Waypark Commercial Mortgage 1 Ltd v Vanguard Number 1 Ltd (in liquidation) [2025] EWHC 1786 (Ch)
In brief
- A secured lender sought to exercise a right of sale over a mortgaged property owned by a company in liquidation.
- The central issue was whether the statutory stay in respect of companies in liquidation (imposed by section 130(2) Insolvency Act 1986) prevents a secured creditor from exercising its power of sale under a legal charge once the company has entered liquidation.
- The court held that it does not, as such a sale is not an "action or proceeding" against the company or its property.
This case provides helpful clarification for secured creditors and their advisers on the scope of the statutory moratorium that applies when a company enters liquidation. The decision confirms that secured creditors can continue to enforce their security rights without court permission, even after a winding-up order is made.
Background
The respondent, Vanguard No 1 Ltd (Vanguard), had granted the Applicant, Waypark Commercial Mortgage 1 Ltd (Waypark), a debenture in 2002 securing its indebtedness to Waypark. The debenture included a fixed legal charge over a property known as Oak House (the Property).
Vanguard was placed into compulsory liquidation following a petition presented by a third-party creditor. Waypark then sought to exercise its power of sale over the Property in order to settle the secured debt.
The purchaser of the property’s solicitors raised concerns that section 130(2) of the Insolvency Act, which stays “actions or proceedings” against a company "or its property" from the date that it enters liquidation, might operate to invalidate the proposed sale. As a result of these concerns, Waypark applied to the High Court for a declaration confirming that the statutory stay did not apply to its sale of the secured property.
Section 130(2) of the Insolvency Act
Section 130(2) provides that:
"When a winding-up order has been made or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company or its property, except by leave of the court and subject to such terms as the court may impose."
Counsel for Waypark argued that this provision did not apply in the present scenario because a sale by a secured creditor under a power of sale is not an “action or proceeding” within the meaning of section 130(2).
However, neither term ("action" nor "proceeding") is defined within the Insolvency Act itself. Accordingly, the question before the court was whether there should be a narrow or broad interpretation of the term “proceeding” for the purposes of section 130(2).
The arguments
Waypark argued that the word "action" in the context of section 130(2) should be given limited application, citing FCA v Carillion plc [2021] EWHC 2871 (Ch), in which Green J held that the term “action” in section 130(2) refers specifically to judicial proceedings against the company. This interpretation was based on an earlier decision in Bristol Airport plc v Powdrill [1990] Ch 744, which established that the term encompasses legal proceedings or quasi-legal proceedings (such as arbitration), but excludes non-judicial acts.
Waypark further relied on the Court of Appeal’s analysis of the statutory purposes of the Insolvency Act and section 130(2) in Cook v Mortgage Debenture Ltd [2016] EWCA Civ 103, in which the court held that the two primary purposes are:
- To prevent individual creditors from obtaining priority over others, thereby preserving the pari passu principle of distribution; and
- To protect the liquidation process from being disrupted by concurrent litigation.
Waypark contended that allowing secured creditors to exercise their power of sale would not undermine either of these purposes, since secured creditors already have priority over unsecured creditors and the sale would not disrupt the liquidation process.
Judgment
Deputy ICC Judge Baister adopted Waypark's submissions in full holding that:
- A sale by a secured creditor under a power of sale is not an “action or proceeding” within the meaning of section 130(2);
- neither of the statutory purposes of section 130(2) are engaged where a secured creditor exercises a contractual power of sale over secured assets;
- the proceeds of such sale would not form part of the general pool of assets available for distribution among unsecured creditors.
Accordingly, Deputy ICC Judge Baister held that section 130(2) does not restrict the exercise of a power of sale under a fixed charge. This decision aligned with established precedent in Sowman v David Samuel Trust Ltd [1978] 1 WLR 22, which held that a winding-up order does not affect the powers of a receiver appointed under a debenture to dispose of charged property.
Deputy ICC Judge Baister further noted that, had he been satisfied that section 130(2) was applicable, he would in any event have granted leave for the sale to proceed. However, given his primary finding, no such leave was required.
Declaration
The court granted the declaration sought: The statutory stay under section 130(2) of the Insolvency Act 1986 did not apply to the sale of the Property by Waypark pursuant to its powers under the debenture. Waypark was therefore entitled to proceed with the sale without seeking the court’s leave.
Key takeaways
This decision provides helpful clarification on the scope and effect of the statutory stay under section 130(2) of the Insolvency Act 1986.
The judgment:
confirms that the statutory stay under section 130(2) does not apply to the exercise by a secured creditor of its power of sale over charged assets. Thus, secured creditors retain their enforcement rights following a winding-up order unless their security is impugned;
Explains that the moratorium in liquidation is intended to protect the company’s uncharged assets and ensure pari passu distribution among unsecured creditors, not to restrict the operation of valid security rights; and
provides comfort to lenders and purchasers, confirming that the liquidation of a chargor company does not of itself invalidate or stay the sale of assets subject to fixed charges.
Comment
This decision represents a sensible and commercially practical outcome that strikes the right balance between protecting the liquidation process and preserving legitimate security rights.
The judgment also demonstrates the courts' willingness to interpret insolvency legislation in a way that respects the fundamental principle that security rights should not be undermined merely because the chargor company enters formal insolvency proceedings.
For practitioners, this case provides valuable precedent on enforcement rights in liquidation scenarios. It should give comfort to both lenders and purchasers that properly documented security can be enforced without the delay and expense of seeking court permission under section 130(2).