[1] That is the initial length provided for a company administration. This 1 year restriction can be found in Insolvency Act 1986, Schedule B1, paragraph 76(1), which reads:

'The appointment of an administrator shall cease to have effect at the end of the period of one year beginning with the date on which it takes effect.'

As will be apparent from the title to this article, this 1 year period is extendable. Insolvency Act 1986, Schedule B1, paragraph 76(2), which reads:

'But -

(a) on the application of an administrator the court may by order extend his term of office for a specified period, and

(b) an administrator’s term of office may be extended for a specified period not exceeding one year by consent.'

[2a] For instance, the application in Re TPS Investments (UK) Ltd (In Admin.) [2020] BCC 437 ('TPS'), was unopposed/consented to by all interested parties.

As an aside, there was an argument in TPS about whether or not the consent of certain entities claiming a beneficial interest ('trust claims') in the company's property, should or should not be recorded in the order. The judge decided that the recording of the entities' consent in the recital to an order, was merely recording the fact of that consent, not whether or not the entities' had the interest asserted, and so an interest in the paragraph 76(2)(a) application. The judge in TPS said, at paragraph 13:

'The order proposed by the administrator merely records the fact of the Alpha companies’ consent to this order, without any acknowledgment of their status, which remains a matter for future determination in the pending litigation. That consent is a matter of fact, and the order should reflect it.'

[2b] Insolvency Act 1986, Schedule B1, paragraph 78(1) to (2A) provides:

'(1) In paragraph 76(2)(b) “consent” means consent of

(a) each secured creditor of the company, and

(b) if the company has unsecured debts, the unsecured creditors of the company.

(2) But where the administrator has made a statement under paragraph 52(1)(b) “consent” means

(a) consent of each secured creditor of the company, or

(b) if the administrator thinks that a distribution may be made to preferential creditors, consent of–

(i) each secured creditor of the company, and

(ii) the preferential creditors of the company.

(2A) Whether the company’s unsecured creditors or preferential creditors consent is to be determined by the administrator seeking a decision from those creditors as to whether they consent.'

Consequently, to determine who's consent is requried for an out of court consensual extension to the administrator's term of office, the first task is to work out whether 'the administrator has made a statement under paragraph 52(1)(b)'. The answer to this question, will determine whether paragraph 78(1) or 78(2) applies.

[2c] Deputy ICC Judge Curl QC in Re E Realisations 2020 Ltd [2022] EWHC 1575 (Ch) ('E Realisations') also quoted this passage, at paragraph 30

[3a] In Re TPS Investments (UK) Ltd (In Admin.) [2020] BCC 437, HHJ Hodge QC sitting as a Judge of the High Court, at paragraph 8, adopted counsel's submission that these were the 4 questions that tend to arise, on such applications. The judge in TPS went on, at paragraphs 9 to 11, to answer theses 4 questions.

As to question 1, the judge said (in his judgment on 11.5.20):

'9. The administration of the company has not yet been completed for two reasons. First, because it retains the title to an extremely valuable, but complex, development opportunity. Conduct of the sale has been given to the fixed charge-holder since February 2018 and it is not clear when the sale will complete, nor whether there will be any, and if so what, surplus. Secondly, the issue of the Alpha companies’ trust claims has yet to be resolved. This will impact on the application of the proceeds of the insurance claim and the proceeds of sale of the property, as well as impacting on whether there is any surplus.'

As to question 2, the judge said:

10. No other alternative insolvency regime is more suitable: a move to creditors’ voluntary liquidation under para.83 of Sch.B1 is not possible as it is not yet known whether there will be any assets to make a distribution to unsecured creditors. The cost of compulsory liquidation is prohibitive, involving as it does administrative expenses, statutory payments and charges, the calling of creditors’ meetings, the conduct of investigations, and regulatory and reporting obligations. The most proportionate and cost effective way for the company to remain “alive” is for it to remain in administration. The administrator is therefore faced with the choice of whether to dissolve the company, on the basis of bare assertions previously made by [the secured creditor] to the effect that the equity in the remaining property will be swallowed by its charge, or to continue in administration.

As to question 3, the judge said:

Any receipt from the sale of the remaining property would assist in achieving the second, or at least the third, in the statutory hierarchy of the purposes of administration.

