In Re NMUL Realisations Limited (in administration) [2021] EWHC 94 (Ch) the Court considered whether a charge-holder’s failure to give notice of their intention to appoint administrators invalidates the appointment.
The issue in this case was that a floating charge-holder’s security had been incorrectly marked as satisfied on the Companies House record. As such, notice of the intended appointment was not provided. The Court considered whether the failure to give notice was a fundamental defect which rendered the appointment void or whether the defect could be remedied by an order of the Court.
NMUL Realisations Limited (“NMUL”) entered into a loan agreement with Tudor Capital Management Limited (“Tudor”) in its capacity as trustee of a pension scheme for £1 million which was secured by way of a qualifying floating charge. Tudor was dissolved in 2016. NMUL wrongfully concluded that the charge was satisfied, gave notice to the Registrar of Companies and the charge was marked as satisfied on the Companies House record.
It later transpired that NMUL still owed approximately £1.5 million to Tudor. While property of a dissolved company normally vests in the Crown bona vacantia, in this case an enforcement receiver had been appointed over the realisable property of the two duly appointed directors of Tudor (following their conviction of conspiracy to cheat the public revenue and the making of confiscation orders) and there was an issue as to in whom the benefit of the Tudor charge was vested.
NMUL later obtained a loan which was secured by way of another qualifying floating charge. The lender subsequently appointed administrators but failed to give notice of its intention to appoint on Tudor. The lender only became aware of there being money owed in respect of the Tudor charge on the day after the appointment.
The Court considered the facts of the case and noted the following:
- The Registrar of Companies had no discretion to include a statement of satisfaction on a company’s filing history following the filing of a certificate of satisfaction.
- The filing of particulars and statements by the Registrar is not conclusive as to the true factual position. A charge-holder therefore cannot solely rely on the Register but must satisfy themselves from their own enquiries that previously registered charges have been properly discharged, even if marked as satisfied on the Register.
- Where a statement of satisfaction is wrongly registered by the chargor, the chargee cannot lose the benefit of its security as a result.
In view of the above, it was of little surprise that the Court took the view that, at the time that the lender appointed the administrators it was required to give notice to Tudor despite being unaware that the Tudor charge remained outstanding. The issue as to whom that notice should have been given (in view of the dissolution of Tudor) was not determined, with the Court stating that it was either the enforcement receiver or the Government Legal Department (responsible for bona vacantia property).
However, following the decision in Re Tokenhouse, the Court decided that Tudor would only have a right to make an application to cure the defect or for an order that its own nominated administrators be appointed in place of the administrators appointed by the bank - Tudor would not be able to prevent administrators being appointed; they would simply have had a right to choose their own preferred administrators. It followed that the failure to give notice to Tudor was not a fundamental defect but an irregularity giving rise to a defect that can be remedied by an order of the Court. It was therefore not a fundamental breach that would render the appointment void.
Despite that finding, prospective administrators and those appointing them would not want to find themselves in a position of having an appointment questioned or challenged by reason of a failure to give notice. Accordingly, sole reliance should not be placed on the charges register at Companies House. Where possible, further enquiries should be made to determine the true factual position where an appointment is proposed.
