Improper-purpose “loan-to-own” appointments: out-of-court administrators may be void ab initio

1) Introduction

Case: Glint Pay Ltd & Ors v Baker & Anor [2026] EWCA Civ 1023 (Arnold LJ, Falk LJ, Zacaroli LJ), 31 July 2026. The appeal arose from an order of a deputy High Court judge ([2025] EWHC 2166 (Ch)) striking out (and in substance granting summary judgment against) the claimant companies’ claims that the respondents were never validly appointed as administrators.

The claimants (“Glint”) were a holding company and two subsidiaries, including an authorised electronic money institution. A lender’s rights under a secured loan were assigned to a special purpose vehicle (“the assignee”), which pursued information requests under the debenture, accelerated the loan for alleged default, and then made an out-of-court appointment of administrators as a qualifying floating charge holder under Schedule B1 to the Insolvency Act 1986. Glint’s case was that the group was solvent and that the appointment was orchestrated solely to enable the assignee to acquire the business/assets via a pre-pack (“loan-to-own”).

The Court of Appeal addressed three principal issues: (i) construction of the debenture’s information covenant (did non-compliance create an event of default making security enforceable?); (ii) whether an out-of-court appointment of administrators can be void from the outset if made solely for an improper purpose; and (iii) whether Glint was barred by estoppel/abuse of process because it had supported an application fixing administrators’ remuneration and had entered into a “waterfall” agreement after the administrations ended.

2) Summary of the Judgment

  • Construction: The Court upheld the judge’s conclusion that Glint’s failure to provide the requested information breached the debenture covenant and therefore triggered an event of default under the loan, making the security enforceable.
  • Improper purpose: The Court held the judge was wrong to strike out/enter summary judgment on the improper-purpose challenge. There was a realistic prospect that Glint could prove the assignee’s sole subjective purpose was improper (to acquire the business/assets), and that such a purpose is capable in law of rendering an out-of-court appointment of administrators ineffective.
  • Estoppel/abuse: The Court held the claim was not unarguably an abuse of process and that other estoppels could not be determined summarily against Glint on the existing materials.
  • Result: Appeal allowed; Glint’s claim that the administrators were invalidly appointed was reinstated for trial (despite Glint losing the construction/default point).

3) Analysis

A. Precedents Cited (and how they shaped the decision)

i) Strike-out / summary judgment framework

The Court noted the conventional distinction between strike-out and summary judgment and the principle that, on strike-out, pleaded facts are assumed true: Three Rivers v Bank of England (No.3) [2003] 2 AC 1. Although the first instance judgment “conflated” the two procedural routes, the Court treated that as non-determinative in this case.

ii) Registered instruments and contextual construction

Glint relied on contextual material concerning the template origins of the debenture language. The first instance judge had treated the debenture’s status as a deed, assignable and registered at Companies House, as limiting the relevance of private background material, referring to Cherry Tree Investments Ltd v Landmain Ltd [2012] EWCA Civ 736; [2013] Ch 305.

The Court of Appeal held it was unnecessary to decide the point, because the proffered background did not affect the proper meaning. However, it indicated (obiter) it would not treat registration/assignability as an automatic bar to admissible contextual evidence, aligning with the more nuanced approach in Pathway Finance SARL v The Defendants set out in Annex 1 to the Claim [2020] EWHC 1191 (Ch), which emphasises “the nature and circumstances of the particular instrument” rather than a bright-line “public/private” division.

iii) Improper purpose in security enforcement: receivership authorities

The central doctrinal move in this appeal was the Court’s willingness to extend equitable “improper purpose” principles—classically applied to mortgagees/receivers—to the out-of-court appointment of administrators by a qualifying floating charge holder.

The key anchor was Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295, where Lord Templeman stated that powers conferred on a mortgagee must be exercised in good faith for the purpose of obtaining repayment; misuse for collateral purposes can constitute an abuse of power. The Court treated this as establishing a principle that security enforcement powers are not at large.