As to question 4, the judge said:

11. [Counsel for the applicant Administrator] acknowledges that the statutory regime contemplates the conclusion of administrations within 12 months of the administrator’s appointment, and that an 18 months extension has now been obtained, unusually over four applications. The administrator is not content, based on the evidence that he has seen, that there is no prospect of any surplus; it may well be a breach of duty to dissolve the company based on [the secured creditors] assertions alone. Given the minimal costs that will be incurred in waiting for the sale of the remaining property, the court accepts that it is appropriate that an extension should be granted, and that the extension of nine months that is sought is long enough to allow a sale to progress. [The secured creditor] has previously confirmed that they are in the course of a formal marketing campaign in relation to the remaining property and that they have received a number of expressions of interest. The pandemic means that no realistic time-frame can now be put forward, and any attempt to do so would be entirely speculative. The court has a discretion as to whether to grant an extension and, if it chooses to do so, as to its duration. In the circumstances, the court accepts that a nine months’ extension is appropriate. The court notes that the only parties with any actual, or contingent, interest in this administration all concur in that course.'

[3b] For completeness, in Mackenzie v Crowdstacker Corporate Services Ltd [2020] EWHC 2663 (Ch); [2021] BCC 133, Philip Marshall QC, sitting as a deputy High Court Judge, said at paragraph 31:

'I did not detect any dissent from counsel from the proposition that the above authorities provide valuable assistance as to key matters that I should have regard to when considering the exercise of the discretion to extend the administrator’s term in office. However, in my judgment further assistance can be obtained for the present case from certain observations made by Sales J in Re Hellas Telecommunications (Luxembourg) II SCA (in admin.) [2011] EWHC 3176 (Ch)...'

The proposition seems to be one that the deputy High Court Judge is himself, setting down.

[3c] See footnote 3a for extracts from the judgment in Re TPS Investments (UK) Ltd (In Admin.) [2020] BCC 437, which will assist with understanding this.

[4a] This passage contains a reference to a company entering voluntary liquidation under paragraph 83 of Schedule B1 of the Insolvency Act 1986. To elaborate, paragraph 83 is entitled 'Moving from administration to creditors' voluntary liquidation' and applies where paragraph 83(1) is engaged.

'(1) This paragraph applies in England and Wales where the administrator of a company thinks

(a) that the total amount which each secured creditor of the company is likely to receive has been paid to him or set aside for him, and

(b) that a distribution will be made to unsecured creditors of the company (if there are any) which is not a distribution by virtue of section 176A(2)(a).'

Paragraph 83(1) is engaged when the administrator of the company 'thinks' (a) and (b) exist. It does not matter how the administrator came into office/is in office, when he so 'thinks' - whether the administrator is in office by appointment by the court or out of court, whether his term in office was extended 'by consent' or by court order.

Where the administrator so thinks, under paragraph 83(3) 'The administrator may send to the registrar of companies a notice that this paragraph applies.'  The word 'may' here gives the administrator a discretion whether or not to send the notice, where he thinks paragraph 83(1)(a) and (b) exist. So he may 'think' it but not act upon it (by sending a (conversion) notice). In Re Ballast Plc (In Administration) [2005] 1 W.L.R. 1928 ('Ballast'), Blackburne J said, at paragraph 15:

'The decision whether to send such a notice rests entirely with the administrator in that, by sub-paragraph (3), he has a discretion whether to send the notice ("the administrator may send ..."). He must therefore "think" that the circumstances specified in sub-paragraph (1) are present before he sends such a notice. Whether those circumstances are present is a matter for him, not the court.'

Later, Blackburne J said, at paragraph 21:

'Whether the circumstances are present which entitle the administrators to have recourse to paragraph 83... and 84 ... is for the administrators.'

Further, while the administrator's thinking process must involve a rational thought process - and so in that sense be reasonable, what the administrator 'thinks' is not subject to any form of test by reference to an objective standard. In Unidare Plc v Cohen [2006] Ch. 489 ('Unidare'), the administrators of a company (K) converted the administration into a CVL under paragraph 83. The administrators thought (paragraph 68), wrongly as Lewison J later held (paragraph 60), that K's (grand) parent company (U) was not a secured creditor of K. That the only (potentially) secured creditor (a bank) had been repaid in full. Lewison J said, at paragraph 71, under the subheading 'Did paragraph 83 apply?':

'Reading paragraph 83 literally, [the administrator] did think that the only secured creditor (the bank) had been repaid; and that there would be a dividend payable to creditors. Thus, on the face of it, paragraph 83 applied. [Counsel for U] submitted that the administrator's conclusion must be based on reasonable grounds; or at least not be one which no reasonable administrator could have reached. I do not consider that paragraph 83 should be interpreted in this way. I accept that the process of thinking involves a rational thought process, and in that sense must be reasonable; but I do not accept that what the administrator thinks is subject to any form of test by reference to an objective standard.'

On the facts, having relied on the legal advice the administrator was given, which Lewison J said was not unreasonable (though Lewison J disagreed with it; paragraph 72), Lewison J concluded, at paragraph 72, that '...in my judgment it can fairly be concluded that [the administrator] formed his opinion on that point on reasonable grounds.' and later, at paragraph 75, 'Accordingly paragraph 83 applied, and the company was validly put into liquidation.'

