Filling the void—the court’s approach to validation orders (Wilson v SMC Properties Ltd)

Filling the void—the court’s approach to validation orders (Wilson v SMC Properties Ltd)

Hugh Sims QC and Christopher Brockman, barristers at Guildhall Chambers, say the decision in Wilson v SMC Properties Ltd emphasises that while good faith alone is not enough, it is a powerful factor in favour of the exercise of the court’s discretion to validate an otherwise void disposition.

Original news

Wilson & anor v SMC Properties Ltd and anor [2016] EWHC 444 (Ch), [2016] All ER (D) 246 (Jan)

The Companies Court dismissed the appellant liquidator’s appeal against the registrar’s validation, pursuant to section 127 of the Insolvency Act 1986 (IA 1986), of a contract made between the second appellant company and the first respondent company as purchaser of land. The registrar’s conclusions on the actual value of the property, applying a deduction from the open market value on the assumption that a quick sale was required, had meant that there had been no loss to creditors.

Briefly, what was the background to the appeal?

The case concerned an application for a validation order under IA 1986, s 127 and an appeal from the recent decision of Registrar Briggs (see Wilson and another v SMC Properties Ltd and others [2015] EWHC 870 (Ch), [2015] All ER (D) 115 (Apr)).

IA 1986, s 127 provides that any disposition of a company’s property after the making of a winding-up order is void unless validated by the court. IA 1986, s 129 provides that a winding-up by the court is deemed to commence at the time of the presentation of the petition.

The facts are very straightforward. The company, 375 Live, purchased 58 Hatton Garden, London (the Property) in August 2011 for £1.2m. In 2013 it took a bridging loan from a private lender and granted a mortgage over the Property. Subsequently it struggled to repay the loan, and the mortgagee informed the company that it would enforce its security if the company did not sell the property to repay the loan by its (extended) due date

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