The Court also relied on Cukurova Finance International Limited v Alfa Telecom Turkey Ltd [2013] UKPC 2; [2016] AC 923 to draw a critical line: enforcement for a purely collateral purpose is ineffective, but if enforcement is genuinely for satisfaction of the debt, the presence of additional collateral motives does not vitiate it. This underpinned the Court’s emphasis that Glint’s case must be (and was pleaded as) one of sole improper purpose, not mixed motives.

iv) Administration “improper motive” and first-instance guidance

The first instance judge relied on Re Aartee Bright Bar Ltd [2023] EWHC 606 (Ch); [2023] BCC 704 (“Aartree”) to conclude that wanting an independent officeholder (and an opportunity to buy the business) was not improper. The Court of Appeal distinguished Aartree as a creditor’s application under paragraph 81 in the context of an insolvent company and where the appointor sought to achieve statutory objectives; it did not answer the pleaded “sole improper purpose” scenario in a solvent-company, loan-to-own setting.

v) Implied constraints on contractual powers (Braganza-type and “legitimate commercial aims”)

The first instance judge rejected any Braganza-type constraint: Braganza v BP Shipping Ltd [2015] UKSC 17. The Court of Appeal did not need to decide the Braganza point regarding appointment, given its conclusion that improper purpose could vitiate appointment in any event.

However, it accepted that the debenture’s information-request power was not wholly unfettered, drawing on Property Alliance Group v Royal Bank of Scotland plc [2018] EWCA Civ 355; [2018] 1 WLR 3529, which infers an implied limitation that such powers be exercised in pursuit of legitimate commercial aims rather than (for example) to vex maliciously. The Court indicated the information-request power must be used for the legitimate commercial aims of the security holder qua security holder.

vi) Abuse of process / “inconsistent positions” estoppel

The first instance judge struck out for abuse of process relying on LA Micro Group (K) Ltd v LA Micro Group Inc [2021] EWCA Civ 1429; [2022] 1 WLR 336, as followed in Malik v Malik [2024] EWCA Civ 1323; [2025] 4 All ER 409. The Court of Appeal (Zacaroli LJ) analysed the LA Micro factors (including the US authority New Hampshire v Maine 532 US 742) and held the abuse argument was not unarguable, especially because Glint was not a party to the remuneration application, did not “win” anything, and may have pragmatically consented on a “pay now, litigate later” basis.

vii) Estoppel by convention

The Court applied the criteria from Revenue and Customs Comrs v Benchdollar Ltd [2009] EWHC 1310 (Ch); [2010] 1 All ER 174, approved (with a caveat) in Tinkler v Revenue and Customs Commissioners [2021] UKSC 39; [2022] AC 886. It held that, on the present record, estoppel by convention raised factual questions not suitable for summary disposal (including what was truly “shared” given Glint’s alleged reservation of rights).

B. Legal Reasoning

i) Construction of the information covenant and “Secured Assets”

The information covenant required the obligors to give the lender “such information concerning the location, condition, use and operation of the Secured Assets as the Lender may require”. Glint argued “Secured Assets” in this clause meant only tangible assets (or fixed charge assets) because only those have “location, condition, use and operation”, and therefore the lender could not demand historical cash balances, creditor lists, or intercompany lending details.

The Court accepted that “Secured Assets” could be context-dependent elsewhere in the debenture (e.g., “possession” in one clause; “let” in another) but held that nothing in this clause limited “Secured Assets” to tangibles. It rejected a conjunctive reading (that all four attributes must be engaged) and treated “and” as functioning as “and/or” in commercial context.

Critically, the Court reframed the clause by substituting the defined term: it permitted information concerning the “undertaking” subject to the floating charge. Requests for cash balances, creditor positions, and intercompany arrangements were naturally information about the condition/operation of the undertaking, and historical trend data could be relevant to present condition/operation. Accordingly, non-compliance was a breach and triggered default.

ii) The new point: improper purpose can vitiate an out-of-court administration appointment

The Court held there was a realistic prospect Glint could prove that the assignee’s sole subjective purpose was to acquire Glint’s assets/business (via an administration/pre-pack), not to recover the loan or pursue statutory administration aims.

The Court then addressed the legal question: does a purely improper purpose matter in administration, given administrators’ statutory duties and objectives? The administrators argued that, unlike receivership, the appointor’s subjective purpose is irrelevant; what matters is whether the appointment can be viewed objectively as directed to the statutory purposes in paragraph 3 of Schedule B1.

The Court rejected that submission as confusing (a) whether the improper purpose is likely to be achieved after appointment with (b) whether that purpose existed at the time of appointment. It also refused to let an “insolvency” created by acceleration of the debt defeat the improper-purpose argument where (on Glint’s case) the very steps to reach enforceability and appointment were part of the improper strategy.

