Rely on the most comprehensive, up-to-date legal content designed and curated by lawyers for lawyers
Work faster and smarter to improve your drafting productivity without increasing risk
Accelerate the creation and use of high quality and trusted legal documents and forms
Streamline how you manage your legal business with proven tools and processes
Manage risk and compliance in your organisation to reduce your risk profile
Stay up to date and informed with insights from our trusted experts, news and information sources
Access the best content in the industry, effortlessly — confident that your news is trustworthy and up to date.
With over 30 practice areas, we have all bases covered. Find out how we can help
Our trusted tax intelligence solutions, highly-regarded exam training and education materials help guide and tutor Tax professionals
Regulatory, business information and analytics solutions that help professionals make better decisions
A leading provider of software platforms for professional services firms
In-depth analysis, commentary and practical information to help you protect your business
LexisNexis Blogs shed light on topics affecting the legal profession and the issues you're facing
Legal professionals trust us to help navigate change. Find out how we help ensure they exceed expectations
Lex Chat is a LexisNexis current affairs podcast sharing insights on topics for the legal profession
Printer Friendly Version
Will the courts reject a challenge to the administrators’ fees and disbursements where an administration could achieve one of the purposes of administration? Stefan Ramel of Guildhall Chambers comments on a ruling that he says will be a comfort to administrators.
Re BW Estates Ltd; Randhawa and another v Turpin and another  EWHC 517 (Ch),  All ER (D) 27 (Mar)
The applicant creditors of a company in administration applied for orders that:
The Companies Court rejected the contention that the administrators, appointed under Insolvency Act 1986 (IA 1986), could not or should not have made the statement as to the statutory purpose, as required under IA 1986, Sch B1, para 29(3)(b), which had led to their appointment. Further, the argument that they should not be entitled to any remuneration at all for their services was rejected. Once the decision to appoint administrators had been made, the responsibility on the prospective administrator in considering whether the statement as to the statutory purpose could be made was to look ahead at what would or might happen during the administration if he was appointed, and not behind at the motives which might have led the directors to choose to make the appointment.
The wider background to this case arises from a dispute between the Randhawas and Mr Robert Williams which resulted in a substantial judgment in favour of the Randhawas. One of Mr Williams’ assets, over which the Randhawas obtained a charging order, was a shareholding in the company. The company in question was a property investment company which owned several properties. The properties were secured in favour of Nationwide Building Society. As a result of their charging order over the shares, the Randhawas had an economic interest in the company. As a result, partly of a freezing order which the Randhawas obtained which affected the company’s property, the company missed mortgage payments to Nationwide. That prompted Nationwide to appoint receivers under the Law of Property Act 1925.
The company’s director (Mr David Williams) then made an out-of-court administration appointment. It is clear from reading the judgment that the Randhawas considered that the administration was deployed by the Williams’ as a tactical device to deplete the company’s assets (and thus render the Randhawas judgment less valuable) by causing administrators to incur fees and disbursements. The Randhawas therefore bought (at full value) the debt of a creditor of the company so that the Randhawas would have the locus to challenge the administrators’ fees and disbursements. It was no part of the application that the administrators were complicit in any scheme by the Williams’ to deplete the company’s value.
Although the claim was initially put both on the basis of rule 2.109 of the Insolvency Rules 1986, SI 1986/1925, and IA 1986, Sch B1, para 74, the latter claim was effectively abandoned and in any event refused by the judge. The creditor’s main argument on rule 2.109 was that, because the administrators were never in a position to confirm that one of the purposes of administration could be achieved, they should not be entitled to any remuneration. The sole issue for the judge was therefore whether, at the time that the administrators were required to state their proposals, they could properly have taken the view that one of the purposes of administration could be achieved.
By a letter and report dated 4 November 2013, the administrators expressed their opinion that either the administration would achieve a better outcome for creditors for the purposes of IA 1986, Sch B1, para 3(1)(b) or, in the alternative, that the company might be rescued as a going concern for the purposes of IA 1986, Sch B1, para 3(1)(a).
The issues arose in the context of the creditors’ claim that the administrators should not be entitled to any remuneration.
The creditors relied on Doltable Ltd v Lexi Holdings plc  EWHC 1804 (Ch),  All ER (D) 100 (Jun) which was a case in which Mann J had concluded that, in a case where a company owned a single property and that its business involved the management of that property, if the property were sold by administrators (given that the property was the only asset), it could never be said that the company’s business could be rescued as a going concern. The creditors sought to apply that case by analogy.
The judge refused the creditors’ application. He ruled that it was conceivable, in this case, that an administration could achieve one of the purposes of administration. Therefore the sole criticism advanced by the creditors was not made out and the application failed.
The facts of the case are unusual. The application was also unusual—two creditors by assignment were engaged in a dispute by proxy with a former shareholder/director of a company over the acts of independent third parties (the administrators). In reality, to the extent that there is a claim arising from the facts, as pointed out by the judge, it lies in asserting that the company’s director acted improperly and in breach of duty. In my view, because the case is quite unusual, it is unlikely that it will turn out to be of great assistance to practitioners in the future.
The case will be of comfort to administrators. Even in circumstances where it is unclear exactly what strategy they should follow to achieve one of the purposes of administration, the court is likely to approach their opinion with some deference and is unlikely to hold that they had no basis whatsoever for reaching it.
Interviewed by Nicola Laver.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
If you are a LexisPSL Subscriber, click the link below for further information:
Out of court appointments—who can apply and in what circumstances?
Not a subscriber? Find out more about how LexisPSL can help you and click here for a free trial of LexisPSL Restructuring and Insolvency.
First published on LexisPSL Restructuring and Insolvency
0330 161 1234