In 2016, the High Court determined that a person may propose to do something without having a settled intention to do it and dismissed an application for an order removing a fourth notice of intention from the court file. At the time the fourth notice was filed, the director only intended to appoint administrators if a CVA proposal was rejected by creditors.
That decision was overturned by the Court of Appeal in 2017 when it stated that it was difficult to discern the real purpose of the interim moratorium if it was envisaged that an appointment might not follow (given that no such moratorium arises where there is no person with a prior right to appoint an administrator). Since that decision, it has been generally accepted that a conditional proposal to appoint administrators does not entitle or oblige a company or its directors to file a notice of intention.
The Court of Appeal’s decision was followed by the High Court in January 2021 in Seabrook Road Ltd v Security Trustee Services Ltd [2021] EWHC 436 (Ch).
Security Trustee Services Limited (STS) appointed receivers over property owned by Seabrook on 7 December 2020 following default in connection with a facilitation agreement. Later on the same day the receivers and STS were notified that a notice of intention had been filed on 27 November 2020.
Although the notice of intention stated that it was being given to STS, that had not happened. This was pointed out to Seabrook whose solicitors stated that Seabrook acknowledged the appointment of the receivers but failed to address non-service of the notice of intention.
In view of the potential difficulties that the notice of intention had on the appointment of the receivers, an application was made by STS and the receivers for orders removing the notice of intention from the court file and declaring the receivers’ appointment valid. It subsequently transpired that two further notices of intention had been filed.
No reason was given for the failure to give STS notice of the notices of intention and the Judge considered this to be an abuse of process. The Judge was also satisfied that Seabrook had no intention to appoint administrators at the time of the filing of the notices of intention and they were filed in an attempt to secure a moratorium and to arm Seabrook with arguments against the appointment of the receivers or enforcement of the facilitation agreement.
The result of the case is unsurprising (the High Court was bound to follow the Court of Appeal authority on the matter) but it does serve to underline the importance of ensuring that there is a settled intention to appoint an administrator before a notice of intention is filed and confirms that a notice of intention should not be used by a borrower to gain leverage in negotiations with lenders. If a previous notice of intention has been filed then the board minutes (if appointment by directors) should properly reflect why a second notice is required.