Part of Unidare was overruled by the Court of Appeal in Granada UK Rental and Retail Ltd v Pensions Regulator [2019] EWCA Civ 1032; [2020] ICR 747, paragraph 129, but that was on another separate determination in Unidare (on the meaning of section 435(10)(b) of the Insolvency Act 1986), and so is irrelevant here.

While the company may have moved from administration to CVL, validly, the administrator might be liable for his actions, under (1) Schedule B1, paragraph 74; and/or (2) Schedule B1, paragraph 75. See Unidare, paragraphs 65 to 79.

Where the administrator does send such notice under paragraph 83(3) (usually referred to as a 'conversion notice'), then:

- under paragraph 83(4) 'On receipt of a notice under sub-paragraph (3) the registrar shall register it.'

- under paragraph 83(5) the administrator '...shall as soon as is reasonably practicable

(a) file a copy of the notice with the court, and

(b) send a copy of the notice to each creditor, other than an opted-out creditor, of whose claim and address he is aware.'

The effect of this is to cause (convert) the company to move from administration into company voluntary liquidation (CVL). This is set out in paragraph 83(6):

'On the registration of a notice under sub-paragraph (3)

(a) the appointment of an administrator in respect of the company shall cease to have effect, and

(b) the company shall be wound up as if a resolution for voluntary winding up under section 84 were passed on the day on which the notice is registered.'

Note:

- the conversion occurs on registration of the (conversion) notice - not receipt of the (conversion) notice by the registrar; and

- administrators were not required to obtain court orders terminating their appointment and discharging administration orders before they could utilise the procedures in the Insolvency Act 1986 Sch.B1 paragraph 83 (and paragraph 84 on dissolution). In Ballast, Blackburne J said, at paragraphs 15 and 16:

'The consequence of serving the notice in accordance with this paragraph is to substitute one insolvency regime (a creditors' voluntary liquidation) in place of another (an administration) so that the one follows without interruption from the other. The effect is necessarily to bring the administration to an end. I see nothing in paragraph 79 which requires that, where an administrator is resorting to paragraph 83 to enable the company to move from administration to a creditors' voluntary liquidation, inter alia by providing for the administrator's appointment to cease to have effect, the court must also make an order under paragraph 79(1) that the administrator's appointment is to come to an end. That seems to me to be an unnecessary duplication. Properly understood, paragraph 79 provides a separate exit from administration to that provided (and, in my view, exclusively regulated) by paragraph 83.

...Where paragraph 83 is resorted to, the cessation of appointment is effected as a consequence of the registration of the notice sent by the administrator to the registrar of companies in accordance with paragraph 83(3), not by force of any order of the court under paragraph 79.'

Later, Blackburne J said, at paragraph 21:

'In the circumstances, I am of the view that it is open to the joint administrators to have recourse to paragraphs 83 and 84 without first applying to the court for orders under paragraphs 79 and 85'

As to who will be the liquidator, well this will be the insolvency practitioner who was the administrator, unless the creditors of the company nominate otherwise. Paragraph 83(7) states:

'The liquidator for the purposes of the winding up shall be

(a) a person nominated by the creditors of the company in the prescribed manner and within the prescribed period, or

(b) if no person is nominated under paragraph (a), the administrator.'

Paragraph 83(8) set out some changes to the ordinary voluntary liquidation process:

'In the application of Part IV to a winding up by virtue of this paragraph(a) section 85 shall not apply,

(b) section 86 shall apply as if the reference to the time of the passing of the resolution for voluntary winding up were a reference to the beginning of the date of registration of the notice under sub-paragraph (3),

(c) section 89 does not apply,

(d) sections 99 and 100 shall not apply,

(e) section 129 shall apply as if the reference to the time of the passing of the resolution for voluntary winding up were a reference to the beginning of the date of registration of the notice under sub-paragraph (3), and

(f) any creditors’ committee which is in existence immediately before the company ceases to be in administration shall continue in existence after that time as if appointed as a liquidation committee under section 101.'

[4b] See footnote 4a for some analysis of paragraph 83 of Schedule B1 to the Insolvency Act 1986.

[4c] In Mackenzie v Crowdstacker Corporate Services Ltd [2020] EWHC 2663 (Ch); [2021] BCC 133, the deputy High Court Judge noted/foresaw two sources of increased costs: (1) from the nature of compulsory liquidation itself; and (2) the fact it would be a new insolvency practitioner that would be the liquidator. It was not going to be the same insolvency practitioner, simply substituting his 'hat' as administrator, for a liquidator's 'hat'. It would be a new insolvency practitioner (essential, because part of the task of the new insolvency practitioner, was to investigate the actions of the 'old' insolvency practitioners). The deputy High Court Judge said, at paragraph 35:

'It is possible that compulsory liquidation will involve some additional costs or expenses (as noted in TPS), particularly for a liquidator and his or her lawyers to get up to the same level of knowledge as the administrators and their solicitors and counsel (although I would hope those costs could be reduced by the administrators providing details as appropriate of previous advice obtained on the claims still to be pursued).'

