Huge relief for Norton Motorcycles’ administrators

The Norton Motorcycles business went into administration on the application of a lender who appeared, on the face of the Companies’ Register, to be the first ranking qualifying floating charge holder (QFCH).

Unbeknownst to the lender, a prior QFCH had been previously removed from the Register by the company in respect of an entity that was dissolved, to which no Notice of Intention was provided pursuant to paragraph 15 of Schedule B1 to the Insolvency Act 1986.

This issue came to light shortly after appointment and the administrators made sufficient realisations, with the consent of all parties, to repay both secured creditors in full. The question remained, however, as to whether the administrators had been validly appointed and they applied to court for such a declaration.

The ICCJ went through the ever growing line of authorities as to when the appointment of administrators is void due to a fundamental defect and when an omission or mistake can be considered “an irregularity giving rise to a formal defect that can be remedied by an order of the court under the provisions of Rule 12.64 of the Rules.”

In this case, the ICCJ followed the decision of ICCJ Jones in Re Tokenhouse [2020] EWHC 3171 (Ch) and held that a failure to give notice under paragraph 15 can be dealt with as a formal defect that can be remedied by an order of the court under the provisions of Rule 12.64 and ordered accordingly, validating the administrators’ appointment.

Re NMUL Realisations Limited [2021] EWHC 94 (Ch)

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