Introduction

The corporate moratorium introduced by the Corporate Insolvency and Governance Act 2020 (CIGA 2020)[1] was designed to facilitate company rescue while affording certain creditors enhanced protection if a subsequent insolvency followed. Yet, despite the regime having been in force for over six years, there has been little judicial guidance on how that enhanced protection operates in practice once rescue efforts fail.  

In Re Cross Transport Ltd (In Administration) [2026] EWHC 1636 (Ch), the High Court considered an application for directions as to the application of paragraph 64A of Schedule B1 to IA 1986. Specifically, it considered whether the “super-priority” afforded to moratorium debts prevented administrators from incurring and paying the costs necessary to realise assets and pursue claims for the benefit of other creditors.

For insolvency practitioners, the decision is particularly significant because it addresses a practical question that may arise in post-moratorium administrations: how should administrators perform their functions where substantial moratorium liabilities benefit from statutory “super-priority” and the payment of those liabilities may (or will) jeopardise the progress of litigation which might otherwise realise a recovery for creditors?

Statutory Framework

The application concerned paragraph 64A of Schedule B1 to IA 1986. That provision applies where a company enters administration within 12 weeks of a corporate moratorium coming to an end. In those circumstances, an administrator must make distributions in respect of certain moratorium debts and priority pre-moratorium debts, with those liabilities enjoying priority over certain other claims.

The administrators of Cross Transport Ltd sought directions from the Court about the operation of those provisions. The issue arose in a particularly practical context. Although the company had limited cash assets remaining, the administrators had identified and issued potentially valuable litigation claims. Pursuing such claims required external funding. However, the proposed litigation funder was unwilling to support the claims unless its funding and related costs could be recovered from any litigation proceeds ahead of the protected moratorium debts. Without funding, the claims were unlikely to be pursued, potentially depriving creditors of any meaningful recovery.

The Court’s Decision

The Court confirmed that paragraph 64A creates a mandatory obligation to make distributions in respect of protected moratorium debts and gives those liabilities “super-priority”. However, it rejected the argument that the provision requires all existing company assets to be preserved or effectively ring-fenced until those debts have been paid in full.

A significant factor in the Court’s reasoning was the practical effect of such an interpretation. The Court considered that a rigid construction of paragraph 64A would risk undermining the purpose of the administration itself.

The Judge considered that preventing administrators from paying expenses while protected moratorium debts remained outstanding could leave them unable to pursue litigation, realise assets or otherwise carry out their functions. As the Judge observed, “No one is going to work for free.” The Court therefore interpreted paragraph 64A in a manner that preserved both the enhanced protection afforded to moratorium creditors and the administrator’s ability to realise value for the estate.

The Court also attached significance to the fact that paragraph 64A does not impose a specific deadline by which protected moratorium creditors must be paid. This formed part of its reasoning that the provision should be interpreted in the context of the administration regime as a whole and the ordinary performance of an administrator’s functions, including the incurring and payment of expenses where appropriate.

We note that while the Court was prepared to provide guidance on the proper construction of paragraph 64A, it stopped short of endorsing any specific course of action. Commercial decisions as to whether expenditure was justified, and whether a proposed step was consistent with the purpose of the administration, remained matters for the administrators.

Practical Implications

Cross Transport provides welcome guidance on a part of the moratorium regime that has remained largely unexplored since CIGA 2020 came into force.

Importantly, the decision confirms that paragraph 64A is not a statutory ring-fencing mechanism. While protected moratorium debts benefit from “super-priority” status, administrators retain the ability to incur and pay reasonable costs where doing so is necessary to achieve the statutory purpose of the administration. This will be particularly relevant where value can only be realised through litigation, investigations or recoveries requiring upfront expenditure.

The judgment also reinforced the distinction between questions of legal interpretation and commercial decision-making; whilst the Court was prepared to determine the effect of paragraph 64A, the question whether a particular course of action should be pursued was a matter for the administrator’s commercial judgment.

More broadly, the decision demonstrates a pragmatic judicial approach to the interaction between the moratorium regime and administration. Instead of treating moratorium creditor protection as an overriding objective, the Court sought to interpret the legislation in a way that allowed the administration process to function effectively.

Conclusion

Although the Part 1 moratorium has now formed part of the landscape for several years, judicial authority on its interaction with administration has been limited. Cross Transport is therefore an important decision.

It confirms the strength of the statutory protection afforded to moratorium creditors while recognising that administrators must remain able to carry out their statutory functions. 

[1] The Part A1 moratorium regime was introduced by CIGA. Paragraph 64A of Schedule B1 to the Insolvency Act 1986, which provides for the “super-priority” of certain moratorium debts and priority pre-moratorium debts, was inserted by Schedule 3, paragraph 31 of CIGA 2020 and came into force on 26 June 2020.