Court Of Appeal Finds Administrator Appointment Arguably Invalidated Because Of Appointor’s Improper Purpose

The court also held that a chargee’s right to request information under a charge document was arguably subject to an implied term that the right should be exercised only for legitimate commercial aims

The Court of Appeal has allowed an appeal against a decision to strike out a claim challenging the validity of an out-of-court appointment of administrators, finding that there was a realistic prospect of establishing that the appointment was invalid in circumstances where the appointor was motivated by an improper purpose: Glint Pay Ltd & Ors v Baker & Anor [2026] EWCA Civ 1023. 

In the present case, the appointor of the administrators was an entity that had acquired secured debt over the company's assets from an existing lender, following an unsuccessful attempt to acquire the company by way of a takeover offer. The Court of Appeal found that the appointor's sole subjective purpose in making the appointment was to acquire the company's assets and business, rather than to achieve any of the statutory objectives of administration set out at paragraph 3(1) of Schedule B1 of the Insolvency Act 1986 (IA 1986). The Court of Appeal rejected the argument that an improper purpose could be rendered proper simply because the administrators would in fact act as independent office holders. If it is ultimately established that an administration order was sought for an improper purpose, the court will need to consider the appropriate remedy.  If the consequence is that the administration order is a nullity, the consequences for an applicant and the insolvency practitioners taking an appointment could be significant (though in this case, the applicant had been dissolved and was not a party to the proceedings).

The decision will also be of interest to financial institutions for its finding that a chargee's right to request information under a security document was arguably subject to an implied term that the right should be exercised only for legitimate commercial aims. This decision is illustrative of a theme we have seen in decisions considering the exercise of contractual rights and discretions in a financial services context (see our previous blog posts). 

Historically, case law has drawn a distinction between a unilateral contractual right (where the decision maker does not need to justify their decisions) and a contractual discretion (which is subject to Braganza limitations, requiring the discretion to be exercised in good faith and not arbitrarily or capriciously, as per Braganza v BP Shipping Ltd [2015] UKSC 17). A right to request information under a security document arguably falls within the former category. However, this decision is part of a growing trend of the "proper purpose" fetter being applied to the use of any contractual power in a contractual banking context, ie that contractual powers are not completely unconstrained, and should be exercised in pursuit of legitimate commercial aims (as per Property Alliance Group Limited v The Royal Bank of Scotland Plc [2018] EWCA Civ 355, see our blog post). A similar conclusion was reached in Murfet & Anor v Property Lending LLP & Anor [2024] EWHC 2787 (Ch) (see our blog post).

We consider the decision in more detail below.

Background

The claimant companies (together, Glint) rejected a takeover offer by an SPV (Niven) incorporated by a Singapore-based venture capital firm. Niven subsequently purchased a secured loan to Glint from an existing lender. The security documents contained provisions requiring Glint to provide information regarding its assets to the chargee (now Niven) upon request. Niven made a request for information, which Glint refused. Niven declared an event of default and demanded repayment of the outstanding loan. 

When Glint did not pay, Niven appointed the defendant administrators out of court as a qualifying floating charge holder pursuant to paragraph 14 of Schedule B1 of the IA 1986, and began negotiations with the administrators to purchase Glint as part of a “pre-pack” administration. Shortly thereafter, Glint obtained alternative finance and repaid the loan in full, ending the administration. Niven was later dissolved and therefore not a party to the proceedings. Glint brought proceedings against the administrators on the basis that they were not validly appointed, and the administrators applied to strike out the claim.

High Court decision

The High Court’s reasoning is discussed in our previous blog post.

In summary, the High Court granted the administrators’ application to strike out Glint’s claim as it considered that Glint had no real prospect of establishing that the appointment of the administrators was invalid. It held that an event of default had occurred under the security documents and Niven had the right to appoint the administrators. The court found that it was clear that Niven appointed the administrators to acquire Glint’s business, rather than as a means to secure repayment. However, the court did not consider this an improper purpose as Niven’s objective fell within one of the proper purposes identified in Re Aartee Bright Bar Ltd (in Administration) [2023] EWHC 606 (Ch).

Glint appealed.

Court of Appeal decision

The Court of Appeal found in favour of Glint and upheld the appeal. The key aspects of the decision that will be of interest to financial institutions are set out below.

Chargee’s right to information under security documents

The Court of Appeal agreed with the High Court that an event of default had occurred because of Glint’s failure to provide information (which gave the chargee the right to appoint administrators).

