[1] As to the scheme, and indeed purpose of administration, one can turn to the judgment of ICC Judge Jones in Re Tokenhouse VB Ltd (formerly Vat Bridge 7 Ltd) [2020] EWHC 3171 (Ch); [2021] BCC 107. In that case, ICC Judge Jones, at paragraph 17, helpfully summarised the scheme and purpose of administration:

'17. The scheme as a whole is for administrations to be a potential rescue route for companies who are unable or likely to become unable to pay their debts and to avoid, for the ultimate benefit of creditors and the company, the all too frequent consequence of a liquidation resulting in a ‘firesale’ before dissolution. The purpose and aim of an administration is to act with speed to enable an independent insolvency practitioner as administrator to present proposals to be approved or rejected by creditors to achieve: (i) the rescue of a company which is or is likely to become unable to pay its debts as a going concern; or (ii) a better result for such a company’s creditors as a whole than will be likely if the company is wound up; or (iii) to realise its property to make a distribution to one or more secured or preferential creditors (see paras 3, 11, 49 and 53(1) of Sch.B1).

18. The [Enterprise Act 2002] when introducing out of court appointments into the [1986 Act] also applied significant changes to the rights of qualifying floating chargeholders otherwise entitled to appoint administrative receivers under a floating charge. Section 72A of the [1986 Act] prohibits such an appointment subject to the exceptions within ss.72B–72H of the [1986 Act]. Although qualifying floating chargeholders were conferred the right to appoint administrators, there are differences less favourable for them:

a) An administrative receiver would be appointed (normally as an agent of the company) with the function of achieving the realisation of the secured assets now the subject of a crystallised floating charge for the benefit of the floating chargeholder. This process would start upon appointment rather than require a proposal and vote of creditors in accordance with the procedure for all administrations, albeit that a “pre-pack” sale may be an option.

b) In contrast, all administrations have the purpose and aim summarised in [17] above, even if the qualifying floating chargeholder makes the appointment. An administrator must act in the interests of the creditors as a whole, subject to the administrator’s function being to make a distribution to one or more secured or preferential creditors. That function will only arise if the administrator thinks it is not reasonably practical to achieve either of the other two objectives and if it will not unnecessarily harm the interests of the creditors as a whole (see paras 3(2) and 3(4) of Sch.B1).

c) Whilst a receiver may still be appointed over less than a substantial part of the company’s secured assets, that may well be unattractive commercially and the appointee would be required to vacate office if an administrator is appointed (see para.41(2) of Sch.B1).'

Also, see two cases where the House of Lords has summarised the general scheme and purpose of administration:

(a) Centre Reinsurance International Co v Freakley [2006] UKHL 45; [2006] 1 WLR 2863; [2006] BCC 971, per Lord Hoffmann at paragraphs 6 and 7; and

(b) Powdrill v Watson [1995] 2 A.C. 394; [1995] BCC 319, per Lord Browne-Wilkinson at 441F to 442A; and 328C to 328E.

(see Arlington Infrastructure Ltd (In Administration) v Woolrych [2021] B.C.C. 288, paragraph 33)

[2] 'out of court' is the usual phrase. It is noted though, that in Secure Mortgage Corp Ltd v Harold [2020] EWHC 1364 (Ch); [2020] BCC 855, HHJ Halliwell sitting as a judge of the High Court on 28.5.20 described it as an 'extra-judicial' appointment (paragraph 1)

[2a] This power to appoint administrators is...itself a means of enforcement' - SAW (SW) 2010 Ltd v Wilson [2017] EWCA Civ 1001; [2018] Ch 213, Briggs LJ, paragraph 35.

This position was affirmed by Andrew Sutcliffe QC sitting as a Deputy High Court Judge in Arlington Infrastructure Ltd (In Administration) v Woolrych (also known as ARL O09 Ltd) [2020] EWHC 3123 (Ch); [2021] 2 All ER (Comm) 999 ('Arlington'), wherein the deputy judge said, at paragraph 48:

'I do not accept [the purported para.14 appointer's] submission that the appointment of an administrator under para.14 of Sch.B1 does not constitute enforcement of security. As Briggs LJ said in SAW (SW) 2010 Ltd v Wilson at [35]: “The power to appoint administrators is in my judgment itself a means of enforcement”. [The purported para.14 appointer's] reliance upon para.43 of Sch.B1 (see [32] above) is misplaced. The terms of para.43 do not mean that the appointment of administrators does not amount to enforcement of the charge. In my view, an out of court appointment of an administrator under paragraph 14 amounts to enforcement of the floating charge. Otherwise, it would make no sense for para.16 to provide that an administrator may not be appointed under para.14 while the floating charge on which the appointment relies is not enforceable.'

In any event, the deputy judge in Arlington observed, at paragraph 48:

'The question to be addressed in the context of an application under para.16 of Sch.B1 is not whether administration is an enforcement procedure but whether the floating charge on which the appointment relies is or is not enforceable.'

[3] The Sch.B1, paragraph 14 power is not also subject to, not limited to, when the company (borrower/floating chargor) is insolvent. Or to put this another way, it cannot be argued that the Sch.B1, paragraph 14 power is not exercisable, merely because the company (borrower/floating chargor) is solvent. In Borg-Olivier v Knowles [2022] EWHC 2579 (Ch) ('Borg'), HHJ Hodge QC sitting as a Judge of the High Court noted the IAD Applicant's grounds for alleging the purported para.14 appointment was invalid. It was the judge's view of the second ground, which is relevant here. As to the second ground, the judge said:

'It is also said that the [the company (borrower/floating chargor)] is solvent; but the solvency of a company is no basis for impugning the validity of the appointment of administrators if the charge pursuant to which they were appointed is, at the time of the appointment, enforceable and the other conditions of paragraph 14 of schedule B1 are satisfied, which, in the present case, they are.'

[4] SAW (SW) 2010 Ltd v Wilson [2017] EWCA Civ 1001; [2018] Ch 213 is an interesting case, in terms of the authority attached to its judgments. It was a 2 member panel in the Court of Appeal. Briggs LJ and Arden LJ agreed on the outcome - appeal dismissed, but reached that view following a 'different analysis' (Arden LJ, paragraph 38). See footnote 21 below for more discussion (and resolution).

[4a] Practice Direction - Insolvency Proceedings, contains paragraph 8, entitled 'Administrations', which reads:

'8.1 Attention is drawn to paragraph 2.1 of the Electronic Practice Direction 51O -The Electronic Working Pilot Scheme, or to any subsequent Electronic Practice Direction made after the date of this IPD, where a notice of appointment is made using the electronic filing system. For the avoidance of doubt, and notwithstanding the restriction in sub-paragraph (c) to notices of appointment made by qualifying floating charge holders, paragraph 2.1 of the Electronic Practice Direction 51O shall not apply to any filing of a notice of appointment of an administrator outside Court opening hours, and the provisions of Insolvency Rules 3.20 to 3.22 shall in those circumstances continue to apply.

8.2 Paragraph 5.4 of the Electronic Practice Direction 510 provides that ‘the date and time of payment’ will be the filing date and time and ‘it will also be the date and time of issue for all claim forms and other originating processes submitted using Electronic Working'.

8.3 In the absence of special circumstances, an application for the extension of an administration should be made not less than one month before the end of the administration. The evidence in support of any later application must explain why the application is being made late. The Court will consider whether any part of the costs should be disallowed where an application is made less than one month before the end of the administration.'

[5] As stated, whether or not a charge is a 'floating' charge, depends on the charge's character when it was created (rather than at some later time). This applies equally for whether the statutory requirements in paragraph 14, Sch.B1 are satisfied. In other words, whether the person seeking to exercise the Sch.B1, paragraph 14 power, is eligible to exercise that power, because (amongst other things) he/it holds 'floating' charge (rather than a 'fixed' charge). In SAW (SW) 2010 Ltd v Wilson [2017] EWCA Civ 1001; [2018] Ch 213 ('SAW'), Arden LJ, at paragraph 50, said:

'It is important to note that the statutory requirements in paragraph 14 apply to the floating charge as created: see section 251 of the Insolvency Act 1986. Subsequent crystallisation is not relevant.'

Briggs LJ in SAW said, at paragraph 22:

'The general definition at section 251 of the 1986 Act provides as follows: “‘floating charge’ means a charge which, as created, was a floating charge …” This illuminates the meaning of floating charge only by requiring the assessment to be carried out at the time of its creation.' [bold added]

Briggs LJ in SAW continued, at paragraphs 23 onwards:

'Apart from those statutory provisions, the meaning of floating charge is to be gathered from the well-known authorities about floating charges and, in particular, In re Yorkshire Woolcombers Association Ltd [1903] 2 Ch 284, 295, per Romer LJ and In re Spectrum Plus Ltd [2005] 2 AC 680, in which the famous definition of Romer LJ is cited with approval by Lord Scott of Foscote, at para 99:

“I certainly think that if a charge has the three characteristics that I am about to mention it is a floating charge. (1) If it is a charge on a class of assets of a company present and future; (2) if that class is one which, in the ordinary course of the business of the company, would be changing from time to time; and (3) if you find that by the charge it is contemplated that, until some [further] step is taken by or on behalf of those interested in the charge, the company may carry on its business in the ordinary way as far as concerns the particular class of assets I am dealing with.”

Romer LJ continued:

“I certainly do not intend to attempt to give an exact definition of the term ‘floating charge’, nor am I prepared to say that there will not be a floating charge within the meaning of the Act, which does not contain all the three characteristics …”

It is apparent from the speech of Lord Scott, at paras 106–107, and 111, that it is the third of Romer LJ's characteristics that plays the predominant part in enabling a floating charge to be distinguished from a fixed charge. [Counsel for the declaration applicant/appellants] also relied upon the following dictum of Lord Walker of Gestingthorpe, at para 139:

“Under a floating charge, by contrast, the chargee does not have the same power to control the security for its own benefit. The chargee has a proprietary interest, but its interest is in a fund of circulating capital, and unless and until the chargee intervenes (on crystallisation of the charge) it is for the trader, and not the bank, to decide how to run its business.”

