Administrators entitled to sell charged property

This case involved an investment scam where investors paid deposits for leases of rooms in a nursing home property. The investors’ money was lent by the company to associated companies and never repaid. The investors were granted secured rights in respect of their deposit payments, but unfortunately, these ranked behind a charge granted over the property, and registered at the Land Registry, securing lending in respect of the property’s purchase, which exceeded its value (the “Charge”).

In light of the competing security interests, the administrators of the property owning vehicle applied to court for an order enabling them to sell the property, notwithstanding the Charge and that the investors may have had fixed charge security against the property, which the administrators were unable to sell free of, without the investors’ permission or order of the court.

The court agreed to grant the order sought on the basis that, whilst some of the investors’ deposits had been paid before the Charge was granted, the Charge was registered at the Land Registry before any of the investors had sought to protect their interests by lodging unilateral notices. The court agreed with the administrators that the Charge had priority over the investors’ security.

The court further agreed that the sale of the property would be “likely to promote the purpose of administration in respect of the company” pursuant to paragraph 71(2)(b) of Schedule B1 to the Insolvency Act 1986, particularly where the proceeds were insufficient to discharge the loan and the investors did not object to the application.

Duffy & Bell v MJF PENSION TRUSTEES LIMITED [2020] EWHC 1835 (Ch)


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