Section 234 Insolvency Act 1986: Exclusion of Mortgaged Land with Appointed Receivers from Administrators’ Possession Orders

Introduction

In Carvill-Biggs & Anor v Reading [2025] EWCA Civ 619, the England & Wales Court of Appeal had to decide whether administrators may use section 234 of the Insolvency Act 1986 to obtain a possession order against a director-occupier who was trespassing in a property secured by a mortgage under which receivers had already been appointed. The dispute arose after TFG Capital No.2 Ltd (“TFG2”) appointed LPA receivers over the freehold land owned by Rose Cottage Farm Ltd (the “Company”) when the Company defaulted on its £2.85 million loan. Subsequently, FRP Advisory administrators sought a High Court order under section 234 for vacant possession from the Company’s sole director, Mr Reading, and his family. The judge below granted that order, but on appeal Lord Justice Snowden allowed the appeal, ruling that section 234 did not authorize administrators to oust receivers or mortgagees from mortgaged land.

Summary of the Judgment

The Court of Appeal unanimously held that:

Section 234 is a summary procedure for enforcing rights the company already has; it does not confer new proprietary rights.
“Property to which the company appears to be entitled” under section 234(2) excludes land subject to a fixed charge with appointed receivers.
Following mortgage law and established insolvency principles, mortgaged land under receiver appointment remains the mortgagee’s fund; the company retains only an equity of redemption.
Administrators cannot displace receivers by section 234; they must instead rely on paragraph 71 of Schedule B1 (the “administrative receivers” power) if they wish to sell charged property.

The order for possession was set aside, and the existing County Court possession proceedings by TFG2 remained unaffected.

Analysis

Precedents Cited

Leyland DAF Ltd v Highwayman (1994) 2 BCLC 106 – confirms that section 234 does not create proprietary rights beyond those of the company.
Smith v Bridgend CBC [2001] UKHL 58 and Ezair v Conn [2020] EWCA 687 – reinforce that insolvency office-holders stand in the company’s shoes, acquiring no better rights.
Four-Maids Ltd v Dudley Marshall (Properties) Ltd [1957] Ch 317 – underlines a mortgagee’s right to possession “before the ink is dry.”
Gosling v Gaskell [1896] 1 QB 669 – establishes that a mortgagor cannot revoke a receiver’s appointment or interfere with charged property.
Buchler v Talbot [2004] 2 AC 298 – explains the separate asset funds for secured and unsecured creditors on winding up, demonstrating that charged assets do not form part of the company’s asset pool.
Ayerst v C&K (Construction) Ltd [1976] AC 167 – describes assets in liquidation as held on trust for creditors, again excluding mortgaged property under fixed charge.

Legal Reasoning

1. Scope and Purpose of Section 234. Section 234 provides a summary route for administrators or liquidators to recover company property in the hands of third parties. However, it does not confer or enhance proprietary rights: it enables enforcement only of rights the company already held (Leyland DAF; Ezair).

2. Mortgage and Receiver Principles. Under section 87 of the Law of Property Act 1925, a legal mortgagee obtains a fictional 3 000-year lease, enabling immediate possession and appointment of receivers under section 101 LPA. The mortgagor retains legal title subject to the mortgage and its right to possession terminates when the mortgagee takes steps—such as appointing receivers or issuing County Court proceedings under CPR 55—to enforce its security.

3. Equity of Redemption. The Company’s only remaining interest after mortgage enforcement is its equity of redemption: the right to re-transfer land on payment of the secured debt. That interest is itself subject to the mortgagee’s superior proprietary right and may not support proceedings for possession once the mortgagee has intervened (cf. section 98 LPA).

4. Administration vs. Receivership. Appointment of administrators under Schedule B1 cannot override prior receiver appointments. Paragraph 67 of Schedule B1 requires the administrator to take control of property “to which he thinks the company is entitled,” excluding charged land under active receivers. Paragraph 71 Schedule B1 provides a limited power to sell charged property—but only with court approval and subject to discharging the secured debt.

5. Procedural Considerations. Although the judge below treated the section 234 application as not governed by CPR 55, the Court of Appeal did not need to decide on CPR interplay because section 234 was jurisdictionally inapplicable. Had section 234 applied, insolvency rules would incorporate CPR procedures (Insolvency Rule 12.1) and ensure defendants’ procedural protections.

Impact

This decision clarifies the boundary between insolvency and property enforcement rights:

Administrators cannot use section 234 to oust mortgagees or receivers; they must rely on paragraph 71 Schedule B1 for any sale of charged land.
Mortgaged property subject to receiver appointment remains outside the pool of company assets recoverable by the office-holder.
The ruling reinforces mortgagees’ security: once receivers are appointed, a mortgagor’s equity of redemption does not support further possession claims.
Practitioners should coordinate enforcement strategies: mortgagees must continue under CPR 55 or receivership, while administrators must adopt insolvency-specific routes to deal with charged assets.

Complex Concepts Simplified

Section 234 Procedure – a fast-track remedy for insolvency office-holders to recover company property, not to grant new rights.
Legal Mortgage & “3 000-Year Lease” – by statute, a mortgagee can act as if holding a long lease, including immediate possession rights.
Equity of Redemption – the mortgagor’s residual interest in mortgaged land, which survives enforcement but is subordinate to the mortgagee’s rights.
Floating vs. Fixed Charge Receivers – receivers appointed under a fixed charge exercise powers for the mortgagee’s benefit; post-appointment, the company cannot interfere.
Paragraph 71 Schedule B1 – a specific court-supervised power allowing administrators to sell charged assets on terms that secure the mortgagee’s debt.

Conclusion

Carvill-Biggs & Anor v Reading establishes that section 234 of the Insolvency Act 1986 cannot be employed by administrators to procure vacant possession of land subject to a fixed charge with active receivers. The decision reaffirms longstanding principles of mortgage law and insolvency: mortgagees’ proprietary security rights take priority, and office-holders in insolvency may enforce only those rights held by the company. Practitioners must accordingly align enforcement strategies—mortgagees under CPR 55 or receivership, administrators under paragraph 71 Schedule B1—avoiding procedural overreach and ensuring respect for secured creditors’ entrenched rights.