[5] Normally, to impose a winding up order upon a company, thereby putting the company into compulsory liquidation, there should be before the court, a winding up petition. However, this is not essential, as there exists an 'exceptional jurisdiction' to make a winding up order against a company, without such a petition being before the court. This was explained Neuberger J in Lancefield v Lancefield [2002] BPIR 1108 at 1111F–1112D:

'If one looks at the commonest case, that of registered companies, s.122 of the 1986 Act empowers the court to wind up a company if one or more of the circumstances set out in s.122(1) applies. Section 124 then provides how an application for the winding-up of a company can be made by certain categories of person. It seems to me, therefore, that two propositions are clear. First, if one or more of the circumstances in s.122 exist, the court has power—not an obligation; note the word ‘may’ in s.122(1) —to make a winding-up order. Secondly, if a person seeks a winding-up, then by virtue of s.124 , he has to apply by petition, and has to be within the ambit of that section.

However, I do not see why that should mean that, where a matter concerning the company is before the court and the court is quite satisfied that there is jurisdiction to make a winding-up order because one or more of the circumstances in s.122(1) applies, the court is in every case powerless to act simply because nobody has petitioned for the winding-up under s.124(1) . I do not see why, in the case of a registered company, the court should not, in an appropriate case, of its own motion, decide on the facts before it that it has power to make a winding-up order under s.122(1) and that it should make such an order. … Having said that, I think it would require a thoroughly exceptional case before the court would even consider making a winding-up order in relation to a company where there is no petition. It would be plainly undesirable if parties to litigation thought that there was, in normal circumstances, even a real possibility of the court, of its own motion, at the risk of prejudicing people who were not before the court, making an order winding up a company. In virtually any case where the possibility of a winding-up order is to be considered—whether a registered company, an unregistered company or a partnership—it seems to me clear that the court should require a properly presented petition.

However, there will be circumstances in which a petition will not be necessary because the circumstances are so plain, and the inevitability, appropriateness and urgency of a winding-up order are so clear, that it would be a denial of justice, and a waste of time and money, for the court to refuse to make an order there and then.'

As recognised in Mackenzie, at paragraph 39 '...this exceptional jurisdiction has been used to transform an administration into a liquidation in the analogous situation of an administration that has failed or been terminated in Re BTR (UK) Ltd [2012] EWHC 2398 (Ch); [2012] B.C.C. 864 and Re Graico Property Co Ltd (in admin.) [2016] EWHC 2827 (Ch); [2017] B.C.C. 15.'

In Mackenzie, this jurisdiction was invoked. The deputy High Court Judge said, at paragraph 39:

'As in those cases, in my judgment this is an appropriate case in which to exercise the Lancefield jurisdiction. Burningnight is plainly insolvent. It is before the court and the sole creditor with any real interest in its estate is pressing for liquidation. Other creditors have expressed no interest in the matter. Requiring a petition to be presented would simply involve needless delay and expense. I will therefor (sic) make a winding-up order to take effect on the termination of the office of the administrators.'

[6a] For completeness, Lord Millett in Re Pantmaenog Timber Co Ltd [2003] UKHL 49; [2004] 1 A.C. 158; [2003] B.C.C. 659 said the following, at paragraph 64:

'Section 236 contains no express limitation on the purpose for which it may be invoked. Of course it may be invoked only for a legitimate purpose in relation to the company which is being wound up, and the court, which has discretion to make or refuse an order, should be astute to see that the powers conferred by the section are not abused. It would plainly be an abuse to use those powers for a purpose which is foreign to the functions of the applicant in relation to the company which is being wound up. But I reject the unspoken assumption that the functions of a liquidator are limited to the administration of the insolvent estate. This is only one aspect of an insolvency proceeding; the investigation of the causes of the company's failure and the conduct of those concerned in its management are another. Furthermore such an investigation is not undertaken as an end in itself, but in the wider public interest with a view to enabling the authorities to take appropriate action against those who are found to be guilty of misconduct in relation to the company. If the investigation yields information material to the Secretary of State's decision to bring or continue disqualification proceedings, it must be reported.'

In Mackenzie v Crowdstacker Corporate Services Ltd [2020] EWHC 2663 (Ch); [2021] BCC 133, Philip Marshall QC, sitting as a deputy High Court Judge, summarised this passage, at paragraph 32, as:

'...the important functions of liquidators to investigate and, as required, report wrongdoing to the appropriate authorities so that proper action can be taken.'

