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Addleshaw Goddard and Interpath have secured another significant result, with a High Court decision that will be welcomed by insolvency practitioners and advisors alike. In an environment where technical pitfalls can occasionally threaten to derail common sense and value maximising outcomes, this judgment stands out as a win for pragmatism and a creditor focused approach. It brings much needed clarity to the law on administration extensions by consent - in particular: when and how to assess the position of preferential creditors.
The case concerned CDI Realisations Limited and CL Realisations Limited, part of the wider printing group 'Communisis', which entered administration in December 2023. Insolvency practitioners from Interpath were appointed as administrators, and a swift business sale preserved value for creditors. However, several matters remained to be resolved during the administration, including a rates rebate, which required an extension of the administration period to maximise recoveries.
For the initial 12 month extension by creditor consent, no preferential creditor consent was sought, as the administrators reasonably concluded that none with a genuine economic interest existed. When the matter later came before the Court for a further extension, questions were raised about whether preferential creditor consent should nevertheless have been sought, given earlier statements in the proposals suggesting a potential preferential pidend.
Consent is only needed from creditors who stand to gain or lose from the extension - not those who once appeared relevant on paper.
Legal arguments
The key legal issue centred on the interpretation of paragraph 78(2)(b) of Schedule B1 to the Insolvency Act 1986, specifically regarding when and how to assess the existence and status of preferential creditors for the purpose of obtaining their consent. The administrators argued that the test is applied at the point the extension is sought, requiring a forward looking assessment of whether any preferential creditors currently have an economic interest - not by reference to earlier proposals. This position aligns with recent case law, including Boughey v Toogood International Transport and Re Pindar Scarborough Ltd, which emphasise that only creditors with a real, present-day economic interest need be consulted.
Applied to CDI and CL, HMRC had no preferential claim against CDI, and CL's earlier potential claim against a third party had been discounted as uneconomic. Progress reports therefore confirmed no preferential distributions would be made. There were therefore no preferential creditors with a genuine economic interest, and seeking their consent would have served no purpose and risked obstructing value maximising outcomes.
The Court's determination
Deputy High Court Judge Richard Farnhill agreed, confirming that creditor rights under Schedule B1 depend on present economic interest, not past classification. Drawing on cases such as Re Lehman Brothers Europe Ltd, the Court held that the original extensions were valid, and a further extension was granted to allow the administrators to complete their work.
Key takeaways
This decision reinforces a practical, evidence based approach to administration extensions:
- Assess preferential creditor status at the point consent is sought (and ahead of time, so there's sufficient opportunity to obtain it).
- Keep proposals and progress reports under active review. Proposals are often circulated earlier than strictly required and possibly before administrators have a complete economic picture, so ensure subsequent progress reports reflect the current economic reality.
- Where uncertainty remains, document your analysis and evidence.
- Expect the courts to support reasonable, creditor-focused actions, backed by legislation and a clear evidential trail.
Requiring consent from creditors with no economic interest would serve no purpose and may actively frustrate efforts to maximise recoveries.
Conclusion: Practicality Prevails
This judgment is a welcome development for the insolvency community. It confirms that, even in the face of technical complexity and tight timelines, the Courts will support a practical, commercially grounded approach. For practitioners navigating complex administrations, the decision offers a clearer framework and reduces the scope for unnecessary procedural challenges. It also aligns with the Insolvency Service's updated guidance, which emphasises that the concept of a "creditor" must be interpreted in a context specific, economically realistic way.
Dawn McCambley of Radcliffe Chambers and Adam Stanley of 23 ES appeared on behalf of the administrators at the hearings.
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