Sale of land – Insolvent company – Administration – Respondent administrators proposing to sell land acquired with funds distributed under Landfill Tax Regulations 1996 – Respondents wanting to use proceeds to pay unsecured creditors and remuneration of administrators – Judge authorising sale of site and declaring proceeds of sale to be company asset — Whether judge erring in law in authorising exchange of contracts – Whether judge erring in law in declaring proceeds to be company assets – Appeal dismissed
The respondent insolvency practitioners applied to the court to determine issues arising from the insolvency and administration of a company and their proposed sale of public amenity land on four sites that were held under the Landfill Tax Regulations 1996. The company had purchased the land with funds provided by distributive approved bodies from tax-deductible donations made by landfill operators to the Landfill Communities Fund. Following the insolvency, the company’s creditors approved proposals by the respondents, as administrators of the company, to sell the land and to use the proceeds of sale to discharge their remuneration and to pay unsecured creditors. The respondents found a buyer and were ready to exchange contracts. However, the appellant regulatory body, ENTRUST, considered that such a sale would infringe the 1996 Regulations, possibly leading to a clawback of the tax credits granted to the landfill operators and litigation by those operators against the administrators. The appellants took the view that the proceeds of sale would be “income derived from” a qualifying contribution for the purposes of regulations 30 to 33 and that it had to be applied for approved objects pursuant to regulation 33A(1)(b), and that the remuneration of the administrators or the payment of creditors would not comply.
The respondents brought proceedings for an order, confirming that they would be entitled to their remuneration from the proceeds of sale in so far as the land was held on trust. They subsequently applied to the court for directions on whether to exchange contacts for the sale of a number of sites and authorising payment of their remuneration. The judge authorised the sale of one of the sites and declared that the proceeds of sale were not held on trust but were assets of the company: see [2009] EWHC B19 (Ch); [2009] PLSCS 248.
The appellant appealed as the regulatory body approved by HM Revenue & Customs (HMRC) to monitor the environment credit scheme because it was concerned about the judge’s conclusions on the efficacy of that scheme.
Held: The appeal was dismissed.
The judge had properly approved the sale of the site. It was not contested that the company was insolvent, nor was it suggested that the price payable under the contracts negotiated by the respondents was not the best price reasonably obtainable. The administrators had the requisite power of sale under para 60 of Schedule B1 and para 2 of Schedule 1 to the Insolvency Act 1986 and had wanted to exercise it. The only objections raised by the appellant related to the application of the proceeds of sale thereafter, which was not a sufficient reason for challenging the judge’s order.
It was significant that the application of the qualifying contribution and its income in the hands of an approved body was constrained by its memorandum and articles of association. The approval of a body corporate by the appellant under regulation 33 of the 1996 Regulations required it to satisfy itself that the conditions set out in regulation 33(1)(b) to (d) had been satisfied. That involved consideration of its objects and the restriction on distributions commonly found in the memorandum of association of a charitable company. Regulation 34 entitled the appellant to impose further or other conditions as it saw fit at the time of giving its approval and subsequently. The sanction for which regulation 34 provided was the revocation of the approval of the body by the appellant. The ability to recover the credit was conferred on HMRC, not the appellant, and was exercisable against the landfill site operator as the registered party, not the approved body.
Whether the judge had been correct to interpret “income derived from” in regulations 33A(1)(b) and 36(1)(a)(ii) as not including the proceeds of sale of an asset bought with a qualifying contribution was irrelevant to the issues raised in the instant appeal. Similarly, whether the obligation imposed by regulation 33A(1)(b) to “apply qualifying contributions” was a continuing obligation applicable to the property for the time being representing the qualifying contribution did not arise on this appeal.
Furthermore, the appellant had not suggested that the judge’s conclusion that the proceeds of sale were assets of the company was incorrect, nor that the sites were held by the company in trust for any other party. It appeared that the part of the notice of appeal that challenged the judge’s order in that respect had been included erroneously. The appeal against that part of the judge’s order would therefore also be dismissed.
Stephen Tromans QC (instructed by Pannone Solicitors LLP, of Manchester) appeared for the appellants; Hugh Jory (instructed by Gordons Solicitors LLP, of Leeds) appeared for the respondents.
Eileen O’Grady, barrister