[5a] For a case on whether a company was bound by a debenture, where 1 of 2 directors of the company, forged the signature of the other director, on the debenture, see Lovett v Carson Country Homes Ltd [2009] EWHC 1143 (Ch) [2011] BCC 789

[6] Two cases here:

(1) In Fairhold Securitisation Ltd v Clifden IOM No 1 Ltd [2018] 8 WLUK 114 ('Fairhold'), HHJ Kramer sitting as a judge of the High Court considered '...particularly concerned with 18(2)(a) whether the person who sought to appoint was the holder of the qualifying floating charge.' (paragraph 35).

A company (Clifden Isle of Man No.1)('Clifden') had purported to appoint administrators 'out of court' under Sch.B1, paragraph 14 (see Fairhold, paragraphs 19 and 30). At the date of purported appointment, Clifden was:

(a) a lender/creditor of the company over which the administrators were purportedly appointed (the 'Company'). Clifden held 'Notes' and the Company had failed to pay on the maturity dates for the Notes (Fairhold, paragraph 11)

(b) not the holder of the qualifying floating charge (Fairhold, paragraph 15). The floating charge was held by a trustee (a Note Trustee):

The obligations of the [Company], who are the issuers of the loan notes, are secured in favour of the Note Trustee, who has a floating charge over the undertaking, property and assets of the company.' (Fairhold, paragraph 14)

'It is common ground that the qualifying floating charge upon which the appointment is based is vested in the Note Trustee.' (Fairhold, paragraph 17; see also, paragraph 48)

However, Clifden claimed to be able to exercise the rights under the floating charge, in certain circumstances, which it said had occurred. Mr Hussain seemingly signed the statutory declaration as part of the purported para.14 appointment. 3 administrators were purportedly appointed, a Mr Bowell, a Mr Coakley and a Mr Hedger. 

Under the heading 'The law as to the appointment of administrators', the Judge said, at paragraphs 30 onwards:

'The relevant law is to be found in Schedule B1 to the Insolvency Act 1986. Paragraph 2 to the schedule provides that:

"A person may be appointed as administrator of a company-

"(a) by administration order of the court under paragraph 10 [which is not this case]

"(b) by the holder of a floating charge under paragraph 14", [which is directly relevant to this case] It is said that the appointment was under that provision.

Paragraph 14(1) provides that:

"The holder of a qualifying floating charge in respect of a company's property may appoint an administrator of the company."

14(2) provides that:

"For the purposes of sub-paragraph (1) a floating charge qualifies if created by an instrument which-

(a) states that this paragraph applies to the floating charge…" [I do not need to go further than that because this floating charge did.]

And 14(3):

"(3) For the purposes of sub-paragraph (1) a person is the holder of a qualifying floating charge in respect of a company's property if he holds one or more debentures of the company secured-

"(a) by a qualifying floating charge which relates to the whole or substantially the whole of the company's property

"(b) by a number of qualifying floating charges which together relate to the whole or substantially the whole of the company's property" [again, I do not need to go further than that because that is what this floating charge does.]

Paragraph 18 deals with the notice of appointment under paragraph (2)(b), appointment. And says that:

(1) A person who appoints an administrator of a company under paragraph 14 shall file with the court

"(a) a notice of appointment, and.

"(b) such other documents as may be prescribed.

"(2) The notice of appointment must include a statutory declaration by or on behalf of the person who makes the appointment

"(a) that the person is the holder of a qualifying floating charge in respect of the company's property

"(b) that each floating charge relied on in making the appointment is (or was) enforceable on the date of the appointment, and

"(c) that the appointment is in accordance with this Schedule."

This case is particularly concerned with 18(2)(a) whether the person who sought to appoint was the holder of the qualifying floating charge.

Paragraph 18(3) provides:

"The notice of appointment must identify the administrator and must be accompanied by a statement by the administrator

"(a) that he consents to the appointment

"(b) that in his opinion the purpose of administration is reasonably likely to be achieved".

We do not need to look at (c).

And I just add paragraph 18(7), although Mr Hussain is not here:

"A person commits an offence if in a statutory declaration under sub-paragraph (2) he makes a statement

"(a) which is false, and

"(b) which he does not reasonably believe to be true."

The sentence for that on indictment is up to two years' imprisonment and/or unlimited fine; and, on summary conviction, six months' imprisonment and a fine to the Magistrates' maximum.

Paragraph 19 of the schedule :

"The appointment of an administrator under paragraph 14 takes effect when the requirements of paragraph 18 are satisfied."

And paragraph 21:

"(1) This paragraph applies where

"(a) a person purports to appoint an administrator under paragraph 14, and

"(b) the appointment is discovered to be invalid."

21(2):

"The court may order the person who purported to make the appointment to indemnify the person appointed against liability which arises solely by reason of the appointment's invalidity."

Paragraph 103(3) deals with joint appointments:

"Where a company entered administration by virtue of an appointment under paragraph 14, an appointment under sub-paragraph (1) [which is for another joint administrator] must be made by-

"(a) the holder of the floating charge by virtue of which the appointment was made, or

(b) the court on the application of the person or persons acting as the administrator of the company."

And 103(6):

"An appointment under sub-paragraph (1) may be made only with the consent of the person or persons acting as the administrator of the company."

On the facts in Fairhold, the purported para.14 appointer was held to have not been entitled to exercise the powers attached to the floating charge and bestowed by Sch.B1, paragraph 14. The purported para.14 appointment was invalid. Amongst other thing: (a)  Clifden had not established, to the summary judgment test, that Clifden held any Notes, or at least enough to have the 25% required to give instructions (direction) to the Note Trustee (paragraph 90); (b) there was a problem with the timing of any direction issued; (c) 'Clifden's argument that they were entitled to act in the name of [the Note Trustee], whether as agent or under some subrogated rights, fails both on its facts and in law.' (paragraph 111). 

The judge in Fairhold concluded, at paragraph 171:

'We therefore have an appointment by somebody who had no power to appoint and administrators who did not consent to act. So the appointment was totally flawed and therefore the appointment is void and of no effect.'

(2) In Secure Mortgage Corp Ltd v Harold [2020] EWHC 1364 (Ch); [2020] BCC 855, the QFC holder had died and there was an issue as to whether the purported para.14 appointment had been made by the QFC holder. 

[7] Insolvency Act 1986, Schedule B1, paragraph 5 is entitled 'Status of administrator' and reads:

'An administrator is an officer of the court (whether or not he is appointed by the court).'

[8] Insolvency Act 1986, Schedule B1, paragraphs 6 and 7 read (respectively):

'A person may be appointed as administrator of a company only if he is qualified to act as an insolvency practitioner in relation to the company.'

and

'A person may not be appointed as administrator of a company which is in administration (subject to the provisions of paragraphs 90 to 97 and 100 to 103 about replacement and additional administrators).'

In Fairhold Securitisation Ltd v Clifden IOM No 1 Ltd [2018] 8 WLUK 114 ('Fairhold'), 3 administrators were purportedly appointed under Sch.B1, paragraph 14, namely: (a) a Mr Bowell, (b) a Mr Coakley and (c) a Mr Hedger. 

'The notices of appointment were filed on 12 July 2018 in respect of Mr Bowell and Mr Coakley and 18 July 2018 in respect of Mr Hedger, whose appointment was to be as a joint administrator of the existing administration.' (paragraph 2). The validity of Mr Hedger's appointment was challenged (amongst other things). 

Mr Hedger's appointment was invalid. The Judge said, at paragraph 22, while recording the parties respective positions:

'As regards Mr Hedger, it is said his appointment was not valid because he was appointed to be a joint administrator of an existing administration. In that event, there were alternative conditions which had to be met but which were not fulfilled. If there was a valid administration, so there were already two administrators, Messrs Bowell and Coakley, then they had to consent, and they did not consent to Mr Hedger's appointment. Alternatively, there had to be an administration for Mr Hedger to join, if there was no administration he could not be appointed as a joint administrator. So, whichever way one looks at it, Mr Hedger's appointment cannot be valid. Indeed that is not disputed by either Clifden or Mr Hussain. In that they are correct.'

Later, at paragraph 44, the Judge said, after quoting, at paragraph 43, Sch.B1, paragraph 103(6) and 'An appointment under sub-paragraph (1) may be made only with the consent of the person or persons acting as the administrator of the company.':

'That, of course, deals with Mr Hedger's situation.'

[9] Insolvency Act 1986, Schedule B1, paragraphs 8 and 9 read (respectively):

'(1) A person may not be appointed as administrator of a company which is in liquidation by virtue of

(a) a resolution for voluntary winding up, or

(b) a winding-up order.

(2) Sub-paragraph (1)(a) is subject to paragraph 38.

(3) Sub-paragraph (1)(b) is subject to paragraphs 37 and 38.'

and

'(1) A person may not be appointed as administrator of a company which

(a) has a liability in respect of a deposit which it accepted in accordance with the Banking Act 1979 (c. 37) or 1987 (c. 22), but

(b) is not an authorised deposit taker.

(2) A person may not be appointed as administrator of a company which effects or carries out contracts of insurance.

(3) But sub-paragraph (2) does not apply to a company which

(a) is exempt from the general prohibition in relation to effecting or carrying out contracts of insurance, or

(b) is an authorised deposit taker effecting or carrying out contracts of insurance in the course of a banking business.

(4) In this paragraph–

“authorised deposit taker” means a person with permission under Part IV of the Financial Services and Markets Act 2000 (c. 8) to accept deposits, and

“the general prohibition” has the meaning given by section 19 of that Act.

