Blights Builders Ltd, Re

Factual and Procedural Background

Company A, effectively a one-person building company, lost its management and ceased operations following the death of its sole manager on 26th May 2006. It was subsequently discovered to be insolvent. On 5th July 2006, a creditor, Company B, presented a petition for the winding up of Company A. On 20th July 2006, the deceased manager's executors, unaware of the existing winding up petition, attempted to appoint Joint Administrators under the Insolvency Act 1986. The court issued the winding up petition on 25th July 2006. The issue arose whether the appointment of the Joint Administrators was valid given the existence of the earlier winding up petition.

Legal Issues Presented

1. What constitutes the "presentation" of a winding up petition under Schedule B.1 of the Insolvency Act 1986—is it the delivery to the court or the subsequent issue of the petition?
2. Whether the appointment of Joint Administrators under paragraph 22 of Schedule B.1 was valid given the existence of an undisposed winding up petition presented prior to their appointment.
3. Whether the invalid appointment of Joint Administrators can be regularised or validated by court order under Insolvency Rule 7.55 or other principles.
4. What orders should be made regarding the consequences of the invalid appointment and the future administration of the company.

Arguments of the Parties

Appellant's Arguments

• Submission that the "presentation" of the petition occurs upon delivery and filing at the court, not upon issuance or sealing of the petition.
• Argued that the appointment of the Joint Administrators was invalid due to the existence of an undisposed winding up petition at the time of appointment.
• Invited the court to consider whether the invalid appointment could be remedied by the regularisation provision in Insolvency Rule 7.55.
• Contended that the appointment was not an "insolvency proceeding" for the purposes of Rule 7.55 and that the fundamental flaw in appointment could not be cured by regularisation.
• Relied on precedent to argue that the invalidity could not be retrospectively validated.

Respondent's Arguments

The opinion does not contain a detailed account of the respondent's legal arguments.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analyzed the meaning of "presentation" of a winding up petition under Schedule B.1 and related Insolvency Rules. It concluded that presentation occurs when the petition is delivered and filed at the court, not when it is issued or sealed. This interpretation was supported by relevant Insolvency Rules, Practice Directions, and historical practice under the Rules of the Supreme Court.

Given that the winding up petition had been presented prior to the appointment of the Joint Administrators, the court held that the company lacked the power to validly appoint them under paragraph 22 of Schedule B.1. The court rejected the argument that the invalid appointment could be remedied by the regularisation provision in Insolvency Rule 7.55, reasoning that the appointment was not an insolvency proceeding and that the statutory criteria for appointment represented a fundamental requirement that could not be bypassed.

The court further distinguished relevant case law, emphasizing that the company simply had no power to appoint administrators due to the extant petition. Consequently, the appointment was declared invalid.

However, the court declared that the acts of the Joint Administrators during their tenure would be treated as valid pursuant to paragraph 104 of Schedule B.1, and granted an indemnity to protect the administrators against liabilities arising solely from the invalidity of their appointment, except for remuneration.

The court then considered the appropriate next steps and allowed the petitioning creditor to apply for an administration order, which would replace the winding up petition. The court was satisfied on the evidence that the company was insolvent and that administration was likely to achieve a better realisation for creditors than liquidation.

Finally, the court made an administration order appointing the same Joint Administrators with effect from the date of the order and dismissed the winding up petition.

Holding and Implications

The court held that the appointment of the Joint Administrators was INVALID due to the existence of a previously presented but undisposed winding up petition, which precluded the company from making such an appointment under paragraph 22 of Schedule B.1.

The court declared the administrators' acts during the invalid appointment valid and granted them indemnity against liabilities arising solely from the invalidity, though not covering their remuneration. The court permitted the administrators to seek orders concerning their costs.

The petitioning creditor was permitted to apply for an administration order, which was granted, resulting in the dismissal of the winding up petition. This decision directly affects the parties by clarifying the timing and effect of presentation of winding up petitions and the limits on appointment powers under insolvency legislation. No new precedent beyond the application of existing principles was established.