[6b] For completeness, the relevant paragraphs in Mackenzie v Crowdstacker Corporate Services Ltd [2020] EWHC 2663 (Ch); [2021] BCC 133, read:

'34. In the case of Burningnight it is not evident that anything remains to be achieved in the administration having regard to its original purpose.

34.1 As I have already mentioned the proposals of the administrators identified the objective of administration as falling solely within subpara.3(1)(c) of Sch.B1 to the 1986 Act (realising property to make a distribution to one or more secured or preferential creditors) and noted that moving to compulsory liquidation might be more appropriate where only investigations remained to be conducted which could be carried out by liquidator.

34.2 Following the asset sale and other work already undertaken by the administrators there appears to be little beyond administrative tasks and the pursuit of a potential claim for recovery of unlawful dividends on their agenda. This lack of any significant ongoing work seems to be supported by the relatively small amount of billable hours being spent by them on Burningnight’s affairs when compared to earlier periods. *142

34.3 The claim for recovery of unlawful dividends has not yet been issued and is one that could be pursued by a liquidator. If the administrators have been able to enter into conditional fee and after the event insurance arrangements to facilitate such a claim there is no reason to believe that a liquidator could not equally do so. If necessary the litigation funder who had previously offered finance could also be approached again.

35. It is possible that compulsory liquidation will involve some additional costs or expenses (as noted in TPS ), particularly for a liquidator and his or her lawyers to get up to the same level of knowledge as the administrators and their solicitors and counsel (although I would hope those costs could be reduced by the administrators providing details as appropriate of previous advice obtained on the claims still to be pursued). However, Crowdstacker, as the sole creditor with any real interest in the estate of Burningnight at the present time, has indicated that it is willing for such additional costs to be incurred.

36. As regards the views of Crowdstacker, as the sole creditor with any real interest, and the potential prejudice to it, the following factors appear to me to be significant:

36.1 Crowdstacker has expressed the firm view that the appointment of a liquidator is necessary to investigate properly the affairs of Burningnight and in particular the conduct of the administrators themselves in respect of the asset sale. On the material before me it is not possible to dismiss the concerns they have expressed as fanciful. Although the administrators have suggested that the criticisms of the asset sale are misguided and can be dismissed, to reach a final conclusion on that subject will require much fuller disclosure and potentially witness evidence. This will include copies of the executed asset sale documentation (only an incomplete draft was available to me), details of the WPC and Access negotiations, any evidence regarding the withdrawal of the WPC offer and the reasons for the withdrawal and possibly details of advice received by the administrators, if reliance is to be placed on such advice. Few of these materials are presently before the court.

36.2 An independent liquidator is best placed to investigate matters where the Administrators own conduct is under scrutiny. However, as explained by Sales J in Hellas , a liquidator will also be able to pursue other lines of investigation and recovery. The administrators have identified a number of claims beyond that for recovery of an unlawful dividend. They have elected not to pursue such claims because of possible problems of recovery from former directors but this appears to be inconsistent with the fact that claims they have now brought in the Cornertrack administration include a claim against a former director of Burningnight. It seems to me that there is a fair and reasonable prospect that a liquidator could take matters further particularly if supported with funding from Crowdstacker.

36.3 Absent the appointment of a liquidator, as matters stand, claims other than that in respect of the unlawful dividend would not be pursued and there would be no independent investigation of the administrators’ conduct of the asset sale. Crowdstacker would be left to pursue a claim itself in respect of the conduct of the administrators (which might be done under paras 74 and 75 of Sch.B1 to the 1986 Act in respect of unfair harm or misfeasance respectively) but this would be without the benefit of being preceded by an investigation of the type that a liquidator could perform.

36.4 It is also appropriate to bear in mind the prima facie entitlement of a creditor to investigation by a liquidator referred in Hellas .

37. Having regard to these factors and the circumstances of the administration as set out in the administrators’ various reports, in my judgment it would not be appropriate to extend the administrators’ term of office in respect of Burningnight.'

[6c] The administrative tasks referred to in this passage, seem to be the 3 referred to in paragraph 18 of Mackenzie v Crowdstacker Corporate Services Ltd [2020] EWHC 2663 (Ch); [2021] BCC 133, namely '...finalising the corporation tax position for the administration period, discharging administration expenses and dealing with the formalities of exiting administration.'

[6d] This comment appears to be based on the assets subject to Crowdstacker's fixed and floating charges, being insufficient to repay Crowdstacker in full (see paragraph 17). Consequently, Crowdstacker is, in reality, a part secured, part unsecured creditor. It would be on the unsecured part, that Crowdstacker could petition for a creditors winding up order against the companies, and claim to be entitled, as of right (or almost as of right), to a winding up order.