(5) This paragraph shall be construed in accordance with

(a) section 22 of the Financial Services and Markets Act 2000 (classes of regulated activity and categories of investment),

(b) any relevant order under that section, and

(c) Schedule 2 to that Act (regulated activities).'

[10] Insolvency Act 1986, Schedule B1, paragraph 3 is entitled 'Purpose of administration' and reads:

'(1) The administrator of a company must perform his functions with the objective of

(a) rescuing the company as a going concern, or

(b) achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration), or

(c) realising property in order to make a distribution to one or more secured or preferential creditors.

(2) Subject to sub-paragraph (4), the administrator of a company must perform his functions in the interests of the company’s creditors as a whole.

(3) The administrator must perform his functions with the objective specified in sub-paragraph (1)(a) unless he thinks either

(a) that it is not reasonably practicable to achieve that objective, or

(b) that the objective specified in sub-paragraph (1)(b) would achieve a better result for the company’s creditors as a whole.

(4) The administrator may perform his functions with the objective specified in sub-paragraph (1)(c) only if-

(a) he thinks that it is not reasonably practicable to achieve either of the objectives specified in sub-paragraph (1)(a) and (b), and

(b) he does not unnecessarily harm the interests of the creditors of the company as a whole.'

[11] In Skeggs Beef Ltd [2019] EWHC 2607 (Ch); [2020] BCC 43, Marcus Smith J, under the heading 'The provisions in the Insolvency Act 1986 and the Insolvency Rules' said, at paragraph 5:

'Schedule B1 was inserted into the Insolvency Act 1986 by s.248 of the Enterprise Act 2002 with effect from 15 September 2003. Schedule B1 introduced a wholly new administration regime.'

[12] Insolvency Act 1986, Schedule B1, paragraph 2 reads:

'A person may be appointed as administrator of a company

(a) by administration order of the court under paragraph 10,

(b) by the holder of a floating charge under paragraph 14, or

(c) by the company or its directors under paragraph 22.'

[13] Inserted by section 248 of and Schedule 16 to the Enterprise Act 2002

[14] Two points:

(a) See footnote 6 above, on the case of Fairhold Securitisation Ltd v Clifden IOM No 1 Ltd [2018] 8 WLUK 114, and arguments about who could exercise the power held by the holder of the QFC.

(b) To perhaps make an obvious point, but here must be a valid floating charge in existence.

An issue in SAW (SW) 2010 Ltd v Wilson [2017] EWCA Civ 1001; [2018] Ch 213 ('SAW') was whether there was, in substance, a floating charge (upon which there could be any right to appoint administrators under Sch.B1, paragraph 14) at all. The situation was that:

(a) there was a prior floating charge over a company's assets;

(b) the company purported to grant a second floating charge over the company's assets (within a debenture, to a building society ('BS Debebture'). In attempting to do so, it caused the prior floating charge to crystalise.  

Did this prior, prior crystalisation, prevent, the second floating charge being created?

In SAW, the submission was made that the BS Debenture (creating the (apparent) second floating charge, which had been relied upon, for the purported para.14 appointment) '...could not in substance create a floating charge, even if it purported to do so in form' (paragraph 18), because, at the time of its purported creation, it could not attach to any asset, property or right held by the company, because the company did not have any such assets, property or rights (at least, none unencumbered), because the prior floating charge had crystalised into a fixed charge over all the assets, property or rights of the purported floating chargor. 

Briggs LJ rejected this submission. Briggs LJ:

(a) identified that, at the heart of this submission, was '...the proposition that a company could not grant floating charge security if, by reason of the crystallisation of a prior floating charge, it neither had uncharged assets to which the new purported floating charge could attach, nor the power to acquire such assets in the future, for as long as the prior crystallised charge remained outstanding.' (paragraph 18). Or, to put it another way, the proposition was '...that the validity of an instrument as a floating charge, at the time of its creation, depends upon the existence of uncharged assets of the company creating it, or upon a power in the company to acquire assets in the future, free from any fixed charge arising from the crystallisation of a prior floating charge.' (paragraph 24). As to this:

(i) firstly, this would be an awkward conclusion, as companies setting themselves up, frequently want to grant a floating charge to borrow, when they have not yet acquired any significant assets; and 

(ii) secondly, the proposition was founded on a wrong understanding of the result of prior floating charge crystalising. Contrary to the assumption underlying the deploying of this apparent proposition, the company did hold assets after a prior floating charge crystalised. The company held, as an asset, the equity of redemption under the (resultant) fixed charge (i.e. the fixed charge generated by the crystalisation of the floating charge).

On these, Briggs LJ referred to In re Croftbell Ltd [1990] BCLC 844 ('Croftbell') (quoted in an endnote to this footnote), wherein Vinlott J pointed out that:

(a) a company, which it setting itself up in business, may wish to grant a floating charge over all or part of its assets, before it has even acquired significant assets - borrowing the money to acquire those very assets; and

(b) 'a prior fixed charge over all or part of the company's assets none the less leaves a subsequent floating charge to attach to the company's equity of redemption under the fixed charge. An equity of redemption is, in this context, no mere chancery abstraction. A company may well wish to grant potentially valuable floating charge security to one intending lender, subordinated to prior fixed charges over the same assets, upon the basis that the prior charge may be redeemed in due course by repayment of the prior lender, leaving the subsequent floating charge as valuable security.' (as summarised by Briggs LJ, at paragraph 26 of SAW).

As to both of these points, Briggs LJ in SAW said they were '...correct both in principle, and for those practical commercial reasons.' (paragraph 26). 

So, on the facts in SAW, the assumption (that the company had no assets after the prior floating charge crystalised) underlying the submission was wrong. In other words, the submission did not work anyway on the facts. But, Briggs LJ went on to consider what would have been the situation if the assumption had been correct. Briggs LJ said: '[a]ssuming... that the entirety of [the company's] assets were subject to simultaneous fixed charges caused by the crystallisation of the floating charge granted to [the prior floating chargee], none the less the [BS Debenture] was a qualifying floating charge at the time of its creation because, on its true construction, it manifested the essential characteristics identified by Romer LJ in In re Yorkshire Woolcombers Association Ltd [1903] 2 Ch 284, 295 and affirmed by the House of Lords in the Spectrum Plus case [2005] 2 AC 680.' (paragraph 27). There was therefore no further requirement, to create a valid floating charge, that the company granting the floating charge, must have some assets upon which the floating charge might crystalise. 

Endnote:

Briggs LJ in SAW (SW) 2010 Ltd v Wilson [2018] Ch 213, at paragraphs 25 and 26, referred to In re Croftbell Ltd [1990] BCLC 844:

'In In re Croftbell Ltd [1990] BCLC 844 the question was whether a debenture was a floating charge within the meaning of section 29(2) of the Insolvency Act 1986. Vinelott J said, at p 848:

“As I understand [Mr Bannister's] argument it is not suggested that a debenture creating a floating charge (which I think this debenture did) falls outside section 29(2) merely because at the time when the receivers are appointed substantially the only asset of the company is subject to a fixed charge, securing a sum in excess of the likely value of that asset, for instance, a factory in the possession of the company and used for the purposes of its business. The property of the company would then comprise the interest of the company as mortgagor and the question whether the holder of a floating charge has power to appoint a receiver over substantially the whole of the company's property cannot depend on the amount of the debt secured by the fixed charge relative to the value of the company's uncharged assets. Equally it cannot have been intended to exclude a floating charge which when created extended to future assets merely because at the creation of the charge the company had no assets or no assets which were not the subject of a fixed charge; for that would exclude the obvious and common case where the floating charge was created to finance the commencement of a company's intended business.”

The meaning of floating charge in section 29(2) is in no relevant respect different from that in paragraph 14 of Schedule B1, as amplified by section 251. Both provisions require the question to be answered at the time of the creation of the relevant charge. Vinelott J's analysis makes two perceptive points. The first is that the company may well wish to grant a floating charge for the purpose of setting itself up in business by borrowing working capital, before it has any significant assets to which the charge can attach. The second is that a prior fixed charge over all or part of the company's assets none the less leaves a subsequent floating charge to attach to the company's equity of redemption under the fixed charge. An equity of redemption is, in this context, no mere chancery abstraction. A company may well wish to grant potentially valuable floating charge security to one intending lender, subordinated to prior fixed charges over the same assets, upon the basis that the prior charge may be redeemed in due course by repayment of the prior lender, leaving the subsequent floating charge as valuable security. In my judgment Vinelott J's analysis is correct both in principle, and for those practical commercial reasons.'

[15] Insolvency Act 1986, Sch.B1, paragraph 15, entitled 'Restrictions on power to appoint', reads:

'(1) A person may not appoint an administrator under paragraph 14 unless

(a) he has given at least two business days’ written notice to the holder of any prior floating charge which satisfies paragraph 14(2), or

(b) the holder of any prior floating charge which satisfies paragraph 14(2) has consented in writing to the making of the appointment.

(2) One floating charge is prior to another for the purposes of this paragraph if

(a) it was created first, or

(b) it is to be treated as having priority in accordance with an agreement to which the holder of each floating charge was party.

(3) Sub-paragraph (2) shall have effect in relation to Scotland as if the following were substituted for paragraph (a) -

“(a) it has priority of ranking in accordance with section 464(4)(b) of the Companies Act 1985 (c. 6),”.

In SAW (SW) 2010 Ltd v Wilson [2017] EWCA Civ 1001; [2018] Ch 213, Briggs LJ said, at paragraph 32: 

'...the reason why paragraph 15 of Schedule B1 only requires notice to, or consent from, the holder of a prior floating charge is because it is floating rather than fixed chargees who have the right to appoint administrators out of court. The obvious purpose of paragraph 15 is to enable the holders of prior floating charges to appoint their chosen administrators, should they wish to do so, in preference to those selected by the holder of the subordinate charge.' [bold added]

[16] Insolvency Act 1986, Sch.B1, paragraph 16 reads:

'An administrator may not be appointed under paragraph 14 while a floating charge on which the appointment relies is not enforceable.'

