CREDIT MANAGEMENT JULY and August 2022

LEGAL MATTERS
AUTHOR – Peter Walker
with the Upper Tribunal to consider it afresh,
i.e. it is strictly not an appeal. The FCA’s
internal decision-making is conducted by the
Regulatory Decisions Committee, but it is a
committee and accountable to the FCA’s board.
STAY IN PROCEEDINGS
Michael Green J added then returned to section
130 of the Insolvency Act 1986, but he added
that section 126 gives a court ‘power to stay or
restrain proceedings’ against a company. This
relates to an ‘action or proceeding’ in the High
Court or in the Court of Appeal.
Michael Green J then considered the
meaning of proceeding in section 130. The
judges of the Court of Appeal provided some
guidance in Bristol Airport plc v Plowdrill
[1990] Ch 744. Four creditors of an airline in
administration agreed that they would not
exercise any power of detention over any of the
aircraft operated by the airline under leasing
agreements until after a creditors’ meeting.
The administrators were hoping to sell the
airline on advantageous terms.
Before that meeting one of the parties
applied for leave to detain two aircraft, and this
was granted subject to a hearing. It became
interesting, when one of the other parties
parked a lorry in front another aircraft operated
by the airline, and it served what is called a lien
notice on its captain.
Although section 88 of the Civil Aviation
Act 1982 ostensibly gave them power to
detain aircraft operated by an airline in
administration, the High Court judge exercised
his discretion to refuse leave for them to act
in this way. The judges of the Court of Appeal
later agreed that the trial judge had correctly
exercised his discretion. The airports, for
example, were not secured creditors, so they
should not be allowed to gain an advantage
over the other creditors by their seizure of the
aircraft.
In the Carillion case Michael Green J
noted Sir Nicolas Browne-Wilkinson V-C’s
observation, ‘In my judgment the natural
meaning of the words “no other proceedings
… may be commenced or continued” is that
the proceedings in question are either legal
proceedings or quasi-legal proceedings such as
arbitration’.
In the case In re Frankice (Golders
Green) Ltd [2010] Bus LR 1608 the Gambling
Commission, a statutory regulator, brought
proceedings against a group of companies in
administration. That group had a deficiency of
£84m, of which a substantial amount was PAYE,
NI, and Amusement Machine Licence Duty.
If the companies were liquidated, 100 trading
premises would be closed and 600 people
would lose their jobs, so the administration
was an attempt to avoid these results. The
Group therefore continued to trade because the
administrators had hoped for a higher price.
NON-CONFORMING
It became apparent that the directors had
not been conducting the business strictly in
conformity with its licence conditions, so the
Gambling Commission was investigating. The
number of gambling facilities provided did
not conform with what the companies were
permitted to provide. The administrators were,
however, conducting a compliant business.
There was yet another complication, because
a prospective purchaser failed to apply for an
operator’s licence, so the sale would not be
completed by the contracted date.
Norris J in the High Court was more
concerned about the Gambling Commission’s
forthcoming review hearing. He decided to
refuse permission for the holding of that
hearing before the completion of the contract
with the prospective purchaser.
If the companies were liquidated, 100 trading premises
would be closed and 600 people would lose their jobs, so the
administration was an attempt to avoid these results.
The Group therefore continued to trade because the
administrators had hoped for a higher price.
In the Carillion case Michael Green J
decided that the Frankice case could be
distinguished from the present situation.
Norris J was concerned not with section 130 but
with paragraph 43(6) of Schedule B1 (governing
administration) of the Insolvency Act 1986.
‘Legal process including legal proceedings,
execution, distress and diligence’ may not be
instituted, etc., against the company without
the consent of the administrator or the court.
Michael Green J was left with section 130,
and he ruled that this must be interpreted
restrictively. In this context ‘action or
proceeding’ meant a legal proceeding or quasilegal
proceeding. The FCA’s warning did not
amount to such action, so he did not have
to issue a stay of proceedings. He added his
opinion that he did not think that parliament
could have intended that the comprehensive
statutory regime of the Financial Services and
Markets Act 2000 ‘operated by the FCA acting
in the public interest should be overlain with
the requirement to seek the permission of the
court to proceed if the company in question has
gone into compulsory liquidation.’
This may not make life easy for administrators
if a regulatory body is contemplating action
against a company in administration. Creditors
may not welcome the possible resulting further
complications during an administration,
although the actions of the regulatory body
should lead to a clarification of what happened
to cause the company’s downfall.
Peter Walker is a freelance Journalist.
Brave | Curious | Resilient / www.cicm.com / July & August 2022 / PAGE 41