Frances Coulson
- Partner
- Insolvency & Restructuring
The appeal in Carvill-Biggs & Anor v Reading [2025] EWCA Civ 619 deals with whether administrators can rely on s 234 Insolvency Act 1986 to obtain an order for possession of a residential property. In this case, a director of the company had been occupying as a trespasser, in circumstances in which a secured lender had already appointed receivers under the Law of Property Act 1925 and started possession proceedings as mortgagee pursuant to CPR 55. The facts of the case are unusual, but the approach the Court of Appeal took to what constitutes property in a liquidation or administration is of some interest.
The company had purchased a property in Orpington with loans from a company called TFG Capital No 2 Ltd which were secured by a legal charge over the property and a floating charge over any other assets and the undertaking of the company. The company defaulted, and TFG2 appointed LPA receivers. TFG2 also issued possession proceedings in the County Court at Bromley against Mr Reading and the company under CPR 55 seeking an order for possession of the property. It subsequently appointed administrators.
The proceedings in Bromley County Court were being resisted and making slow progress. At the suggestion of the administrators’ solicitors, the administrators themselves issued an Insolvency Act application in the name of the company and in their own names in the Business and Property Courts in Leeds. The respondents were Mr Reading and “occupiers unknown;” TFG2 was not a party. The application sought declarations as to the legal and beneficial ownership of the property and orders for vacant possession and sale by the administrators and payment of the net proceeds of sale to the administrators. The judge in the Business and Property Courts in Leeds gave the administrators relief under s 234 Insolvency Act, making an order for delivery of possession of the property to the administrators. It was that order that was the subject of the appeal, permission to appeal having been given by Snowden LJ.
The Court of Appeal considered three grounds of appeal:
(i) that in circumstances in which LPA receivers had been appointed, the property was no longer “property to which the company appear[ed] to be entitled” within the meaning of s 234(2) Insolvency Act 1986;
(ii) that the judge below was wrong in holding that CPR 55 did not apply to the application, so that any order for possession should have been made in proceeding brought by TGT2 rather than under the Insolvency Act; and/or
(iii) that it was an abuse of process for the administrators to seek to bypass the Bromley County Court proceedings by commencing a second set of proceedings seeking possession of the property in a High Court centre some distance from the property.
The judgment of the court was given by Snowden LJ with whom Nugee LJ and King LJ agreed.
Snowden LJ I agreed with the judge below that, under s 436 Insolvency Act, “property,” for the purposes of s 234, could include land and any interest in land. However, in this case, at the relevant time, the respondents to the administrators’ application had had no legal or equitable interest in the property to deliver up: they had only been in possession in the sense that they had been in occupation.
When a winding-up order was made, s 144(1) Insolvency Act provided for the liquidator to take into his custody or control “all the property and things in action to which the company is or appears to be entitled.” That did not, however, include property over which a receiver had been appointed under a fixed charge in a mortgage.
Snowden LJ relied on Lord Hoffmann’s analysis in Buchler v Talbot: liquidation operated to create separate funds of assets for holders of security and unsecured creditors of the company. Although Lord Hoffmann was dealing with the position of the holders of a floating charge which had crystallised and became fixed, the same analysis necessarily applied to a mortgage that had, from the outset, constituted fixed security. The meaning and effect of s 234 was no different in the case of an administration. An administrator was defined by Sch B1 para 1(1) as a person “appointed…to manage the company’s affairs, business and property.”
Just as the court had held in Gosling v Gaskell that the appointment of a liquidator did not give the company rights that it did not previously have, similarly, the appointment of an administrator could not give the company rights to property that it did not have prior to the administration. Thus, when Sch B1 para 67 provided, in terms similar to s 144, for the administrator to take custody or control of all the property to which the company was entitled, that too could not extend to mortgaged property over which receivers had been appointed prior to the administration. As Snowden LJ put it:
“Applying these principles to the instant case, although the Company remained in possession of the Land after the grant of the Mortgage, the effect of the commencement of the Bromley Proceedings by TFG2 was to terminate any right that the Company had as mortgagor to take proceedings for possession of the Land. In this regard, as in other respects, I do not see how the Administrators could stand in any better position than the Company was in prior to their appointment.”
Although that argument on the first ground of appeal succeeded and was sufficient to dispose of it, Snowden LJ went on to consider the second and third grounds.
He was not persuaded that any procedural defect arising as a result of the failure to apply CPR 55 would have invalidated the administrators’ application. Rather, “it was for the court hearing the Application to apply the provisions of CPR 55 to the proceedings, with any necessary modifications, except to the extent that the provisions of CPR 55 are inconsistent with the Insolvency Rules.” (See r 12.1(2) Insolvency Rules 2016.)
On ground three he said, “[I]t is self-evident that the commencement of duplicative proceedings so as to subject a defendant to more than one set of proceedings on the same subject matter at the same time is capable of amounting to an abuse of process.” The reality of the situation was that the administrators’ application and TFG2’s possession proceedings were both conducted for the sole benefit of TFG2 as mortgagee. “In these circumstances,” he said, “although, as I have said, we do not need to decide the point, I incline to the view that it was a misuse of section 234 for the Administrators to offer to issue the Application in effect for the private advantage of TFG2 as mortgagee, thereby subjecting the Respondents to duplicate proceedings which were designed to achieve for TFG2 the same result that it was already trying to obtain in the existing Bromley Proceedings.”
The appeal was allowed (on ground 1 only).
Of note is this short obiter statement that appears towards the beginning of Snowden LJ’s judgment:
“[…] I have very real doubt that section 234 is intended to apply where the only basis for saying that a person ‘has in his possession or control property to which the company is entitled’ is that he is occupying land as a trespasser. I find it difficult to see what property a trespasser could be ordered to ‘pay, deliver, convey, surrender or transfer” to an office-holder. What a trespasser would in fact be required to do would be to cease to occupy the land. The point can be tested by contemplating what would happen if an order that a person ‘deliver possession’ of land was not complied with. In such a case the court would simply order that the person be physically removed (evicted) from the land in question.”
But,
“That point was…not argued before us on this appeal, and it is not necessary for us to decide it.”
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