Court of Appeal, help us out

Lawyers are currently torn between the revenue generated by applications for court orders confirming the validity of administration orders and the lack of clarity from the numerous High Court decisions on the position. This decision related to an application by administrators for a declaration from the court that their appointment was valid, notwithstanding the directors’ failure to give notice of the intention to appoint administrators to a qualifying floating charge holder (QFCH), which was not disclosed to the proposed administrators at the time.

When they discovered the error, the administrators applied to court for the declaration, not opposed by the directors or the QFCH, or alternatively a retrospective administration order. The judge considered the lengthening list of authorities and agreed with the administrators that the more recent first instance decisions show a consistent approach in favour of administrators' appointments only being defective and not void, following the recent decision, on similar facts, in Re Tokenhouse BV Ltd.

The judge recognised that there was a growing consensus of decisions, which should be followed, that the relevant breach did not render the appointment a nullity, but rather defective, but curable, having not caused any substantial injustice. The judge also ordered that the directors pay the costs of the application. Whilst recent first instance decisions are seeing a more consistent approach by the courts, conflicting decisions necessitate these applications until the Court of Appeal provides a clarifying decision.

Zoom UK Distribution Ltd (in administration) [2021] EWHC 900 (Ch)

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