[17] Insolvency Act 1986, Sch.B1, paragraph 17 reads:

'An administrator of a company may not be appointed under paragraph 14 if

(a) a provisional liquidator of the company has been appointed under section 135, or

(b) an administrative receiver of the company is in office.'

[18] In SAW (SW) 2010 Ltd v Wilson [2017] EWCA Civ 1001; [2018] Ch 213 ('SAW'), Arden LJ (giving the second (of 2) judgments) provides an example the statutory conditions being checked off (both in paragraph 14(2) and paragraph 14(3), Sch.B1). At paragraphs 47 and 48, Arden LJ said:

'In my judgment, the floating charge created in favour of [the purported para.14 appointer] meets all the requirements of paragraph 14. The floating charge states that paragraph 14 applies to the floating charge. It purports to empower the holder of the floating charge to appoint an administrator. It also purports to empower the holder of the floating charge to make an appointment of an administrative receiver within the meaning of section 29(2) of the Insolvency Act 1986. The floating charge also relates to the whole or substantially the whole of the company's property. No party suggested that the “Assets” subjected to the [the purported para.14 appointer] Debenture (see para 13 above) did not constitute the “whole or substantially the whole of the company's property” for the purpose of subparagraph (3)(b) of paragraph 14.

That completes the statutory conditions for the creation of a qualifying floating charge.'

Arden LJ in SAW then noted:

'There is no additional condition that there should be any assets available within the floating charge at the moment it is created.' (paragraph 48)

'...there is no inherent requirement that the company should have assets which fall within the floating charge at the moment of its creation, in order for it to be validly created.' (paragraph 48, agreeing with Briggs LJ)

'All that paragraph 14(3)(b) requires is that the floating charge “relate[s] to the whole or substantially the whole of the company's property” and that is in my judgment satisfied by a floating charge which has effect in relation to the whole of that property when it comes into existence.' (paragraph 48)

[19] In SAW (SW) 2010 Ltd v Wilson [2017] EWCA Civ 1001; [2018] Ch 213 ('SAW'), Arden LJ continued (at paragraph 51)

'In the present case, the assets included an equity of redemption which may or may not have been of value to the floating charge holder. Nor in my judgment does it necessarily matter at that time whether the floating charge has ceased to float. The effect of its ceasing to float is that the incomplete assignment effected by the charge has become a completed assignment: see Business Computers Ltd v Anglo-African Leasing Ltd [1977] 1 WLR 578. The significant point for paragraph 16 purposes is that in this case [the purported para.14 appointer] had not then taken any step to enforce the Debenture. There is no suggestion that its contractual right to take such steps had not arisen. In my judgment, that means that the charge was enforceable for paragraph 16 purposes.'

Paragraphs 33 and 51 of SAW were affirmed, in Arlington Infrastructure Ltd (In Administration) v Woolrych (also known as ARL O09 Ltd) [2020] EWHC 3123 (Ch); [2021] 2 All ER (Comm) 999 ('Arlington'), wherein Andrew Sutcliffe QC sitting as a Deputy High Court Judge said, after saying he'd been referred to SAW, at paragraph 20:

'In order to decide that case, the court merely had to find that a floating charge was enforceable regardless of whether there were assets against which it could be enforced. The guidance should be approached on that basis, but what is said by the court with regard to the need for a floating charge to be “enforceable” would seem to be applicable more generally. Briggs LJ said at [33]

“that the requirement in para.16 of Sch.B1 that the floating charge relied upon for the appointment of administrators ‘be enforceable’ is concerned with the question whether the chargee has a right to enforce, rather than with the question whether there are free assets to which the chargee can have recourse for the purposes of enforcement. A floating charge is in my judgment enforceable if any condition precedent to enforcement has been satisfied (such as an event of default) and there remains a debt for which the floating charge stands as security”.

Arden LJ said at [51]:

“The word ‘enforceable’ clearly means ‘capable of being enforced’ … The significant point for para.16 purposes is that in this case [the debenture holder] had not then taken any step to enforce the Debenture. There is no suggestion that its contractual right to take such steps had not arisen. In my judgment, that means that the charge was enforceable for para.16 purposes.”'

[20] In Perhar 3284, ICC Judge Prentis, at paragraph 116, said, after quoting Sch.B1 paragraph 16:

'As is stated by Lightman & Moss, 6th ed, 6-069: “Essentially this means that there must be a default on the part of the company, or an event must have occurred which has given the charge-holder the right to make the appointment”. 

But, with respect, this only covers some of things that must exist, for the floating charge to be enforceable. 

[21] The status of the Briggs LJ in SAW (SW) 2010 Ltd v Wilson [2017] EWCA Civ 1001; [2018] Ch 213 ('SAW') had not been without doubt. It was a 2 member panel in the Court of Appeal, who agreed on the result, but not on the reasoning. Further, Briggs LJ's comments in paragraph 33 seem to be obiter. In Secure Mortgage Corp Ltd v Harold [2020] EWHC 1364 (Ch); [2020] BCC 855 ('Harold') HHJ Halliwell (sitting as a judge of the High Court) both: (a) explained the doubt as to the status of Briggs LJ's judgment in SAW; and (b) resolved the doubt about whether Briggs LJ's statemet, at paragraph 33 of SAW, was good law, or not (it is good law). The judge in Harold said, at paragraph 28:

'In [SAW] the Court of Appeal have provided some guidance about the operation of para.16, albeit in a case heard by two appellate judges only, Arden and Briggs LJJ. In that case, the Judges both concluded that a floating charge was enforceable regardless of whether there were assets against which the floating charge could be enforced. This was sufficient to dispose of the appeal. However, Briggs LJ also observed, at [33], that “a floating charge is … enforceable if any condition precedent to enforcement has been satisfied (such as an event of default) and there remains a debt for which the floating charge stands as security”. Arden LJ did not endorse the analysis of Briggs LJ on this issue but she did not say anything inconsistent with it. In any event, the analysis is consistent with established principles and persuasive as a statement of the law. I am satisfied that a floating charge will generally be enforceable if the criteria identified by Briggs LJ are satisfied.'

In Arlington Infrastructure Ltd (In Administration) v Woolrych (also known as ARL O09 Ltd) [2020] EWHC 3123 (Ch); [2021] 2 All ER (Comm) 999, Andrew Sutcliffe QC sitting as a Deputy High Court Judge, referred to paragraph 28 of Harold, without criticising it. 

[22] It is interesting to note that administrators don't always take a neutral stance on an IAD Application.

In Fairhold Securitisation Ltd v Clifden IOM No 1 Ltd [2018] 8 WLUK 114, HHJ Kramer sitting as a judge of the High Court on 17.10.18, recorded set out the positions of the parties. In particular, that 2 of 3 administrators (all respondents to the IAD Application), purportedly appointed under Sch.B1, paragraph 14, contended '...that the appointments of [3 administrators] as administrators are void.'

This probably needs to be seen in a wider context however. The Judge in Fairhold continued ('GLAS' was the Note Trustee (also, the holder of the QFC), Messrs Bowell and Coakley were the 2 of the 3 administrators; Clifden was the purported para.14 appointer):

'The appointments purport to be under paragraph 14(1) of Schedule B1 to the Insolvency Act 1986. That is a process that is available to the holder of a qualifying legal charge. Firstly, they say GLAS, who is the qualifying legal charge holder, did not file notice of appointment, so they did not appoint the administrators; and, as they are the Note Trustee in whom the qualifying floating charge is vested, nobody else could do so on their part.

Secondly, as regards Messrs Bowell and Coakley it is said that they did not consent to be appointed as the administrators; and indeed neither did they form the view that the purposes of the administration were reasonably likely to be achieved. They did not consent to the use of any document in which they had said they consented to act or stated such a view to being used.

It is accepted by Messrs Bowell and Coakley that they did give Clifden signed documents containing consents to act and confirmation of their necessary opinion, but they say they were given in escrow and there has never been consent to use those documents.'

[23] In Borg-Olivier v Knowles [2022] EWHC 2579 (Ch) ('Borg'), HHJ Hodge QC sitting as a Judge of the High Court found the law to be:

'...where payment of a debt is made by a third person as agent for, and on account of, the debtor, and with his prior authority or subsequent ratification, then that duly discharges the debt' (paragraph 26). 

And, on the facts, the judge said:

'That seems to me to be the position in the present case.' (paragraph 26)

This was in circumstances where a third party had paid the [QFC holder/purported para.14 appointer] sum due, to the [QFC holder/purported para.14 appointer], from the company, but the [QFC holder/purported para.14 appointer] had, following receipt, rejected the payment received (but did not return the money until 12.4.12), on the basis it did not know the identity of the payer (paragraph 11). To meet this, the company informed the [QFC holder/purported para.14 appointer]  (paragraph 12) as to: (a) the identify of the payer, (b) where the payer got the money from. Some bank statements were provided also (paragraph 12). 

And later,

'At the time of the appointment, the [QFC holder/purported para.14 appointer] still retained the full amount which it had demanded on [6.8.21] and, in those circumstances, in my judgment, it was not open to the [QFC holder/purported para.14 appointer] to enforce the floating charge by appointing the [purported administrators] as administrators.' (paragraph 28)

[24] In Arlington Infrastructure Ltd (In Administration) v Woolrych (also known as ARL O09 Ltd) [2020] EWHC 3123 (Ch); [2021] 2 All ER (Comm) 999 ('Arlington'), High Court (Andrew Sutcliffe QC sitting as a Deputy High Court Judge) on 19.11.20 considered a case involving complex scenario:

(1) Arlington (AIL) was the parent company to 3 subsidiaries. AIL owned 100% of the shares in each of the 3 subsidiaries;

(2) AIL borrowed money in two phases:

(a) first, from SASPC, a single legal entity consisting of (confusingly) 3 respondents (R9, R4 and R5). SASPC lent AIL £39m. To secure this lending, AIL (and the 3 subsidaries) was granted:

(i) fixed charges over AIL's shares in its 3 subsidiaries; 

(ii) floating charge (qualifying floating charge (QFC)) over AIL's assets, and, importantly, over the assets of the 3 subsidiaries;

(b) second, from other Creditors (which I shall label XYZ Creditors). XYZ Creditors lent c.5m to AIL. To secure this lending, AIL was granted a floating charge (QFC) over AIL's assets, but, not over the 3 subsidaries' assets). For completeness, there were no fixed charges granted. 