Improper purpose in appointing administrators

The Court of Appeal considered that Glint had a realistic prospect of establishing that Niven’s sole subjective purpose in appointing administrators was to acquire Glint’s assets and business. This was clear from the circumstances of the appointment, including: the failed takeover offer made by Niven followed shortly by its purchase of the secured loan to Glint; the timing of the request for information; Niven’s enforcement of its security notwithstanding Glint’s balance sheet solvency; the plan to purchase Glint in a pre-pack administration; and Niven’s reluctance to accept repayment of the loan.

The question was whether an out of court appointment of administrators was valid in circumstances where the appointor was motivated by an improper purpose. The administrators accepted that the appointor’s purpose could be relevant, but submitted that the subjective purpose of the appointor is irrelevant in the case of administration, arguing that what matters is whether the appointment is made for one of the statutory purposes under the IA 1986 (viewed objectively). They distinguished the appointment of receivers, who are required to safeguard the interests of the appointor. By contrast, an administrator is required to prioritise the company and creditors under paragraph 3 of Schedule B1 of the IA 1986, namely to:

1. give priority to rescuing the company as a going concern; or 
2. achieve a better result for the company’s creditors as a whole than would be likely if the company were wound up.

The administrators argued that it was impossible for Niven to have an objective improper purpose of acquiring the business and assets of Glint, as it must have appreciated that the administrators would be required to act independently of Niven to achieve objectives (a) or (b) above. The Court of Appeal did not accept this submission, which confused the likelihood of achieving an improper purpose following appointment, with the existence of that purpose prior to/at the time of appointment. The Court of Appeal concluded that where an appointor has a subjective improper purpose, it may render an out of court appointment of administrators ineffective. 

This contrasted with the High Court’s conclusion that the appointment was not improper. The Court of Appeal found that the High Court’s judgment was based on a flawed understanding of the reasoning in Aartee, as follows:

• The High Court found that Niven’s purpose of appointing administrators (in order to acquire Glint), still fell within one of the proper purposes identified in Aartee, namely "to enable an independent office holder to take control of the assets". This was because the appointment of administrators would lead to an independent office holder taking control of Glint’s assets. 
• In the view of the Court of Appeal, the Aartee decision was set in a wholly different context, involving an insolvent company and an application to appoint administrators made by a creditor. The allegation made in that case was that the only proper purpose in appointing administrators was to recover payment of the appointor’s debt, whereas the appointor might have also achieved repayment from assets realised outside the administration. The court in Aartee held that this did not render the appointment improper - the appointor nevertheless had the genuine purpose of appointing administrators to achieve statutory objectives: to ensure creditors were better off than in liquidation and enable investigations by an independent office holder. 
• The flaw in the High Court’s reasoning was that Niven’s arguably improper motive for appointing administrators could not be rendered proper, simply because the administrators would then in fact be appointed as independent office holders.

Exercise of powers under security documents reasonably and for proper purpose

Given the conclusions above, the Court of Appeal said it was unnecessary to deal with Glint’s submission that Niven was subject to an implied Braganza-style term restricting the exercise of the power to appoint the administrators. However, it addressed separately the argument that there was an implied term in the security documents that the power to request information was exercisable only for legitimate commercial aims. The Court of Appeal agreed that there was arguably an implied term of this nature in the security document based on Property Alliance Group v Royal Bank of Scotland plc [2018] EWCA Civ 355, which found that a lender’s right under a facility agreement to request a valuation of the secured properties and charge the borrower the cost of doing so was not wholly unfettered, and was subject to the implied limitation of legitimate commercial aims.

Estoppel

Lastly, the court held that Glint was not estopped from challenging the validity of the administrators’ appointment because it had previously agreed to the administrators applying to court for payment of their fees in separate ICC proceedings, which was dependent on their valid appointment. The court noted that Glint was not a party to the ICC proceedings and, at most, had acquiesced in the relief sought by the administrators for their own benefit, and it was not unreasonable for Glint to opt for a “pay now and litigate later” approach to end the administrators’ appointment (and avoid their incurring further costs) while reserving the right to object to the validity of the appointment later. The court disagreed with the High Court’s finding that Glint’s claim would be characterised as an abuse of process.

Accordingly, the Court of Appeal allowed the appeal against the High Court’s decision to strike out the claim/grant the administrators summary judgment.