- Directors cannot file a notice of intention to appoint (NoI) without a ‘settled intention’ to appoint an administrator
- NoIs cannot be used where there is no qualifying floating charge holder (QFCH)
- The judgment has implications for validity of appointments where requirements not met
Davis Haulage Limited (the Company) was the tenant of a warehouse owned by JCAM Commercial Real Estate Property XV Limited (JCAM). Given the Company’s rent arrears, JCAM threatened possession proceedings which it subsequently issued on 28 January 2016.
Unknown to JCAM, on 22 January 2016, the director of the Company filed a NoI with the court and thus triggered an interim moratorium. JCAM was subsequently made aware that this had been done in order to find a solution to secure the business going forward, motivated in part by the threatened possession proceedings.
Three further consecutive NoIs were filed during February and March 2016. The NoIs were served on the QFCH. However, no administrators were appointed.
After the third NoI was filed, a CVA proposal was also filed at court and circulated to creditors. Following this, the fourth NoI was filed and a meeting to consider the CVA proposal was held. JCAM issued an application seeking an order that the fourth NoI be vacated and removed from the court file.
The Court of Appeal overturned the first instance decision and held that it is a statutory pre-requisite for there to be a settled intention to appoint an administrator when filing a NoI. In this case, because a CVA was also being proposed and administration was one of a range of possible outcomes, there could have been no such settled intention. Consequently, the NoI was removed from the court file.
The Court of Appeal also confirmed that a NoI cannot be filed where there is no QFCH on whom such NoI is to be served under paragraph 26 of Schedule B1.
This is an important judgment which will have implications for the circumstances in which directors are able to obtain the benefit of the interim moratorium, making clear that where administration is one option amongst many, it is not appropriate for a NoI to be filed.
The judgment does not discuss the ramifications for IPs appointed where there was no such settled intention, but the prudent view is that the appointment would, at the very least, be defective and may well be a nullity – either way requiring an application to be made to court.