The Court of Appeal decision in Carvill‑Biggs & Anor v Reading [2025] EWCA Civ 619, clarifies the scope and application of section 234 of the Insolvency Act 1986, which empowers an office-holder to compel the delivery up of company property or documents from third parties, in relation to mortgaged land.
This blog considers the unique facts of the case, how they shaped the Court of Appeal’s findings and the key takeaway points for office-holders and lenders.
Background
Rose Cottage Farm Limited (the Company), wholly owned and controlled by Mr Reading (Mr Reading), held the freehold to a £2.5m property in Orpington (the Property).
TFG Capital No. 2 Limited (the Lender) provided a £2.85 million loan to the Company which was secured by a first legal mortgage over the Property and a debenture over the Company.
In April 2023, following an event of default, the Lender appointed LPA receivers over the Property.
Mr Reading purported to occupy the Property as a tenant under a tenancy agreement, claiming a right to remain in possession of the Property. As such, in August 2023, the Lender, as mortgagee in possession, issued proceedings in the County Court in Bromley pursuant to Rule 55 of the Civil Procedure Rules 1996 (CPR 55) (the Possession Proceedings).
Facing delays in the Possession Proceedings, in November 2023, the Lender appointed Mr Cavill-Biggs and Mr Needham as joint administrators of the Company. In their capacity as Administrators, Mr Cavill-Biggs and Mr Needham issued proceedings against Mr Reading under s. 234 of the Insolvency Act 1986 seeking possession of the Property (the S.234 Application).
At first instance, the High Court ruled in favour of the Administrators, granting possession of the Property but Mr Reading appealed this decision.
Grounds of Appeal
The Court of Appeal considered three grounds of appeal:
(i) in circumstances where LPA receivers had been appointed, the Property was no longer “property to which the company appear[ed] to be entitled” within the meaning of s. 234(2);
(ii) the judge at first instance was wrong in holding that CPR 55 did not apply to the S.234 Application; any order for possession should been made in Possession Proceeding rather than under the Insolvency Act; and/or
(iii) it was an abuse of process for the Administrators to seek to bypass the Possession Proceedings by commencing the S.234 Application.
The Court of Appeal Findings
1. Scope of “property… to which the company appears to be entitled” under s. 234
The Court reaffirmed that s 234 does not give an office-holder any better rights to any property than the Company had. Land under a fixed legal mortgage which was subject to an LPA receivership is not property to which a company is entitled. The Company’s rights were limited to its equity of redemption, which gave no entitlement to possession, only the LPA receivers/mortgagee could assert possession rights.
2. Interaction between LPA receivership and Administration
A mortgage creates a fixed charge. Once money is due and unpaid, the mortgagee may appoint receivers, usually with broad powers of possession and sale. In this case, the Lender validly appointed LPA receivers over the Property. The later appointment as Administrators over the Company did not override the prior LPA receivership and s 234 could not be used to displace the LPA receivers’ control over the Property.
3. Abuse of process and route to possession
Administrators are not authorised to initiate possession proceedings in parallel with existing proceedings under CPR 55. The Court was inclined to find that their resort to s 234 was misuse (but not abuse) of process.
Outcome
Mr Reading’s appeal was granted, and the possession order was stayed pending determination of the Procession Proceedings. However, the Court emphasised the need to avoid making the appeal academic and ordered Mr Reading to pay £2,000 per month into court during the stay, balancing the parties’ equities.
Key Takeaways
The Court of Appeal’s decision offers the following key takeaways:
- When assets are subject to fixed-charge security with an active receivership, s. 234 is unavailable as a remedy for possession. The Lenders and the LPA receiver’s rights prevailed. The appointment of Administrators did not bypass the rights of the Lender or LPA receivers in this case.
- Once a lender has taken enforcement steps (e.g., appointed a receiver or issued possession proceedings), an insolvent company’s interest in mortgaged property is typically limited to its equity of redemption; it does not include a right to possession.
- s. 234 has limitations and cannot be used as a shortcut. Possession proceedings must follow CPR 55 unless s. 234 is legitimately available (e.g., unencumbered property) but even then, the application must, so far as possible comply with Part 55.
- Commencing parallel proceedings in different courts, motivated by strategic advantage, may be viewed as an abuse of process.
Concluding Comments
The Court of Appeal’s decision in Carvill Biggs & Anor v Reading provides a clear warning that statutory powers under s. 234 cannot be used as a backdoor to possession where a lender has already taken enforcement steps. The judgment also reinforces that office-holders must respect the boundaries of existing legal proceedings and any attempt to circumvent those may amount to an abuse of process.
Although s. 234 enables an office-holder to “get in” a company’s property, the company must be entitled to the property. Here as the Company had no right to possession s. 234 did not assist because the administrators could not claim a greater right to the Property than the Company had. Although it might (in appropriate cases) be acceptable for an insolvency practitioner to bring an application under s. 234 to obtain possession of real property, such an application will need to, so far as possible, comply with Part 55 of the CPR – the judgment made that clear. This does beg the question why wouldn’t an officeholder simply commence proceedings under Part 55 in the first instance? Costs and time spring to mind, but as noted, the decision is a clear warning for officeholders to use the right procedure and follow process – even if sometimes this can be frustratingly slow.