[6e] For completeness, the relevant paragraphs in Mackenzie v Crowdstacker Corporate Services Ltd [2020] EWHC 2663 (Ch); [2021] BCC 133, read:

'40. The position with reference to Cornertrack is different.

41. Firstly, the purpose of administration appears to be still potentially capable of achievement. In the case of Cornertrack the objective of the administration was that set out in subpara.3(1)(b) of Sch.B1 to the 1986 Act: achieving a better result for creditors as a whole than would be likely if the *144 company were wound up (without first being in administration). The administrators have proper grounds for contending that, with the sale of the Ovenden Hotel and the proceedings that they have now instituted in respect of an unfair preference or transaction at undervalue, this objective can yet be carried out and further time is required to do so.

42. Secondly, although Crowdstacker is opposed to the continuation of the administration, it is not as things stand, the only party interested. The principal potential asset for the estate is a recovery in the current unfair preference and transaction at undervalue claim potentially worth some £3 million. However, the proceeds of such a claim would not be passed to Crowdstacker as the holder of a debenture by virtue of s.176ZB of the Insolvency Act 1986 which provides that:

“The proceeds of the [unfair preference or transaction at undervalue] claim … are not to be treated as part of the company’s net property, that is to say the amount of its property which would be available for satisfaction of claims of holders of debentures secured by, or holders of, any floating charge created by the company”.

There are other unsecured creditors with substantial outstanding debts, which as matters stand have a substantial interest in the administration and are not opposing its continuation.

43. Thirdly, it is not clear to me that any investigation by a liquidator and claim for compensation in respect of misfeasance by the administrators in respect of their conduct of the asset sale could not be pursued adequately through the winding up of Burningnight. If there are difficulties in this regard it ought to be possible for them to be brought before the court with an appropriate explanation in evidence at a further hearing.

44. Fourthly, a termination of administration now and change to liquidation would be potentially highly disruptive to the ongoing litigation and increase costs to the potential detriment of other creditors, for the reasons set out above.

45. Finally, although Crowdstacker may have legitimate grounds for concern that other claims require further investigation and that the sale of the Ovenden Hotel should not result in an payment to ABL, it seems to me that such concerns can be addressed:

45.1 The potential other claims could (and in my judgment should) be offered to Crowdstacker and the liquidator of Burningnight for acquisition. If they consider they may be worth pursuing then an assignment could take place. Any difficulties in this regard could be the subject of an application for diretions.

45.2 As regards the sale of the Ovenden Hotel the court could make directions for the funds derived from the sale to held in escrow or paid into court pending the outcome of any challenge made to the security or debt of ABL which Crowdstacker wished to advance. For the purpose of enabling such a challenge to be made the court could also direct that any information or documents obtained by the administrators relevant to that issue be made available to Crowdstacker. In the absence of agreement an application for these directions could be made by Crowdstacker.

46. In the light of these factors and bearing in mind also the progress of the administration so far, as outlined in the evidence, in my judgment it is appropriate to extend the term of office of the administrators in respect of Cornertrack for a further period. That period will be for six months rather than one year. This will enable the court to review the position again within a short period once a liquidator has become established in respect of Burningnight, with more evidence regarding the actual position in respect of any claim against the administrators for misfeasance in respect of the asset sale and in light of the updated position in respect of the pursuit of any further claims (whether against *145 directors or others) and with regard to any arrangements made for resolution of any dispute over the proceeds of sale of the Ovenden Hotel.'

[6f] In Re E Realisations 2020 Ltd [2022] EWHC 1575 (Ch), Deputy ICC Judge Curl QC explained his decision to grant an extension (of 12 months) to the administrator's term of office, at paragraph 31, as follows:

'The evidence of the administrators indicates that a number of tasks remain to be undertaken before the administration can be concluded. These include concluding the final aspects of a licence to occupy granted to the pre-pack purchaser in relation to the Company's 21 leasehold properties; dealing with VAT refunds; agreeing the claims of unsecured creditors and distributing the prescribed part to them; making a final distribution to the remaining secured creditor once the prescribed part has been set aside; and dealing with the orderly close of the administration. Further, the administrators have considered and rejected the alternatives to an extension to the administration: liquidation is not in the interests of the creditors on the ground of cost and dissolution is inappropriate because there remain assets to be distributed. Moreover, this is the first time the court has been asked for an extension in what has been a high-profile and substantial administration. For these reasons, I also granted a twelve month extension to the administrators' appointments under para.76(1)(a) of Schedule B1 to the Act.'

