When administrators overreach: Carvill-Biggs and the boundaries of s 234

Key points

• The Court of Appeal’s recent decision in Carvill-Biggs & anr v Reading [2025] EWCA Civ 619 provides important clarification on the limits of administrators’ powers when dealing with mortgaged property.
• The case, which saw administrators attempt to use s 234 of the Insolvency Act 1986 to obtain possession of property from trespassing occupiers, ultimately failed on fundamental principles of property and insolvency law.
• Lord Justice Snowden’s judgment offers crucial guidance on the scope of s 234 and the interaction between fixed security interests and insolvency processes.

The factual context: competing claims over valuable property

The facts present a common scenario in modern insolvency practice. Rose Cottage Farm Limited, a special purpose vehicle controlled by director Ashley Reading, had borrowed £2.85m from TFG Capital No.2 Limited, secured by both a legal mortgage and floating charge over a £3.5-4m Orpington property. When Reading and his family took up residence in breach of covenant, and the company subsequently defaulted, multiple parties found themselves competing for control of the asset.

TFG2’s response followed established practice: it appointed LPA receivers and commenced possession proceedings under CPR 55. However, when administrators were later appointed under the floating charge, they took the unusual step of initiating separate proceedings under s 234, seeking to bypass the existing County Court proceedings. This strategic decision would prove fatal to their case.

Section 234: A summary procedure with hidden limits

Section 234 of the Insolvency Act 1986 (IA 1986), titled ‘Getting in the company’s property’, provides a summary procedure for office-holders to recover assets. The provision requires that any person having “possession or control” of property “to which the company appears to be entitled” must “pay, deliver, convey, surrender or transfer” such property to the office-holder.

The section’s broad language might suggest wide application. The company held legal title to the property, and the occupiers were admittedly trespassers with no competing interest. However, as the Court of Appeal demonstrated, this surface-level analysis overlooks fundamental limitations in the provision’s scope and purpose.

Ground 1: The core problem with the administrators’ approach 

The Court of Appeal’s primary reasoning reveals why s 234 was simply unavailable to the administrators, based on two interconnected principles of property and insolvency law.

The effect of receiver appointment

The first element of the court’s reasoning centres on the consequences of appointing LPA receivers. Drawing on Gosling v Gaskell, Snowden LJ emphasised that once receivers are appointed, the mortgagor loses the right to interfere with their management of the charged property. This principle applies equally in insolvency proceedings: administrators cannot possess rights superior to those held by the company itself.

Sections 143 and 144 of the IA 1986, which confer rights on administrators to “secure, take into custody or control” company assets, cannot extend beyond the company’s pre-existing entitlements. The appointment of an administrator does not create new proprietary rights – it merely allows the office-holder to exercise those rights the company already possessed.

The mortgagor’s extinguished right

The second element demonstrates how property law principles directly constrain insolvency remedies. Section 98(1) of the Law of Property Act 1925 (LPA 1925) explicitly states that mortgagors may sue for possession only where “the mortgagee has not given notice of his intention to take possession”. Once TFG2 commenced the Bromley proceedings, this statutory right was extinguished.

This analysis reveals the sophisticated interaction between different areas of law. The administrators’ s 234 application was not merely procedurally inappropriate – it was jurisdictionally impossible. The company had no subsisting right to possession that could be enforced against third parties.

Procedural questions and abuse process

Although unnecessary for the decision, the court’s obiter observations on grounds 2 and 3 provide valuable guidance for practitioners navigating similar disputes.

Insolvency proceedings CPR 55

The relationship between possession claim procedures and insolvency applications raises questions about procedural consistency. The court’s provisional view that Insolvency Rule 12.1(1) would incorporate CPR 55 requirements “with necessary modifications” suggests judicial preference for procedural alignment. However, the court’s reluctance to invalidate proceedings for technical non-compliance reflects pragmatic case management principles.

The problem of duplicative proceedings

The court’s indication that the administrators’ application constituted an abuse of process carries broader implications. The reality that TFG2 was the sole economic beneficiary of both sets of proceedings – the Bromley possession claim and the administrators’ s 234 application – exposed the artificial nature of the latter. This finding has significant consequences for cases where insolvency office-holders effectively act as proxies for secured creditors.

Broader implications: Property rights and insolvency efficiency

The decision illuminates important tensions in contemporary insolvency law. Section 234 represents Parliament’s attempt to provide office-holders with efficient recovery mechanisms, but Carvill-Biggs demonstrates that efficiency cannot override established property rights hierarchies.

The equity of redemption principle

Central to the court’s analysis is recognition that post-appointment, the only “company property” available for administration is the equity of redemption – the residual value after satisfying secured debts. This principle, established in Buchler v Talbot, ensures that fixed security interests retain their priority even in formal insolvency processes.

Summary procedures vs substantive rights

The court’s emphasis that s 234 “does not create new rights but is designed as a summary procedure” reflects judicial reluctance to permit procedural shortcuts that undermine substantive legal principles. This approach protects the integrity of security interests while preventing interpretations that could destabilise commercial lending relationships.

Practical consequences for insolvency practice

For practitioners, Carvill-Biggs establishes clear parameters around s 234’s utility. The decision indicates that the provision’s effectiveness is largely confined to scenarios involving unencumbered assets or situations where the company’s title is genuinely superior to competing claims.

Strategic considerations

The judgment highlights significant risks in attempting to circumvent established procedures. Administrators seeking to bypass perceived obstacles in County Court proceedings face judicial scrutiny of their motives. The court’s robust approach to abuse of process suggests similar strategic manoeuvres will attract disapproval.

Wider applications

More fundamentally, the decision reinforces the principle that insolvency office-holders cannot exercise rights the company never possessed. This constraint applies beyond possession claims to any situation where administrators seek to assert rights against properly secured creditors.

Looking forward: Clarity in complex commercial relationships

Carvill-Biggs provides valuable clarification of competing proprietary claims in insolvency contexts. The Court of Appeal’s analysis demonstrates that while insolvency law provides powerful tools for asset recovery, these cannot override the fundamental principle that security interests rank according to their legal priority, not administrative convenience.

The decision serves as both a cautionary tale for administrators and a reassurance to secured lenders that their rights remain protected in formal insolvency proceedings. In an era of increasing commercial complexity, such clarity provides necessary certainty for participants in the secured lending market.

The judgment’s emphasis on respecting established property law hierarchies, even within the supposedly flexible framework of insolvency proceedings, reinforces the importance of understanding the limits of statutory powers.

For administrators, the lesson is clear: summary procedures like s 234, however convenient, cannot create rights that never existed in the first place.

Article by Callum Reid-Hutchings – first appeared in the August issue of Corporate Rescue and Insolvency