Carvill-Biggs & Anor v Reading

Factual and Procedural Background

The Appellant, together with his family, occupies a large residential property (the "Property") owned by Company A, a special purpose vehicle established by the Appellant as its sole director to acquire the Property in 2022. The Property was purchased for approximately £2.5 million. Company A obtained a loan of £2.85 million from Company B secured by a legal mortgage over the Property and a floating charge over other assets. The mortgage included a covenant prohibiting occupation by persons related to Company A, yet the Appellant and family members took residence without any formal lease or agreement.

Company A defaulted on the loan in April 2023, prompting Company B to appoint LPA receivers over the Property in August 2023. Subsequently, Company B initiated possession proceedings under CPR 55 in the County Court (the "County Court proceedings") seeking possession to facilitate a sale free from occupation. The Appellant indicated an intention to contest these proceedings.

To avoid delays, Company B appointed the Respondents as joint administrators of Company A under its floating charge in November 2023. The administrators sought possession of the Property through an application under the Insolvency Act 1986 (the "IA Application") in the Business and Property Courts in Leeds, joined by other adult occupiers. On 16 May 2024, the Judge ordered possession in favour of the administrators under section 234(2) IA 1986, finding that Company A appeared entitled to the Property and that CPR 55 did not apply.

The Appellant sought permission to appeal the possession order and a stay of execution, arguing that the Property should not be regarded as property to which Company A appears entitled due to the fixed charge and appointment of LPA receivers, that CPR 55 was the correct procedure, and that the administrators’ application constituted an abuse of process. Permission to appeal was granted on these grounds, and a stay was initially granted pending appeal due to the risk of prejudice if possession were enforced before the appeal.

The administrators later applied to vary or discharge the stay, seeking an oral hearing and arguing detriment to the administration from delay and lack of payment for occupation. The court considered the procedural propriety of this application and the substantive merits of continuing the stay.

Legal Issues Presented

1. Whether, in circumstances where LPA receivers have been appointed under fixed charges, the Property should be regarded as "property to which the company appears to be entitled" for the purposes of section 234(2) IA 1986.
2. Whether CPR 55 applies to possession claims in this context, such that possession should have been sought in the County Court proceedings rather than via the IA Application.
3. Whether the administrators’ application for possession constituted an abuse of process by circumventing ongoing County Court proceedings and relocating the dispute to another court.
4. Whether the stay of execution of the possession order pending appeal should be continued, varied, or discharged.

Arguments of the Parties

Appellant's Arguments

• The Property is subject to a fixed charge with LPA receivers appointed, so Company A is only entitled to the equity of redemption, not the Property itself, and thus section 234(2) IA 1986 does not apply.
• The possession order should have been made under CPR 55 in the County Court, not through the IA Application.
• The administrators’ proceedings constitute an abuse of process by bypassing the existing County Court proceedings and moving the case to a geographically distant court.
• The stay of possession should be maintained to prevent the appeal from becoming academic and to avoid prejudice.
• The Appellant offered to pay £2,000 per month for occupation pending appeal.

Respondents' (Administrators') Arguments

• The Judge was entitled to make the possession order under section 234(2) IA 1986 as the company appeared entitled to the Property.
• The appeal is a matter of form, not substance, and has no real prospect of success.
• Granting a stay authorizes trespass and prejudices the administrators by delaying sale and preventing rent collection.
• The stay should be set aside or varied to include payment of market rent (£10,000 pcm) for continued occupation pending appeal.
• The application to vary the stay should have been supported by evidence and followed proper procedural rules.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Hammond Suddard Solicitors v Agrichem [2001] EWCA Civ 2065	Framework for assessing whether to grant or refuse a stay pending appeal by balancing the risk of injustice to parties.	The court applied this principle to weigh the risk of injustice to both the Appellant and the Administrators in deciding to continue the stay.
R (Van Hoogstraaten) v Governor of Belmarsh Prison [2002] EWHC 2015 (Admin)	Clarification that the possibility of an appeal becoming academic is not determinative for granting or refusing a stay.	The court considered this principle but ultimately found the risk of injustice favoured the Appellant despite the appeal potentially becoming academic without a stay.

Court's Reasoning and Analysis

The court carefully analysed the jurisdictional scope of section 234(2) IA 1986, noting the absence of direct authority on whether a company subject to a fixed charge and with appointed LPA receivers can be regarded as "appearing to be entitled" to the property. The court acknowledged the Appellant’s position that the company’s interest is limited to the equity of redemption and that the fixed charge and receivership complicate the administrators’ claim to possession.

The court rejected the administrators’ procedural approach to varying the stay, emphasizing the clear procedural rules under CPR PD 52C para 19(2) for contesting stays pending appeal. It held that the administrators failed to properly oppose the stay initially and did not provide sufficient evidence to justify its variation or discharge.

In balancing the risk of injustice, the court recognized that although the Appellant lacks a legal right to occupy the Property, the law requires that eviction be carried out lawfully. The appeal raised substantive issues regarding jurisdiction and procedural propriety, not merely points of form. The court found that enforcing possession before the appeal would likely render it academic and cause the Appellant significant prejudice.

The court found no credible evidence that continuing the stay would cause material financial prejudice to the administrators, who lack authority to sell or rent the Property absent court approval, and that the LPA receivers hold the primary rights to realize the Property under the mortgage. The court noted that any delay pending appeal would likely be short, further mitigating prejudice.

Regarding conditions on the stay, the court accepted the Appellant’s offer to pay a reduced monthly sum (£2,000) into court as a condition, noting the absence of agreement on the recipient but proposing a mechanism involving the administrators, LPA receivers, and Company B to resolve distribution. The court clarified this condition does not determine the appropriate rent nor affect rights to seek damages for trespass.

Holding and Implications

The court REFUSED TO DISCHARGE the stay of execution of the possession order pending appeal but VARIED it by imposing a condition requiring the Appellant to pay £2,000 per month into court for continued occupation.

This decision preserves the Appellant’s ability to pursue a substantive appeal on important jurisdictional and procedural questions without suffering irreparable prejudice. It confirms that possession orders under the Insolvency Act require careful scrutiny where fixed charges and receivership exist and that possession claims should follow proper procedural routes. The ruling does not set new precedent but clarifies procedural expectations and the balancing of interests in stay applications pending appeal in insolvency-related possession disputes.