MTB Motors Ltd, Re

Factual and Procedural Background

An ordinary application was issued by the joint administrators of Company A in the Manchester District Registry seeking a declaration that their administration appointment and all acts undertaken since the appointment time should be deemed valid despite the failure to obtain prior written consent from the Financial Services Authority (FSA) as required by statute. The administrators were appointed on 7th October 2010 by the company’s directors under paragraph 22 of Schedule B1 to the Insolvency Act 1986. Subsequent to their appointment, the administrators discovered that Company A was registered with the FSA, a fact not initially known due to a search conducted using the company’s formal name including full stops after initials, whereas the FSA register listed the company without full stops. The FSA later provided written consent to the appointment, but this was filed with the court after the notice of intention to appoint had been submitted. The administrators applied for a court declaration to cure the defect caused by the absence of prior FSA consent and to validate their appointment retrospectively.

Legal Issues Presented

1. Whether the failure to obtain and file prior written consent from the Financial Services Authority to the appointment of administrators under Section 362A of the Financial Services and Markets Act 2000 renders the administrators’ appointment null and void.
2. Whether the defect in failing to file the FSA consent can be cured under Rule 7.55 of the Insolvency Rules 1986 or paragraph 104 of Schedule B1 of the Insolvency Act 1986.
3. Whether the court has jurisdiction to make an administration order with retrospective effect under paragraph 13(2) of Schedule B1 to validate the administrators’ appointment and acts done since the purported appointment.

Arguments of the Parties

Appellant's Arguments

• The administrators accept the statutory requirement for FSA consent and its filing but argue that the failure to file the consent does not invalidate their appointment.
• They contend that the requirement to file FSA consent is not "prescribed" within the meaning of paragraph 29(1)(b) of Schedule B1, as it is not mentioned in the Insolvency Act or Rules, and thus should be considered an external administrative requirement.
• The administrators argue that the defect is curable either under paragraph 104 of Schedule B1 or Rule 7.55 of the Insolvency Rules, allowing validation of their appointment despite the procedural irregularity.
• They invite the court to exercise its discretion under paragraph 13(2) of Schedule B1 to make a retrospective administration order validating their appointment from the original date, to avoid additional costs, delay, and uncertainty.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analyzed the statutory framework governing the appointment of administrators, focusing on Section 362A of the Financial Services and Markets Act 2000 and the provisions of Schedule B1 to the Insolvency Act 1986. It held that the requirement for FSA consent to be filed with the court alongside the notice of intention to appoint is a mandatory and prescribed condition, as indicated by the language of paragraph 29(1)(b) of Schedule B1 and the 2000 Act. The court rejected the administrators’ argument that the filing requirement was merely administrative and external to the insolvency procedure. Relying on the binding precedents of Re G-Tech Construction Ltd and Pillar Securitisation, the court concluded that the failure to file the FSA consent rendered the appointment invalid from the outset, and the provisions for curing defects under Rule 7.55 and paragraph 104 of Schedule B1 did not apply where no valid administration existed.

However, the court acknowledged the practical difficulties and potential prejudice caused by invalidating the appointment. It identified the court’s jurisdiction under paragraph 13(2) of Schedule B1 to make administration orders with retrospective effect. The court noted that retrospective appointments had been made previously in similar insolvency cases and distinguished this power from the more limited temporal provisions in the Civil Procedure Rules. Exercising its discretion, the court found it appropriate and expedient to validate the administrators’ appointment retrospectively to the original appointment date, thereby confirming the validity of their acts and entitlements during the intervening period.

The court also emphasized the importance of this case as a cautionary example, highlighting the need for administrators to conduct thorough FSA register searches using variant company names to ensure compliance with the statutory consent requirements.

Holding and Implications

The court’s final decision was to make an administration order appointing the joint administrators retrospectively with effect from the original appointment date of 7th October 2010, notwithstanding the initial failure to file the FSA consent. The order validated all acts and decisions taken by the administrators since that time and confirmed their entitlement to remuneration and costs incurred.

The costs of the application were ordered to be treated as an expense of the administration. The court noted that the costs of obtaining and circulating a transcript of the judgment could also be treated as an administration expense if the administrators deemed it appropriate.

This decision does not establish new precedent altering the strict requirements for valid appointments but demonstrates the court’s willingness to exercise its discretion to mitigate procedural defects where justified by the circumstances, thereby providing practical relief without undermining statutory safeguards.