(3) a Deed of Priority ('DOP') was entered (20.9.19). SASPC were 'Junior Creditors'; XYZ Creditors were 'Senior Creditors'. In the DOP, it was agreed that:

(a) the Senior Creditors' QFC (which was only over AIL's assets) would take priority over the Junior Creditors' QFC over AIL's asset. 

(b) by Clause 9.1.4. that the Junior Creditors would need the Senior Creditors' written consent in order to enforce. 

(4) on 17.8.20, the Senior Creditors appointed administrators over AIL (this is not the important appointment of administrators);

(5) on 28.9.20, the Junior Creditors purported to appoint administrators over the 3 subsidaries (this is the important (apparent) appointment of administrators)

(6) on 27.10.20, an application was issued, seeking a declaration that the 28.9.20 Junior Creditors purported appoint administrators over the 3 subsidaries, was invalid (an 'invalid appointment declaration'; or 'IAD')'. This application was made by: (a) 1 of the Senior Creditors; and (b) AIL (in administration) ('IAD Application') (the 'IAD Applicants'). There were 2 limbs founding the IAD Application:

(a) '...prior to appointing administrators over the subsidiaries, the junior creditors did not obtain the prior written consent of the senior creditors pursuant to cl.9.1.4 of the deed of priority' (paragraph 7). the IAD Applicant's said that

'...the consequence of failing to obtain such prior written consent was to render the appointments of administrators over the subsidiaries invalid because the QFCs were not enforceable by the junior creditors at the relevant time and the appointments did not therefore comply with para.16 of Sch.B1. This constitutes the first limb of their application which I shall call the para.16 application.' (paragraph 7); if that failed, there was a second limb

(b) 'the junior creditors had an improper motive in appointing administrators over the subsidiaries and apply for an order under para.81 of Sch.B1 that such appointment should cease to have effect forthwith (the para.81 application).' (paragraph 8)

This second limb is not relevant for the purposes of this article (the judgment only deals with limb 1 anyway, the Court not having had time to hear submissions on limb 2 during the hearing (paragraph 8)).

(7) The deputy judge recorded that, in respect to the first limb, it was '...not disputed that, prior to appointing administrators over the subsidiaries, the junior creditors did not obtain the prior written consent of the senior creditors pursuant to cl.9.1.4 of the deed of priority.' (paragraph 7).

[25] 'The deed of priority was a contract made between the senior creditors and the junior creditors' (paragraph 16); whereas

'Nor do I accept SASPC’s submission that AIL’s and the subsidiaries’ inability to enforce the promises made by the junior creditors in cl.9.1 of the deed of priority is the relevant question. I agree with SASPC that AIL, though a party to the deed of priority, is unable to bring such a claim (although the second applicant may be able to do so as one of the senior creditors named in Sch.1 Pt 1). I also agree that since the subsidiaries were not parties to the deed of priority, they are unable to bring any such claim, not least by virtue of cl.22 which prevents them from enforcing in their own right any terms of the deed of priority that confer a benefit on them.' (paragraph 53)

and

'The [IAD Applicants] submit that they are not attempting to enforce the deed of priority (to which at least one of the [IAD Applicants], AIL, was a party for only limited purposes).' (paragraph 23, part of submissions)

'Although AIL is a party, recital D records that it is a party to the Deed to “acknowledge its terms and give certain covenants” and cl.16.2 provides that “[AIL] further acknowledges that none of the provisions entered into by the Creditors in this deed are for the benefit of [AIL], nor may they be enforced or relied on by [AIL]”. (paragraph 39, part of submissions)

[26] Clause 9.1. in the Deed of Priority read:

“Except with the prior written consent of the senior creditors, the junior creditors shall not:

…

9.1.4 take any step to enforce any Junior Security Interest, whether by appointing a Receiver, exercising its power of sale or otherwise; or

9.1.5 present, or join in, an application for an administration order or a petition for a winding-up order to be made in relation to [AIL] or initiate, or support or take, any step with a view to any voluntary arrangement or assignment for the benefit of creditors or similar proceeding involving [AIL] or issue a notice of intention to appoint an administrator or appoint an administrator of [AIL].”

Further, the deputy judge in Arlington said, at paragraph 17:

“Junior Security Interest” is defined by cl.1.1 as “any Security in favour of a Junior Creditor created by a Junior Security Document”. Junior security document is in turn defined as including “any document referred to in Part 2 of Schedule 3 ”. The documents referred to in Pt 2 of Sch.3 include the junior creditors’ QFCs over AIL and the subsidiaries.'

[27] In Closegate Hotel Development (Durham Ltd) v McLean [2013] EWHC 3237 (Ch); [2014] Bus. L.R. 405, Richard Snowden QC sitting as a deputy High Court judge, under the heading 'The law on promissory estoppel', summarised the law, as follows, at paragraphs 48 to 57:

'The law as regards promissory estoppel can be traced back to cases such as Hughes v Metropolitan Railway Co (1877) 2 App Cas 439. In that case, a tenant to whom a notice to repair had been given wrote to the landlord proposing to sell its interest in the premises and stating that “we propose to defer commencing the repairs until we hear from you as to the probability of an arrangement such as we suggest”. The landlord responded by a letter which the House of Lords interpreted as assenting to the suggestion that the repairs were to be deferred until it could be ascertained whether an agreement could be made for the purchase. The negotiations came to an end and the issue arose as to whether any of the time during which the negotiations had been continuing should be counted towards the six month period for the carrying out of the repairs under the notice to repair.

The House of Lords held that the landlord was estopped from contending that the time should be counted. Lord Cairns LC observed, at p 448:

“it is the first principle on which all Courts of Equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results - certain penalties or legal forfeitureafterwards by their own act or with their own consent enter on a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties.”

I would observe that though couched in relatively general terms, Lord Cairns LC's comments were made against the background of a finding that there was a clear statement by the tenant in correspondence as to his intentions as regards the making of repairs, and an assent to that proposal by the landlord.

The importance of precision in the communications between the parties said to give rise to a promissory estoppel has been apparent in subsequent cases. In Low v Bouverie [1891] 3 Ch 82, 106 Bowen LJ said:

“an estoppel, that is to say, the language on which the estoppel is founded, must be precise and unambiguous. That does not necessarily mean that the language must be such that it cannot possibly be open to different constructions, but that it must be such as will be reasonably understood in a particular sense by the person to whom it is addressed.”

Kay LJ, at p 113, said: “where no fraud is alleged, it is essential to shew that the statement was of such a nature that it would have misled any reasonable man, and that the plaintiff was in fact misled by it.”

In Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741, Lord Hailsham of St Marylebone LC gave the leading speech, which was concurred in by Viscount Dilhome and Lord Pearson. Lord Hailsham LC, at p 755, reiterated the proposition derived from Low v Bouverie that in order to give rise to an estoppel, a representation should be clear and unequivocal, and he indicated that if a representation was not made in such a form, it would not matter that the representee had misconstrued it and relied on it. Lord Hailsham LC also addressed the dictum of Bowen LJ in Low v Bouverie [1891] 3 Ch 82, 106 and said [1972] AC 741, 756:

“I am satisfied that, in the second sentence of the above quotation, the meaning is to exclude farfetched or strained, but still possible, interpretations, whilst still insisting on a sufficient precision and freedom from ambiguity to ensure that the representation will (not may) be reasonably understood in the particular sense required. I do not regard this second sentence as any authority for general qualification of the first. On the contrary, the first sentence governs the second and contains the very proposition for which Low v Bouverie is rightly cited as an authority.”

[Counsel for the company] drew my attention to Lord Cross of Chelsea's speech (with which Viscount Dilhome also agreed) which, he suggested, adopted a view of Low v Bouverie that was more favourable to a representee. Lord Cross referred to a decision of McNair J in Marquess of Bute v Barclays Bank [1955] 1 QB 202 in which McNair J had said that to found an estoppel a representation must be clear and unequivocal “or at least reasonably understood to be clear and unequivocal” and continued [1972] AC 741, 768

“In the course of the argument in this case there was considerable discussion as to what Bowen LJ and McNair J may have meant. How, it was said, could a statement which was ‘precise and unambiguous’ be open to more than one construction and how could someone reasonably understand a statement to be clear and unequivocal which was in fact not clear and unequivocal? But though the language used may be open to criticism the thought behind it is not, to my mind, very obscure. Although words used have only one ‘true’ construction - namely, that which would be placed on them by the court if called on to decide their meaning - there are different types and shades of ambiguity. Sometimes the ambiguity of the statement may be obvious to anyone but sometimes it may arise from facts not known to the representee. What, I conceive, Bowen LJ and McNair J were saying - rightly or wrongly - was that the question to ask was, whether the representee was justified in having no doubt that the words meant what he took them to mean. But one cannot decide questions of this sort without regard to the relationship of the parties for that may be such that the representor ought to be saddled with the risk of the representee putting the best interpretation which he can on language which is undoubtedly equivocal.”

