Corporate insolvency – administration – office-holder’s remuneration – charges – financial mis-selling – paragraph 99(3) Sch 1B IA 1986
Sunnyside Holiday Park Limited ran a holiday park business. It entered into several ‘vanilla’ swaps with Natwest to support its borrowing. It terminated the swaps in 2004, having paid considerable sums. In 2007, the company’s business worsened and, in 2008, the claimants were appointed administrators. They endeavoured to sell the holiday business for the benefit of the secured creditor but, in 2012, their appointment was ended and fixed charge receivers managed the company until it was dissolved in November 2013. At dissolution, the claimant administrators had outstanding time costs of over £132,000
An unknown person initiated the company’s inclusion in the Financial Conduct Authority’s review into the mis-selling of interest rate protection products. In November 2014 a letter was sent to the applicants, as interested parties, stating that Natwest might be prepared to pay £62,646, a sum referred to as a provisional redress calculation. However, no steps had yet been taken to resurrect the company or make any claim against Natwest. The claimants issued a claim seeking an order under paragraph 99(3) of Schedule B1 to the Insolvency Act 1986 that the unpaid balance of their remuneration and expenses be charged on and payable out of the sum said to be due from Natwest.
Rejecting the claimant administrators’ claim, the Judge held that Natwest was not at present obliged to pay the anticipated redress amount to anyone. There was no jurisdiction to order it to pay any money until a cause of action was asserted against it. Accordingly the ‘redress payment’ adverted to was not an asset and, therefore, could not be the subject of the charge under paragraph 99(3).
Even if it was an asset, it could not be assumed, following Re MK Airlines Ltd [2012] EWHC 1018 (Ch) that the holder of the statutory charge under paragraph 99(3) would have the same rights as a fixed or floating charge holder and, therefore, the rights of the holders of the statutory charge were limited to enforcement of that charge through the courts, not dealing with the assets directly as the legal owner could. In this case, whatever assets the company had (i.e. a claim against Natwest in tort or contract relating to the mis-selling) vested in the Crown following the company’s dissolution. If the claim was to be pursued, it was better that the company be resurrected and the claim pursued by a liquidator who could act in the interests of all creditors.
This case contains useful guidance for administrators and those advising them on the types of assets and interests on which the charge under paragraph 99(3) will bite. It is also a warning of the dangers inherent in attempting to subvert the usual procedures for administering assets post-dissolution.
