Company – Administration – Jurisdiction – Company going into administration – Banks issuing claim forms before seeking permission to bring proceedings for negligence in preparing property valuations – Whether court having jurisdiction to grant retrospective permission – Application granted
The first defendant was a firm of property valuation surveyors which in 2006 prepared valuations of care homes, let to and operated by companies in the Southern Cross group, instructed by the claimant banks for the purpose of providing finance for the purchase of the care homes. In July 2011, companies in the group went into administration. Valuations obtained by the claimants in 2011 indicated much reduced values for the properties and they started to investigate whether there had been negligence in the preparation of the valuations by the first defendant in 2006. As a result, ten claim forms were issued by the claimants on 13 September 2012, claiming damages for negligence against the first defendant. The second and third defendants were the administrators of the first defendant.
The claimants then applied to the court for permission to commence the proceedings against the first defendant, as a company in administration, pursuant to paragraph 43(6) of Schedule B1 to the Insolvency Act 1986. An issue arose whether the court had jurisdiction under that provision to grant permission retrospectively for the commencement of legal proceedings against a company in administration.
Held: The application was granted.
The decisions of the House of Lords and the Court of Appeal in Seal v Chief Constable of South Wales Police [2007] UKHL 31 and Adorian v Commissioner of Police of the Metropolis [2009] EWCA Civ 18, concerning the Mental Health Act 1983 and the Criminal Justice Act 2003 respectively, strongly supported the decision of Lindsay J in Re Saunders [1997] Ch 60 that legal proceedings commenced against a bankrupt or a company in compulsory liquidation were not a nullity and that the court had jurisdiction to give retrospective permission for their commencement.
The general approach to provisions requiring permission for the commencement of proceedings and the factors relied on in Adorian were equally applicable to the relevant provisions in the Insolvency Act. Equally, there were not applicable to those provisions of the Insolvency Act any special factors analogous to those relied on by the House of Lords in Seal.
The decisions of the House of Lords in Seal and the Court of Appeal in Adorian required the court in cases such as the present to look beyond the language of the section to the entire context of the provision, its purpose, and the consequences of a decision as to its effect, with a general pre-disposition that the lack of prior permission should not render the proceedings a nullity.
Having regard to those considerations, there was little to support a conclusion that proceedings brought without the permission required by various provisions of the Insolvency Act were a nullity and much to support the contrary conclusion. In addition to the consequences of holding that proceedings were a nullity, it was clearly relevant to have regard to the purpose of the provisions in the context of insolvency. It was important to note that the requirement for permission for the commencement of proceedings applied to insolvency proceedings under the control of the court: bankruptcy, winding-up by the court and administration. It did not apply to a company in creditors’ voluntary winding-up. That suggested that the real purpose of those provisions was not so much the protection of creditors as to ensure that, when a winding-up order had been made by the court, the whole of the task of supervising the collection and distribution of the company’s assets should be committed to the winding-up court and that all proceedings having any bearing upon the winding-up of the company should remain under the supervision and control of that court: See Boyd v Lee Guinness Ltd [1963] NI 49.
Given that purpose, it was hard to see why the court should not be permitted to grant retrospective permission if in the circumstances it was appropriate to do so. There was, in the case of administration, the additional consideration that consent might be granted by the administrator. There was no convincing reason why an administrator should not be permitted to grant retrospective consent.
Re Saunders was correctly decided and retrospective permission could be given for the commencement of proceedings, whether under section 130(2) or section 285(3) of the Insolvency Act 1986 or under paragraph 43(6) of Schedule B1.
Per curiam: In the light of the continuing uncertainty as to the availability of retrospective permission under the relevant provisions of the Insolvency Act, for the purposes of the Practice Direction (Citation of Authorities) [2001] 1 WLR 1001, this judgment was intended to resolve those uncertainties and to establish the principle that retrospective permission might be given.
Edward Knight (instructed by Elborne Mitchell LLP) appeared for the claimants; The defendants did not appear and were not represented.
Eileen O’Grady, barrister