Lord Salmon added to the debate at p 771:

“It is reasonably easy to draft a letter containing a representation, the true meaning of which is clear and unequivocal. I would classify such a letter as ‘alpha’. It is, however, quite another matter to be able to draft a letter, or anything else, which is not only clear and unequivocal but is also incapable of having extracted from it some possible meaning other than its true meaning. I would classify such a letter, if it exists, as ‘alpha plus’. As I understand Bowen LJ's judgment, all he was saying was that the language on which an estoppel is founded must comply with what I call the ‘alpha’ standard but that it need not come up to ‘alpha plus’.”

These authorities were recently considered by the Court of Appeal in Kim v Chasewood Park Residents Ltd [2013] HLR 309. Patten LJ did not in terms deal with the difference between Lord Hailsham LC and Lord Cross, but acknowledged that there were conceptual issues. He said, at para 23:

“There is no doubt that in order to found a promissory estoppel (in the same way as any other estoppel based on a representation of fact) the representation or promise must be clear and unambiguous. But this principle raises a number of subsidiary questions. Does it mean that the estoppel cannot arise unless there is only one possible meaning of the words used or is the existence of other possible (but perhaps less probable) meanings not fatal to the creation of an estoppel where the court can say that it was reasonable for the representee to have interpreted the words used in the way he did? There is also an issue about the test to be adopted by the court. Few, if any, statements are not capable of being interpreted in more than one way. The court's usual role in construing, for example, a contract is to arrive at the legally correct meaning of the words. Their construction is a matter of law and the court's function is to resolve any ambiguities in reaching its conclusion. But it is arguable that in the case of estoppel it should not go any further than to identify the existence of any real ambiguities in the language. If the statement is open to more than one reasonable interpretation (one of which is fatal to the estoppel defence) then the representee was not entitled to rely on what was said without further clarification and there is no basis for an estoppel.”

Patten LJ then observed that the courts have tended to a relatively strict application of the requirement that a representation should be unambiguous. He referred to Lord Hailsham LC's explanation of Bowen LJ's dictum rather than that of Lord Cross, before concluding, on the facts, that it would not have been reasonable for the claimant in that case to rely on the representation in the manner for which she had contended.

On the basis of these decisions, it seems to me that the weight of authority is to the effect that for a plea of promissory estoppel to succeed, there must have been a clear and unequivocal statement; and that if ambiguous words were used which could reasonably be interpreted in several ways (one of which would not support the alleged estoppel) then those words will not found an estoppel unless the representee seeks and obtains clarification of the statement.'

[28] In Closegate Hotel Development (Durham Ltd) v McLean [2013] EWHC 3237 (Ch); [2014] Bus. L.R. 405, Richard Snowden QC sitting as a deputy High Court judge, summarised the alleged statements and conduct by the bank, from which it was said the promissory estoppel representation could be derived. The representation was to be inferred from a 'combination of phrases used in various letters from the bank, the facts and conduct of negotiations between the parties, and some words uttered at a meeting.' (paragraph 60). For context, it might be also helpful to quote paragraphs 60 and 61 in their entirety: 

'At the start of my analysis, I would observe that this is not a case in which the alleged “clear and unequivocal” statement said to give rise to an estoppel is to be found in the express terms of any single document or oral statement. On the companies' case, their understanding is said to have been derived by inference from a combination of phrases used in various letters from the bank, the facts and conduct of negotiations between the parties, and some words uttered at a meeting. It is also not obvious precisely when, in the train of events that I have outlined, the companies contend that the estoppel against the bank actually arose.

Whilst I do not suggest that it is conceptually impossible for a promissory estoppel to arise by implication from a variety of sources as the companies contend, I think that the requirement for precision apparent from the authorities to which I have referred means that the court must scrutinise such a claim with particular caution.' [bold added]

[29] In Closegate Hotel Development (Durham Ltd) v McLean [2013] EWHC 3237 (Ch); [2014] Bus. L.R. 405, Richard Snowden QC sitting as a deputy High Court judge set out his analysis of the bank's statements and conduct, said to generate the representation needed found a promissory estoppel, in paragraphs 58 to 77 (under the heading 'Analysis'). Readers should read those paragraphs. However, it is noted that:

(a) after noting a bank's letter indicating a (bare) willingness to engage in negotiations, the deputy judge said, at paragraphs 62 and 63:

'...I do not think that the bank's indication that it was open to participating in such discussions, which was repeated in its letters of 27 September and 15 November 2012, carried any implication, still less any clear and unequivocal representation, that the bank was agreeing to a suspension of its rights against the companies.

Moreover, whilst those who were involved in such negotiations on the part of the companies might have assumed that the bank would not call in its loan or seek to enforce its security whilst the negotiations were ongoing, the bank's participation in such negotiations would not, of itself, provide any legal basis for a restriction preventing the bank from exercising its strict legal rights at any time. Companies in financial difficulty frequently enter into settlement or restructuring discussions with their creditors, and it would be a surprising consequence if participation in such discussions alone had the result that the creditors were estopped from enforcing their rights. Indeed, it is frequently the case that companies in such a position seek to protect themselves from enforcement action by the execution of an express standstill agreement with their creditors. Absent such an agreement, in my view something more than the mere existence of settlement negotiations would be required before a creditor's rights would be affected.'

(b) the judge dealt with a letter in which a bank had expressly reserved all its rights. The deputy judge said 

'Further, when the bank repeated its openness to progress settlement negotiations in its letter of 25 January 2013 and subsequent letters - which are plainly the most relevant when considering the position at 11 October 2013 - the bank expressly reserved all its rights.' (paragraph 64)

and 

'In context, that reservation could only sensibly have been understood to be a reference to the bank's legal rights to make demand on the companies for repayment and to take enforcement action. The bank had no other relevant rights, I simply do not see how it can be suggested that by expressly reserving all its rights, the bank was implicitly representing that it would not seek to exercise them in the manner now alleged by the companies.' (paragraph 64)

(c) the judge dealt with the situation where a party offers to treat an offer from the other side 'seriously'. The deputy judge said 

'I do not think that the statements made by the bank in the letter of 27 September 2012 that it would treat an offer from the companies “seriously” and would seek to hold discussions with the landlord “in good faith” concerning apportionment of any moneys offered take the matter any further. They are entirely consistent with the ordinary conduct of negotiations and say nothing about the bank's ability to exercise its legal rights.' (paragraph 65)

[30] In Glint Pay Ltd (In Administration) [2020] EWHC 3078 (Ch); [2021] BCC 274 ('Glint'):

(a) 3 companies were (purportedly) put into administration (under Sch.B1, paragraph 14).

(b) The (purported) administation ran its course. Then,

(c) the (purported) administrators applied for a Sch.B1, paragraph 98 discharge order from the court (such an order to release them from liability for any acts or omissions done as administrators), to take effect 28 days after it is made, with a saving provision, saving from the effect of the discharge order, any claim notified to them by that date the order takes effect on. 

(d) the Court made (6.12.19) the discharge order, with it to take effect on 25.12.19, however, the discharge order did not include the saving provision. 

(e) on 23.12.19, so during the window of time, between 6.12.19 (discharge order made) and 25.12.19 (discharge order to take effect), the 3 companies issued claims against the (purported) administrators. 

(f) the 25.12.19 date passed.

(g) on this issue, the Court held that the discharge order did not contain, expressly or impliedly, any saving provision (paragraph 43; it is possible for an discharge order to contain such an express provision, but it will not normally do so (paragraph 50)). So the claims were not saved. What the 3 companies should have done, was applied during the window, to discharge the discharge order (or at least vary it, to extend the date it too effect from, to a suitably later date). The alternative route - to commence the summary procedure (known as an 'examination') under Sch.B1 paragraph 75 (which requires court permission to pursue) - was not available to the applicants as they lacked standing to commmence such proceedings (paragraph 37-39).

So far, so not relevant to the focus of this article. However, the 3 companies (ignoring 2 irrelevant other claimants/applicants for present purposes - paragraphs 10-11) in Glint had drafted:

(i) their claim form - its 'brief details of claim' alleged '...claims under paras 74 and/or 75 of Sch.B1, misfeasance, breaches of fiduciary or other duties, breaches of statutory duty and/or other tortious duties including an unlawful means conspiracy. The bases for those claims being the circumstances of the respondents’ appointments, including their validity, and their conduct in relation to the administrations and to their exits on 19 November 2019.' (paragraph 10)

(ii) their (draft) particulars of claim - 'The draft claims the respondents’ appointments were in breach of para.16 of Sch.B1 and are based upon a variety of particulars relating to the reasons why under the terms of the floating charge it was not enforceable. These include a claim of improper and collateral purpose and a challenge to an assignment. They are advanced to reach the conclusion that the appointment was invalid. It is alleged that the purported administrators acted in breach of statutory duty by failing to ensure a valid appointment and/or to apply to the court to terminate the administrations. Their particularised actions as purported administrations involved trespass and conversion. It is also claimed that they breached fiduciary and/or common law duties owed to the applicants as purported administrators. It is asserted that such breaches also resulted from the purported administrators acting in breach of an agreement with the consortium of shareholders who financed the rescue of the companies as going concerns. Breaches of such duties are also alleged to have been brought about by the manner of exit, by failing to secure funding and in dealings concerning their fees.' (paragraph 12).

The Judge held, at paragraph 66:

'My decision is that the applications are otiose. There is no claim for which they are necessary or relevant. The claims are limited to actions and omissions by the respondents whilst there were no insolvency proceedings because their appointments were invalid as alleged.'

[30a] I(E&W)R 2016, r.12.64, entitled 'Formal defects' provides:

'No insolvency proceedings will be invalidated by any formal defect or any irregularity unless the court before which objection is made considers that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by any order of the court.'

[30b] In Re London Oil and Gas Ltd; Barker v O’Connell [2020] EWHC 35 (Ch) ('London Oil'), ICC Judge Jones on 14.1.20 made these comments within some wider observations, at paragraphs 66 and 67:

'It is of course a legal principle that issues of invalidity should be allowed to be raised in any proceedings where they are relevant. However, the ability to raise them must not only depend upon relevance but also upon the person concerned having standing and a "legitimate interest" in doing so.

