2) of the Insolvency Act 1986 affected the sale.

The respondent’s liquidators did not appear and made no representations. The central issue was whether the statutory stay applied to a secured creditor’s exercise of a power of sale over charged property.

1. Declaration and outcome. The court declared that the stay imposed by s 130(2) of the Insolvency Act 1986 did not apply to the applicant’s sale of Oak House pursuant to its fixed legal charge and debenture.
2. Meaning of “action or proceeding”. The provision concerns court proceedings and quasi-legal proceedings, and other processes sufficiently similar to them when considered against the statutory purposes of the stay. The relevant purposes are to preserve pari passu distribution and to protect the claims-adjudication process from unnecessary litigation. Those principles were drawn from Financial Conduct Authority v Carillion plc and Mortgage Debenture Ltd v Chapman.
3. Secured creditor’s power of sale. Execution and distress may fall within the stay because they can give an individual creditor an advantage. A secured sale is materially different. Charged property and its proceeds do not form part of the general fund for unsecured creditors, unless the security is impugned. The stay therefore had no application to this sale. Sowman v David Samuel Trust Ltd provided further support for that conclusion.
4. Alternative relief. If the stay had applied, the court would have granted leave to sell for the same reasons. That alternative was recorded in the recital rather than the operative order.