On 24th August 2016 the claimant issued protective proceedings against four defendants for damages in excess of £10 million in relation to alleged defects in the design and construction of a high bay warehouse and associated infrastructure ("the Works"). The third defendant ("Twintec") was responsible for the design and construction of a steel fibre reinforced concrete slab, which formed part of the Works, and was insured by Royal and Sun Alliance Insurance PLC ("RSA"). The claimant and the defendants entered into a standstill agreement, extending the date of service of the claim form and the particulars of claim until 28th April 2017. Subsequently, on 23rd February 2017, Twintec was placed into administration.
BAE Systems Pension Funds Trustees Limited v Bowmer and Kirkland Limited and Ors  EWHC 1200 (TCC) came before the court three days before the expiry of the standstill agreement. The claimant applied for a) permission to lift the statutory moratorium and continue proceedings against Twintec under paragraph 43(6)(b), Schedule B1 of the Insolvency Act 1986 ("the Insolvency Application") and b) for an order that RSA be added to the claim pursuant CPR 19.2 and, to the extent necessary, CPR 19.5. This e-shot considers the Insolvency Application only.
The claimant and Twintec agreed that in determining an application under paragraph 43(6)(b) the court should have regard to the guidance given by Nicholls LJ in In Re Atlantic Computer Systems Plc  Ch., 505 at p542A. The burden rests with the claimant to make the case for lifting the moratorium, regard is to be had to the purpose of the statutory moratorium (namely to assist the company in the administration to achieve the purpose for which the administration order was made) and the court is to engage in a balancing exercise, weighing up the interests of the claimant and other creditors. The court acknowledged that where the application concerns a monetary claim only, there must be exceptional circumstances present before it could be granted (AES Barry Limited v TXU Europe Energy Trading  EWHC 1757 (Ch)) and it was to consider whether lifting the moratorium and allowing the action would significantly impede the objective of the administration (Magical Marking Ltd v Phillips  F.S.R. 36 at paragraph 21).
The claimant argued that the moratorium should be lifted otherwise there would be significant detriment to the claimant; in short, if it was not permitted to serve the claim form it was likely that Twintec would have a good limitation defence against the claim and, as a result, so would its insurer, RSA. It was also asserted that some of its losses were not insured by RSA.
It was argued that lifting the moratorium would not cause any significant or real impediment to the administration, particularly as Twintec was not going to continue as a going concern, there were no real assets to meet judgment and most of the work in respect of the administration had already been done.
The claimant invited the court to permit it to at least serve the claim form and that any further potential impediment could be dealt with by way of case management and a potential stay.
In Twintec's view, the fact that some of the claimant's losses (if proven) may be uninsured by RSA did not amount to exceptional circumstances. The claimant was an unsecured creditor and should prove its debt in the administration like any other.
Twintec reminded the court that as things stood, unsecured creditors were to receive a dividend (albeit a very modest one) and if the claim was allowed to proceed against Twintec, even if that was not to be as far as judgment against it, the administrators' costs in dealing with the claimant's claim would effectively wipe out the small dividends otherwise payable to unsecured creditors. The point was made that regard should be had to the administrators' commercial judgment, in how it decided to handle any claim made by the claimant, and the administrators' evidence was that dividends would be extinguished. Whilst there were limited recoveries to be made, the administration had not yet concluded, and the claimant did not need to bring proceedings against Twintec to pursue RSA directly, by virtue of the Third Parties Rights Against Insurance Act 2010.
The judge weighed up all the factors and found that she could maintain the status quo by permitting the moratorium to be lifted for the purpose of serving the claim form only. This limited lifting of the moratorium preserved the claims against Twintec and RSA, as neither party could raise the contemplated limitation defence, but it also meant there would be no impact on the administration, without further order.
This case is a potent reminder that the statutory moratorium will only be lifted in exceptional circumstances for monetary claims, and the courts must continue to balance the competing interests before it, as envisaged in In Re Atlantic Computer Systems Plc.
An assertion that the claimant may be prejudiced due to some losses being uninsured did not mean that its interests outweighed those of other unsecured creditors and did not warrant an immediate lifting of the moratorium to allow the proceedings to continue beyond service of the claim form. The court has to balance the interests of creditors and a 'limited lifting' can sometimes achieve that aim.
The judgment can accessed via Westlaw.