This does not offend principles of transparency. It recognises that the issue is one for the parties concerned. They may not wish to raise the issue and do not have to. If not, an act capable of being declared void in law may be valid for practical purposes ands, therefore, valid in fact. This is trite law and mirrored by the fact that a court which accepts an action is void does not have to grant legal remedies to implement that result. The invalid act can become effectively valid in practice by the refusal of relief. This may occur, for example, because the discretionary remedy sought is inappropriate (perhaps because of the applicant's bad faith, an estoppel or consideration of third party rights) or because the court finds the applicant lacks standing.'

[30c] In Secure Mortgage Corp Ltd v Harold [2020] EWHC 1364 (Ch); [2020] BCC 855 ('Harold 1364'), HHJ Halliwell, sitting as a judge of the High Court, had before him an IAD Application, issued by: (a) the Company (purportedly put into administration); and (b) another secured creditor of the Company. Under the heading 'Standing', said:

(a) in respect the standing of the Company, at paragraph 16:

'At one point in the proceedings, [the putative adminstrator respondent] sought to challenge the standing of [the Company] on the basis that the proceedings have been initiated by Mr Henesy in his capacity as a director without the consent of [the putative adminstrator] himself as administrator. However, this begs the very question in issue as to the lawfulness of [[the putative adminstrator’s] own appointment. In any event, following the judgment of Mr Richard Snowden QC (as he was) in Closegate Hotel Development (Durham Ltd) v McLean [2013] EWHC 3237 (Ch); [2014] Bus. L.R. 405, it is now well established that, in a case such as this, the company through its directors does, indeed, have standing to bring the proceedings. In these circumstances, [counsel for the purported para.14 appointers] wisely chose not to pursue this point in his submissions. I am satisfied that, in the present case, [the Company] does have standing.'

(b) in respect the standing of the other secured creditor of the Company ('HCC'), at paragraph 17, the judge said: (a) he had not heard submissions on this; and (b) would not decide this issue until costs, if material.  So we do not have an answer on the standing of the other secured creditor of the Company IAD Applicant in the Harold 1364 judgment. But the consequentials judgment is also available in this case, reported at Secure Mortgage Corp Ltd [2020] EWHC 1780 (Ch) ('Harold 1780'). See paragraphs 7 to 11. Amongst other things, the judge said

'If HCC has contractual rights in respect of the Property under the 2019 Charge, it was and is potentially affected by the outcome of these proceedings.' (paragraph 9)

'I am thus satisfied that HCC can be treated as having been properly joined as a party to the proceedings.' (paragraph 11)

[31] In Closegate Hotel Development (Durham) Ltd v McLean [2013] EWHC 3237 (Ch) ('Closegate'), Richard Snowden QC sitting as a deputy High Court Judge, under the heading 'The standing of the companies to make the application' said there was a '...preliminary objection...as to the standing of the companies to make the application.' (paragraph 4). The contention being that '...the appointment of the administrators deprived the directors of the authority to cause the companies to challenge the appointment of the administrators; or that it did so unless the directors were prepared to offer an indemnity to the companies in respect of the costs of the application.' (paragraph 4). There were 2 arguments. The first is dealt with here (the second argument is dealt with in the next footnote). 

'...paragraph 64 of Schedule B1 to the 1986 Act...provides that an officer of a company in administration may not exercise a management power without the consent of the administrator. “Management power” is defined as a power which could be exercised so as to interfere with the exercise of the administrator's powers.' (paragraph 5) and that '...causing the companies to challenge the appointment of the administrators necessarily interfered with the exercise of the administrators' powers.' (paragraph 5).

Rejecting this, Mr Snowden QC in Closegate said, at paragraphs 6 to 8:

'On the basic point of construction of Schedule B1, in common with Lord Glennie in the Scottish case of In re Stephen, Petitioner [2012] BCC 537, I think that the concept of a “management power” as defined in paragraph 64 is primarily intended to catch powers which, if exercised by the directors, could impede the exercise of similar powers by the administrators. I do not think that paragraph 64 is intended to catch a power on the part of the directors to cause the company to make an application challenging the logically prior question of whether the administrators have any powers to exercise at all.

 I also note, as did Lord Glennie, that there is long-standing authority to the effect that even after the appointment of a provisional liquidators, the board of directors of a company retains a residuary power to instruct lawyers to challenge the appointment of the provisional liquidator, to oppose the petition and, if a winding up order is made, to appeal against the making of that order: see In re Union Accident Insurance Co Ltd [1972] 1 WLR 640. There are also numerous reported cases in which the directors of a company have caused the company to take proceedings to challenge the validity of the appointment of a receiver: see eg R A Cripps & Son Ltd v Wickenden [1973] 1 WLR 944 and Sheppard & Cooper Ltd v TSB Bank plc [1996] 2 All ER 654. I see no reason in principle why the position should be any different as regards the appointment of an administrator by a qualifying charge-holder under paragraph 14 of Schedule B1.

It would, moreover, be to my mind an anomalous result if it were within the authority of the directors to cause the company to resist an application by a qualifying charge holder to the court for the appointment of an administrator under paragraph 10 of Schedule B1 but that it was outside their authority to cause the company to challenge the validity of an appointment under paragraph 14 of Schedule B1.'

[32] In Closegate Hotel Development (Durham) Ltd v McLean [2013] EWHC 3237 (Ch) ('Closegate'), Richard Snowden QC sitting as a deputy High Court Judge, addressed the submission that '..the appointment of the administrators deprived the directors of the authority to cause the companies to challenge the appointment of the administrators...unless the directors were prepared to offer an indemnity to the companies in respect of the costs of the application.'

After considering (a) Newhart Developments Ltd v Co-operative Commercial Bank Ltd [1978] QB 814; and (b) GE Capital Commercial Finance Ltd v Sutton [2004] 2 BCLC 662, Mr Snowden QC said, at paragraphs 12 onwards:

'In my view, neither of these cases is authority for the proposition that the directors of a company lack authority to cause a company to commence proceedings against a third party after the appointment of a receiver, or that the existence of such authority is conditional on an indemnity for costs being provided. Indeed, the reference to an indemnity may not be entirely apposite. As explained by Chadwick LJ, where all of the assets of a company are caught by a floating charge, the position is that as a practical matter the directors who cause a company to bring such proceedings are likely to have to find outside funds to provide assurance to the solicitors that they instruct to act on behalf of the company that their fees and disbursements will be paid from some source other than the charged assets (which will be in the hands of the receiver). Further, the defendant to such proceedings may be entitled to apply for security for his costs of the action on the footing that the charged assets in the hands of the receiver will not be available to meet any adverse costs order against the company.

It seems to me that similar considerations might apply in the case of an administration where the administrator is likely to be unwilling to agree to charged assets being used to fund an action in the name of the company of which he does not approve. I also cannot immediately see why payment of the solicitors instructed by the directors rather than by the administrators should qualify for payment as an administration expense under rule 2.67 of the Insolvency Rules 1986 (SI 1986/1925), or why a court could or should direct that any order for costs against the company in favour of the defendant must be paid as an administration expense.

As I have indicated, the observations of Shaw and Chadwick LJJ to which I have referred were made in the context of claims being brought in the name of a company against third parties. In such cases there may well be time for the third party to seek to protect its own position by seeking the provision of security for costs before substantial costs are incurred in defending the action. That may be impracticable where the proceedings in the name of the company are brought on urgently. That is the case with the present application, where there was no application by any of the respondents for security for costs.

In such a situation, it seems to me that the respondents to an application such as the present may be thrown back on the jurisdiction of the court to make third party costs orders against the directors of the applicant company under section 51 of the Senior Courts Act 1981 in an appropriate case. An analogy may be found in cases in which directors who improperly cause a company to resist the appointment of liquidators or provisional liquidators have been ordered to pay the costs of such resistance personally: see eg Gamlestaden plc v Brackland Magazines Ltd [1993] BCC 194. In making those general comments I emphasise that I am not passing any judgment on the facts of the instant case.

In the result on this point, I conclude that the directors do have authority to cause the companies to challenge the appointment of the administrators, and that such authority is not dependent on the provision by them of an indemnity for costs.'

[32a] See the end of the quotation in footnote 32 above. Also, see this article, by the same author, which touches on non-party costs orders against funders generally (not just in relation to 'Pure Funders').

[33] In Pettit v Bradford Bulls (Northern) Ltd [2016] EWHC 3557 (Ch); [2017] BCC 50, Mann J said, at paragraph 17:

'The question of whether court-appointed administrators can be appointed retrospectively has arisen in a significant number of cases. I was taken to reports of those cases in which the point is reported as having been considered, starting with the decision of Hart J in Re G-Tech Construction Ltd [2007] B.P.I.R. 1275. In that case Hart J considered that he did have jurisdiction to appoint administrators retrospectively in order to fix a problem which contaminated their earlier ineffective appointment. That decision has been followed, though in each case with judges expressing misgivings about it, in Re Derfshaw Ltd [2011] EWHC 1565 (Ch); [2011] B.C.C. 631 by Morgan J; in Re Care Matters Partnership Ltd [2011] EWHC 2543 (Ch); [2011] B.C.C. 957 by Norris J; in Re Synergi Partners Ltd [2015] EWHC 964 (Ch); [2015] B.C.C. 333 by HH Judge Hodge QC; by Henderson J in Re Frontsouth (Witham) Ltd [2011] EWHC 1668 (Ch); [2011] B.C.C. 635; and lastly in Re Elgin Legal Ltd [2016] EWHC 2523 (Ch); [2017] B.C.C. 43 by Snowden J. In all those cases after G-Tech the judges expressed misgivings about the existence of the jurisdiction but felt it right to follow the precedent set by Hart J. I know that for my part on more than one occasion in the past, in cases which are not reported, I myself have followed the lead of Hart J and the other judges who had gone before me at the time, albeit sharing their misgivings. I consider that in the circumstances and subject to a decision of the Court of Appeal to the contrary, it would be right for me to follow my brethren and to consider that the jurisdiction exists.'