[6g] In Re Caversham Finance Ltd [2022] EWHC 789 (Ch), Michael Green J said, at paragraphs 36 and 37:

'The evidence of [one of the joint administrators] discloses sensible and credible reasons for extending the administrations for a further year:

(i) she says an extension of the administration of CFL is necessary primarily to permit the continuing realisation of the Loan Book and to explore the possibility of a full or partial sale of the Loan Book to a third party;

(ii) an extension of the administration of CTL is necessary in order to support the ongoing administration of CFL by managing the outsourcing of logistics and engineering services and through the support provided by its retained employees;

(iii) as the strategy for the collection of the Loan Book debt remains subject to ongoing review, key operational wind-down tasks needed to complete the administrations will only become appropriate, and the final receipts and payments accounts that need to be prepared prior to exit can only be prepared at a later stage;

(iv) one year will allow sufficient time for these tasks to be completed leaving an adequate margin for unforeseen delays; and

(v) other exit routes from the administration are less advantageous. Dissolution of the Companies and liquidation are inappropriate, given that CFL's collection activities are ongoing, and CTL's administration continues to support those activities, while liquidation would involve expenses that would diminish the returns available to creditors.

...As at the date of this hearing no objections had been raised by the creditors, and so accordingly I will extend the administrations for a further year...'

[7a] In Mackenzie v Crowdstacker Corporate Services Ltd [2020] EWHC 2663 (Ch); [2021] BCC 133, there were two companies subject to administrators' applications for term of office extensions: (1) Cornertrack, which was the subsidiary/surety; and (2) Burningnight - the parent/holding company/principal debtor. The respondent/secured creditor Crowdstacker resisted the applications. Crowdstacker argued that: (1) both companies should be put into compulsory liquidation; (2) it had concerns about the way the administrators for Burningnight had sold one of Burningnight's properties (the asset sale); (3) the conduct of the joint administrators and the companies' directors had to be fully investigated.

The application was refused in relation to Burningnight, which was put into compulsory liquidation instead. The application was successful in relation to Cornertrack, to the extent that the administrators' term in office was extended by 6 months (though this was less than the 1 year sought).

Philip Marshall QC, sitting as a deputy High Court Judge said, at paragraph 46:

'...in my judgment it is appropriate to extend the term of office of the administrators in respect of Cornertrack for a further period. That period will be for six months rather than one year. This will enable the court to review the position again within a short period once a liquidator has become established in respect of Burningnight, with more evidence regarding the actual position in respect of any claim against the administrators for misfeasance in respect of the asset sale and in light of the updated position in respect of the pursuit of any further claims (whether against directors or others) and with regard to any arrangements made for resolution of any dispute over the proceeds of sale of the Ovenden Hotel.'

[7b] In Re E Realisations 2020 Ltd [2022] EWHC 1575 (Ch) ('E Realisations') Deputy ICC Judge Curl QC said, paragraphs 14 to 16:

'At the level of general principle, a distinction is to be drawn between defects in procedure (which do not render the appointment a nullity and may be remedied) and defects that go to the fundamental validity of the appointment (which result in an invalid appointment and cannot be cured). This distinction has been widely applied, including by Norris J in Re Euromaster Ltd [2012] EWHC 2356 (Ch); [2012] BCC 754 and Marcus Smith J in Re Skeggs Beef Limited [2019] EWHC 2607 (Ch); [2020] BCC 43 .

HHJ Davis-White QC also took this approach in Re A.R.G. (Mansfield) Ltd, identifying the following questions that the court should consider:

i) What are the statutory requirements?

ii) If they have been breached, is the consequence, as a matter of construction of the provisions, that there is only a procedural defect or is the appointment a nullity?

iii) If the appointment is subject to a procedural defect, is substantial injustice caused by what would otherwise be its validation under r.12.64?

iv) If there is such substantial injustice, can this be remedied by court order?

v) If the appointment is a nullity, can and should the defect be cured by a retrospective order?

In Re Caversham Finance Ltd (in administration) [2022] EWHC 789 (Ch), Michael Green J accepted a submission that the authorities concerning the out of court appointment of administrators are equally applicable to the out of court consensual extension of their appointment and directed himself according to the cases I have just cited. Re Caversham also concerned an issue with the need to give reasons under r.3.54(2) of the Rules. Michael Green J rejected a suggestion that, although the notices themselves did not give reasons, a reference in the covering letters to the administrators' first progress report, which provided such reasons, meant that there had been no defect. The judge held, however, that the failure of the administrators to give reasons in the notice did not result in a nullity and could not have been intended by Parliament to have had that consequence. There was no substantial injustice to creditors and the judge made a declaration that the administrations had been validly extended by consent.'

The citation to Re A.R.G. (Mansfield) Ltd is [2020] EWHC 1133 (Ch); [2020] BCC 641, wherein there is a careful analysis of the authorities, from paragraphs 55 to 88, of the out-of-court process for appointing administrators. Michael Green J accepts these cases are equally applicable to out of court consensual extensions of Administration, at paragraph 27 of Re Caversham Finance Ltd (in administration) [2022] EWHC 789 (Ch),

Insolvency Rules 2016 r.12.64 reads:

'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.'

