Unsuccessful challenge to a QFCH appointment

The relationship between the lender and company broke down and eventually, the lender demanded repayment of the debt due to it and appointed administrators under its floating charge. It did so by way of a letter of demand sent at 9am by email and by post, and then by filing a notice of appointment at 11.56am on the same day.

The applicant contested the appointment on three grounds, all of which were rejected:

1. The debenture did not contain any express terms setting out when it became enforceable. The court accepted those terms were missing, but considered the debenture and facility had to be read together and so implied a term to the effect that the security became enforceable when an event of default arose under the facility.
2. The demand was premature as the debenture did not permit the giving of notices by email. The court took the view, but not without some misgivings, that the demand was valid. The provision was not mandatory, the company accepted it had received the demand and it did not have the funds to meet it. Even if the lender had jumped the gun, that defect did not necessarily stand in its way because the court could still cure such a defect if it considered it procedural.
3. There were several defects in the notice, including a failure to state the security was enforceable and to file Paragraph 100(2) statement with the notice, but those were procedural defects and no prejudice was caused to anyone. The court was prepared to cure those.

The remainder of the application which is for  an order under Paragraph 81 Sch B1 Insolvency Act 1986 that the administration end on the grounds there was some improper motive for the appointment remains to be determined.

In the matter of the Sustainable Bathroom Company Ltd [2023] EWHC 2065.