[34] In Pettit v Bradford Bulls (Northern) Ltd [2016] EWHC 3557 (Ch); [2017] BCC 50 ('Pettit'), the QFC holder/purported para.14 appointer were also the 2 directors of the company. Relying on their QFC, the creditors/directors purported to appoint administrators over the company. Subsequently, the adminstrators applied to court, for (amongst other things) a declaration as to the validity of their appointment. This was because 2 issues were spotted which called into question the appointment: (a) absence of a signature on the debenture (paragraph 3); (b) the debenture provided for adminsitrators to be appointed in the event of an 'event of default', but there was no definition of what an 'event of default' was (paragraph 4). The creditors/directors supported a declaration that the purported para.14 appointment valid. HMRC, a creditor with a suspended petition against the company, took a neutral stance (paragraph 23). At the hearing, the Court:

(a) treated the directors as having applied to the Court for an order, appointing the present (putative) administrators, as court-appointed administrators (paragraph 13);

(b) proceeded as if the (putative) administrators has applied under Sch.B1, paragraph 79(1) and (4) for their own appointment to come to an end (paragraph 21). It is helpful just to pause, to note, what Sch.B1, paragraph 79(1) and (4) provide:

'On the application of the administrator of a company the court may provide for the appointment of an administrator of the company to cease to have effect from a specified time.'

'On an application under this paragraph the court may(a) adjourn the hearing conditionally or unconditionally;

(b) dismiss the application;

(c) make an interim order;

(d) make any order it thinks appropriate (whether in addition to, in consequence of or instead of the order applied for).'

Mann J then, in essence: 

(a) terminated the (putative) administrator's appoint (if they were validly appointed), under Sch.B1, paragraph 79, and retrospectively appointed them court-appointed administrators, from the date of the purported para.14 appointment;

(b) (on the alternative basis that the purpurted para.14 appointment was invalid) merely retrospectively appointed the (putative) administrators, court-appointed administrators, from the date of the (invalid) 'out of court' appointment date, 

The result was the same, and the Court did not need to determine whether or not the purported para.14 appointment, had actually been invalid or not. 

Mann J at paragraphs 20 to 22, said, after quoting Sch.B1, paragraph 79:

'In my view, if it is right that the present “administrators” were validly appointed I would nonetheless have jurisdiction to remove them by an order under that rule.

Furthermore, since para.79 provides that the prior appointment shall cease to have effect “from a specified time” and since although the wording is different the principle is the same as that expressed in para.13(2)(a) (which is the paragraph which allows retrospectivity of appointment of administrators), it seems to me that retrospectivity of the termination of the appointment can be achieved under para.79(1). Accordingly, insofar as the present administrators or purported administrators are validly appointed I can replace them with the newly appointed administrators (who will obviously be the same people) and I can do so retrospectively. In the circumstances I shall exercise that jurisdiction so far as it is necessary to do so. I do not have before me an application by the administrators to provide for their own appointment to come to an end but I am prepared to proceed as though one were before me because [counsel for the (putative) administrators] is prepared to proceed on that basis, and my order will reflect the fact that “insofar as may be necessary” their appointment shall come to an end on the (retrospective) date from which their new appointment takes effect. The order will recite the uncertainties which are being resolved by the order.

It seems to me that going about the matter in that way and providing an order which is capable of operating “if and insofar as the administrators were validly appointed”, all bases are covered. If they were not validly appointed then they have an appointment via the order covering the entire period. If they were validly appointed, then they are replaced by the new administrators, again for the whole period. Making an order in that form and in that way is a much more cost effective way of disposing of this application than determining at length whether or not the debenture was validly executed and then having to deal with questions of construction.'

At paragraph 24, Mann J in Pettit said:

'In those circumstances, therefore, the order I shall make will be one which discharges the present administrators with effect from the date of their purported appointment, so far as they are validly appointed, and in any event appoints the same gentlemen to be court-appointed administrators with their appointment backdated to the original appointment or purported appointment of them as out of court-appointed administrators.'

[35] In Phlo Technologies Ltd v Tallaght Financial Ltd (t/a Cubefunder) [2025] EWHC 1405 (Ch) ('Phlo'), Nicola Rushton KC sitting as a Deputy High Court Judge, considered Lewison J's judgment in BCPMS (Europe) Ltd v. GMAC Commercial Finance Plc [2006] EWHC 3744 (Ch) ('BCPMS'). 

In a Section entitled 'The law', the deputy judge in Phlo said, at paragraph 33:

'In BCPMS Lewison J (as he then was) considered the test to be applied on an application for an injunction to prevent the out of court appointment of an administrator. In particular he considered whether it was the same as the test on an application to restrain the presentation of a winding up petition, where an injunction will be granted if the debt is wholly disputed in good faith and on substantial grounds.

Lewison J held that it was not the same test. In the case before him the company was claiming that the relevant contract and the debenture had been entered into as a result of fraudulent misrepresentation by the lender (see [35]). The judge accepted, at [49] that there was a dispute in good faith and on substantial grounds. However he held that this did not mean the company was automatically entitled to an injunction (analogous to a winding up petition). Rather, he concluded, whether to grant or refuse an injunction should be decided on American Cyanamid principles. In other words, so long as there was a triable issue as to whether the security existed and had become enforceable, the court should proceed to consider stages 2 and 3 of American Cyanamid and in particular the balance of convenience. This had been the position under earlier law concerning granting an interim injunction to prevent the appointment of a receiver by a bank, and the same principles applied to an interim injunction to prevent the out of court appointment of an administrator. This was so even though it would not be resolved until the trial whether the QFC was enforceable or not (at [65]), so it might ultimately prove to be the case that the appointment of an administrator had been wrongful.

At [66] – [68] Lewison J expanded on some of the reasons for this approach:

"66. The appointment of an administrator by a secure creditor is often a hostile act proposed by the company's management. In my judgment it would be a serious impediment to the realisation of assets for the payment of secure creditors if they could be precluded from appointing an administrator merely because the debt was disputed, even if the dispute was in good faith.

67. Schedule B1 is part of a package of measures intended to encourage enterprise. That package includes the facilitation of the raising of credit. Part of the quid pro quo was to make it easier for creditors to appoint administrators, hence the current power to appoint administrators without having to apply to the court. I do not consider that Mr Lyon's analogy with bankruptcy and winding up petitions is a sound one.

68. A debenture and the powers of a debenture holder derive from a contract between the lender and the borrower. The borrower consents to the grant to a lender of powers of enforcement, including the appointment of administrators, formerly administrative receivers. Therefore, I reject Mr Lyon's submission that the appointment of the administrators was necessarily invalid merely because of the existence of a dispute in good faith on substantial grounds.

69. Mr Lyon's fallback submission on this point is that if administrators are appointed in the face of a disputed debt, it is inevitable that an injunction would be applied for. If applied for, it is inevitable that it would be granted. I reject this submission too. If the administrators are appointed and an injunction is applied for, the grant or refusal of an injunction will, in my judgment, be decided on familiar American Cyanamid principles…"'

On the facts, the deputy judge said (Cubefunder were the putative QFC Holder):

(a) on the 'serious issue to be tried' test - 'Applying BCPMS, this is therefore a case where all of the loans are disputed in good faith and on substantial grounds. This means that on the one hand, there is a serious issue to be tried as to whether Cubefunder is entitled to appoint an administrator pursuant to its claimed QFC, but on the other hand that dispute does not mean Phlo was and is automatically entitled to an injunction. Rather I must proceed to consider stages 2 and 3 of American Cyanamid...' (paragraph 47)

(b) on the would 'whether damages would be an adequate remedy for either party' test - 'I do not consider that damages would be a sufficient remedy for either party' (paragraph 48). Adding, '...as outlined in BCPMS, the ability to appoint an administrator gives a lender such as Cubefunder important powers for which a claim in damages is not a sufficient substitute, especially where as here, losses are increasing month on month.' (paragraph 49)

(c) on the 'balance of convenience' test - 'In my view the most significant factor is that discharging the injunction and permitting Cubefunder to appoint administrators will almost certainly stifle the claim and prevent the allegations against Mr Sarwar, and the defence to the claims by Cubefunder on the loans, from being considered and resolved. If Phlo is right, then this is not in truth a case, as posited by Lewison J in BCPMS where Phlo entered into a bargain with Cubefunder under which it borrowed money on the security of a debenture, because those agreements are void. In this situation it seems to me that the balance of convenience points in favour of continuing the Injunction, to prevent the appointment of administrators until those issues are resolved. Further, I do accept that such an appointment would have a very serious effect on Phlo's continued ability to trade at all, let alone grow.

I accept that there is a very real risk that Phlo will be in a worse position financially at the end of a trial than it is now, but I do not consider that that risk outweighs those pointing the other way, and I consider that the risks to Cubefunder can also be mitigated through fortification of the cross undertaking and by the fact that Cubefunder is still able to apply to the court for the appointment of an administrator under ss.10-12 IA 1986. To continue the Injunction is also to continue the status quo...

As Lord Hoffmann said in Olint at [17]:

"In practice, however, it is often hard to tell whether either damages or the cross-undertaking will be an adequate remedy and the court has to engage in trying to predict whether granting or withholding an injunction is more or less likely to cause irremediable prejudice (and to what extent) if it turns out that the injunction should not have been granted or withheld, as the case may be. The basic principle is that the court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other."

My view here is that, for the reasons I have outlined, lifting the injunction is clearly more likely to cause irremediable prejudice and injustice than continuing it....the right course is... to continue it until trial or further order.'