The Court considered paragraph 81 of Schedule B1 (creditor application alleging improper motive, with discretionary remedies including cessation at a specified time) and held it did not impliedly exclude a company’s ability to contend that an appointment is void from inception for sole improper purpose: paragraph 81 is creditor-focused, discretionary, and not inconsistent with a different remedy pursued by the company itself.

On that basis, the Court concluded that equitable improper-purpose principles (as developed in the receivership/mortgagee context) are capable of applying so as to render an out-of-court appointment of administrators ineffective if made solely for an improper purpose. This was the decisive reason the strike-out/summary judgment could not stand.

iii) Estoppel/abuse: remuneration orders and pragmatic consent

The Court’s analysis is notable for its realism about insolvency practice. It emphasised difficulties in treating Glint’s support for a remuneration application as barring a later validity challenge:

  • Glint was not a party to the remuneration proceedings.
  • The remuneration/discharge orders benefited the administrators, not Glint (a fee cap was commonplace).
  • Courts typically assume (rather than investigate) appointment validity when dealing with in-administration applications.
  • A pragmatic “pay now, litigate later” approach may be legitimate to end a process quickly without conceding validity, especially where litigating validity first could prolong the administration and escalate harm and cost.

The Court also signalled that “jurisdiction” objections based on an allegedly invalid appointment may be treated as a failure of a statutory precondition rather than lack of subject-matter jurisdiction, referencing Khan v Singh-Sall [2023] EWCA Civ 1119.

C. Impact

i) A meaningful constraint on “loan-to-own” use of out-of-court administration

The principal precedential significance is the Court’s holding that an out-of-court appointment is capable of being void from the outset if the appointor’s sole subjective purpose is improper (e.g., to obtain assets by leveraging the administration machinery) rather than to pursue proper security-enforcement or statutory administration objectives. This is especially salient where the company is (at least arguably) solvent and the appointor’s strategy depends on manufacturing enforceability and then using administration as an acquisition pathway.

ii) Litigation posture and timing

The judgment should reduce confidence in arguments that a company inevitably “affirms” an administration merely by cooperating with exit steps (fees/discharge) necessary to mitigate commercial damage. It also suggests that administrators and their advisers should take care in how stakeholder consents and recitals are documented if later estoppel arguments are anticipated—though whether any estoppel arises will remain highly fact-sensitive.

iii) Information-rights under debentures

On construction, the case confirms that information covenants tied to “Secured Assets” may extend to the “undertaking” under a floating charge, not merely tangibles—supporting broad lender monitoring rights, including requests for trend data. At the same time, the Court endorsed an implied limitation that such powers be used for “legitimate commercial aims” (Property Alliance Group), which may be deployed in future disputes about abusive lender information tactics.

4) Complex Concepts Simplified

  • Qualifying floating charge (QFC): A form of security over substantially all of a company’s assets that (if the instrument so provides) gives the holder a statutory right to appoint administrators out of court (Schedule B1, paragraph 14).
  • Administration objectives (Schedule B1, paragraph 3): An administrator must pursue a hierarchy—(a) rescue the company as a going concern; failing that (b) achieve a better result for creditors than liquidation; failing that (c) realise property to distribute to secured/preferential creditors.
  • “Improper purpose” / “collateral purpose”: Using a legal power for an end it was not given for. In secured lending, equity traditionally restrains enforcement powers used other than for repayment/enforcement of the secured debt (e.g., using enforcement machinery purely to seize control or strip assets).
  • Void ab initio: Treated as invalid from the beginning (as if it never happened), rather than merely terminated prospectively.
  • Estoppel / abuse of process: A party may be prevented from taking a position inconsistent with an earlier stance if doing so would be unfair or would undermine the integrity of the court process; but it is fact-sensitive and not a rigid rule (as discussed in LA Micro Group (K) Ltd v LA Micro Group Inc and Malik v Malik).

5) Conclusion

Glint Pay Ltd & Ors v Baker & Anor [2026] EWCA Civ 1023 establishes (at least at the level required to defeat strike-out/summary judgment, and expressed as a legal conclusion) that an out-of-court appointment of administrators by a QFC holder is capable of being ineffective from inception if made solely for an improper purpose, applying equitable principles familiar from receivership and mortgage enforcement. The Court simultaneously confirmed a robust, “undertaking-wide” reading of information covenants linked to “Secured Assets”, while recognising an implied constraint that such powers be exercised for legitimate commercial aims. The decision is likely to be invoked in future challenges to aggressive “loan-to-own” appointment strategies, particularly in cases involving solvent or near-solvent companies and disputed manufactured defaults.