The Debenhams saga - procuring an appointment under Section 164

The court has allowed an amendment of a claim to enable a creditor and shareholder to argue that agreeing the terms of a deed of release amounted to an offence under Section 164 Insolvency Act 1986, rendering the deed unenforceable.

Section 164 Insolvency Act 1986 prohibits a person from giving a member or creditor of a company any “valuable consideration with a view to securing his own appoint or nomination….”

In 2021, Fraser Group purchased some fixtures and fittings from the joint administrators of Debenhams. A secured creditor whose release was needed required a Deed of Release to be agreed with the joint administrators and Fraser Group which included terms that certain parties (including Fraser Group) would not vote for or seek appointment of a replacement liquidator and would not oppose an application for a replacement liquidator as selected by relevant creditors of Debenhams PLC. 

A disagreement followed over a replacement liquidator and proceedings were issued. In those, Fraser Group are arguing the terms of the Deed of Release unenforceable but sought to expand the basis for that assertion. At first instance, ICC Judge Jones was not prepared to allow the amendment, but Sir Paul Morgan did give permission:

  1. Section 164 was not limited to an office holder - it could apply to anyone (including a corporate)
  2. It was a matter for the trial judge to determine whether valuable consideration was given to Fraser Group but it was at least arguable given assets were acquired and there was a condition that the Deed of Release was entered into
  3. It was also sufficiently arguable that the purpose of the deed was to clear a path for certain creditors to nominate their choice of liquidator and prevent Fraser from applying for a different liquidator to be appointed

This decision appears to be the first reported instance of the elements of Section 164 being explored and it will be interesting to see how these are applied and resolved at trial.

Fraser Group Plc v Official Receiver & Ors (Re Debenhams PLC) [2022] EWHC 2995

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