Mark Guy Boughey & Anor v Toogood International Transport and Agricultural Services Ltd (in administration)
[2024] EWHC 1425 (Ch)
Stephen Hobson & Anor v OAS Realisations (2022) Limited (formerly known as Open Administration Systems Ltd) (in Creditors’ Voluntary Liquidation)
17 June 2024
[2024] EWHC 1491 (Ch)
High Court
A company's administrators wanted to move it from administration to liquidation. A legal question arose as to whether creditors with priority payment were still considered 'unsecured' for the purposes of the law. The judge ruled that they were, allowing the transition, even if the administrators' interpretation of the law was later proven partially wrong, as their interpretation was reasonable.
Key Facts
- •Joint administrators of OAS Realisations (2022) Ltd sought declarations regarding the company's transition from administration to creditors' voluntary liquidation (CVL).
- •The transition was based on a notice sent to the Registrar of Companies under paragraph 83(3) of Schedule B1 to the Insolvency Act 1986.
- •A question arose regarding whether preferential creditors (HMRC) qualify as 'unsecured creditors' under paragraph 83(1)(b) for the purposes of triggering the transition to CVL.
- •The administrators believed they could pay a dividend to the preferential creditor (HMRC) but not to ordinary unsecured creditors.
Legal Principles
Interpretation of 'unsecured creditor' in paragraph 83 of Schedule B1 to the Insolvency Act 1986.
Insolvency Act 1986, Schedule B1, paragraph 83; section 248
The administrator's belief in the satisfaction of the conditions in paragraph 83(1) is sufficient, even if their belief is incorrect; the administrator's belief need only be reasonable.
Unidair plc v Cohen [2005] EWHC 1410 (Ch)
Outcomes
The court granted the declarations sought by the administrators.
The court found that preferential creditors are 'unsecured creditors' under the statutory definition in section 248 of the Insolvency Act 1986 and that the context of paragraph 83 does not restrict this meaning. Even if the interpretation of paragraph 83 was incorrect, the administrators reasonably believed the conditions were satisfied (following the principles set out in *Unidair plc v Cohen*).