Re BXL Services [2012] EWHC 1877 (Ch)

Analysis

BXL Services (the company) was a charitable company limited by guarantee. Owing to government cuts and a large pension deficit, it became insolvent and the directors resolved to place it into administration pursuant to para 22 of Schedule B1 to the Insolvency Act 1986 (the Act). No formal notice in the form prescribed by para 26(2) to Schedule B1 of the Act was given to the company itself. On one construction of the Act, this omission was fatal to the validity of the appointment. On a second construction, it was not an omission at all as such notice was not a requirement. On a third construction, if notice was required then the omission was not fatal.

The authorities disclosed a conflict of judicial opinion. At the time of the hearing, the two most recent decisions (both reached on the same day) were in conflict. In Re Virtualpurple Professional Services Ltd [2012] EWHC 3487 (Ch), Norris J had decided that prior notice was unnecessary and even if necessary the failure to give notice did not invalidate the appointment. However, in National Westminster Bank plc v Msaada Group [2012] EWHC 3423 (Ch), Warren J had held that failure to give notice invalidated the appointment. Further earlier cases on the point were also in conflict and there was no authority giving definitive consideration to all the previous conflicting authorities.

Between the hearing and Purle J’s written judgment, the conflict was resolved at first instance by the decision of Arnold J in Re Ceart Risk Servcies Ltd [2012] EWHC 1178 (Ch), who preferred Virtualpurple to Msaada. Ceart Risk had concerned the Financial Services and Markets Act 2000, but Arnold J’s reasoning was of general application to the construction of Schedule B1 of the Act. Arnold J had not been referred to the conflicting decision of Judge Hodge QC in Re MTB Motors Ltd [2010] EWHC 3751 (Ch) but reference to this case would not have absolved Arnold J of the need to choose between conflicting first instance authorities.

Held (declaring the appointment valid):

1. (1) A first instance judge should follow any later first instance authority that fully considers previous authority, even if that later authority is in conflict with one or more of those earlier authorities. It is for the Court of Appeal to reserve the later ruling, if appropriate (para [7]).
2. (2) Ceart Risk settled the position at first instance. The decisions of Norris J in Virtualpurple and Arnold J in Ceart Risk should be followed at first instance without elaboration (para [14]).
3. (3) Prior notice to the company is not necessary and (even if necessary) the failure to give notice does not invalidate the appointment of administrators (para [6]).

JUDGMENT JUDGE PURLE QC: [1] This case concerns the validity of the appointment of joint administrators of a charitable company limited by guarantee made by the directors out of court. [2] As a result of government cuts and a large inherited pension deficit, the company became insolvent and, following advice, the directors resolved to appoint …

Continue reading "Re BXL Services [2012] EWHC 1877 (Ch)"