On the facts in E Realisations: (1) there was failure to give reasons ('incidental reference' to a separate report was inadequate - paragraph 19), (2) this was a procedural defect; and (3) there was no substantial injustice thereby caused, to impede r.12.64 validation. The result was that the extension by consent in E Realisations was valid.

[8a] Insolvency Rules 2016,  R.3.54(6) ends with 'except where paragraph (3) applies'. R.3.54(3) (and (4)) read:

'(3) A request to the creditors may contain or be accompanied by a notice that if the extension is granted a notice of the extension will be made available for viewing and downloading on a website and that no other notice will be delivered to the creditors.

(4) Where the result of a request to the creditors is to be made available for viewing and downloading on a website, the notice must comply with the requirements for use of a website to deliver documents set out in rule 1.49(2)(a) to (c), (3) and (4) with any necessary modifications and rule 1.49(5)(a) applies to determine the time of delivery of the document.'

[8b] Insolvency Act 1986, Schedule B1, paragraph 78(5) and (6) read:

'(5) Where an administrator’s term of office is extended by consent he shall as soon as is reasonably practicable

(a) file notice of the extension with the court, and

(b) notify the registrar of companies.

(6) An administrator who fails without reasonable excuse to comply with sub-paragraph (5) commits an offence.'

Section 430 of the Insolvency Act 1986 is entitled 'Provision introducing Schedule of punishments' and reads:

'(1) Schedule 10 to this Act has effect with respect to the way in which offences under this Act are punishable on conviction.

(2) In relation to an offence under a provision of this Act specified in the first column of the Schedule (the general nature of the offence being described in the second column), the third column shows whether the offence is punishable on conviction on indictment, or on summary conviction, or either in the one way or the other.

(3) The fourth column of the Schedule shows, in relation to an offence, the maximum punishment by way of fine or imprisonment under this Act which may be imposed on a person convicted of the offence in the way specified in relation to it in the third column (that is to say, on indictment or summarily) a reference to a period of years or months being to a term of imprisonment of that duration.

(4) The fifth column shows (in relation to an offence for which there is an entry in that column) that a person convicted of the offence after continued contravention is liable to a daily default fine; that is to say, he is liable on a second or subsequent conviction of the offence to the fine specified in that column for each day on which the contravention is continued (instead of the penalty specified for the offence in the fourth column of the Schedule).

(4A) In relation to an offence committed before section 154(1) of the Criminal Justice Act 2003 comes into force, a reference in Schedule 10 to 12 months on summary conviction in England and Wales is to be read as a reference to 6 months.

(5) For the purpose of any enactment in this Act whereby an officer of a company who is in default is liable to a fine or penalty, the expression “officer who is in default” means any officer of the company who knowingly and wilfully authorises or permits the default, refusal or contravention mentioned in the enactment.'

Schedule 10 to the Insolvency Act 1986 contains the following information in the row for Sch.B1, para.78(6) - Administrator failing to give notice of extension by consent of term of office.

Mode of Prosecution: Summary

Punishment: One-fifth of the statutory maximum.

Daily Default Fine (where applicable): One-fiftieth of the statutory maximum.

[9] In Re TPS Investments (UK) Ltd (In Admin.) [2020] BCC 437, HHJ Hodge QC sitting as a Judge of the High Court, summarised the application before him, at paragraph 1 as:

(1) an application (pursuant to para.76(2) of Sch.B1 to the Insolvency Act 1986 (as amended)) made by the sole administrator of TPS Investments (UK) Ltd for a nine months’ extension to his term of office (to 10 February 2020).

(2) with documentation in support, being: (i) administrator's witness statement; (ii) short witness statement from the Administrator's solicitor, exhibiting emails from (i) the legal representatives of the company’s secured creditor, and also (ii) the entities asserting a prior interest in the company’s assets, indicating their consent to the proposed extension and confirmation of their non-attendance at the hearing;

And that:

(3) the application is unopposed;

(4) listed for 30 minutes in the Applications List;

The judge then stated, in paragraph 1:

'In the usual course (prior to the extended hearing times required for remote hearings due to the Coronavirus pandemic), it would have been listed for about half that time; and I would have proceeded immediately to deliver a short, extemporary judgment setting out my reasons for acceding to the application.'

[10] See Re Mederco (Cardiff) Ltd [2021] EWHC 386 (Ch) - that (1) this is mandatory and (2) the former administrator does not have standing to make the application to extend.

[11] See, for instance, Re TT Industries Ltd [2006] BCC 372 and Re Frontsouth (Witham) Ltd [2011] EWHC 1668 (Ch); [2011] BCC 635

[12] The Practice Direction (Ch D: Insolvency Proceedings) [2020] BCC 698, reads, at paragraph 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.'