“(1) The administrator of a company must perform his functions with the objective of “(a) rescuing the company as a going concern, or “(b) achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration), or “(c) realising property in order to make a distribution to one or more secured or preferential creditors. “(2) Subject to sub-paragraph (4), the administrator of a company must perform his functions in the interests of the company's creditors as a whole. “(3) The administrator must perform his functions with the objective specified in sub-paragraph (1)(a) unless he thinks either “(a) that it is not reasonably practicable to achieve that objective, or “(b) that the objective specified in sub-paragraph (1)(b) would achieve a better result for the company's creditors as a whole.”
“The concept of rescuing a company as a going concern is not achieved by successfully realising all of its assets so that distributions of surplus monies can be made to shareholders after paying creditors in full. It connotes the retention of all, or a material part, of the business of the company, together with a restoration of the solvency of the company, so that the company can properly continue to trade as a going concern.”
“a) grant relief; b) dismiss the application; c) adjourn the hearing conditionally or unconditionally; d) make any interim order; e) make any other order it thinks appropriate.”
“All of those cases seem to me to support the thesis that bankruptcy is a court-controlled process in relation to which the court has wide powers exercisable for the purpose of the insolvency process as a whole, which are not limited to those conferred expressly by the relevant legislation. There are non-statutory elements in the law of bankruptcy, such as the principle in Ex P James LR 9 Ch App 609, even though these may result in an application of assets which is not strictly in accordance with legal rights and obligations. There is also scope for the court to direct that things be done or not done in apparent conflict with the express provisions of the legislation.”
“It may do so directly by giving directions, or in the exercise of its control over an administrator as an officer of the court.”
“The only footnote I add is that Mr Trace contended that in any event, the court has no jurisdiction to give any directions as sought because the Insolvency Act makes no provision for an application for directions such as this. I do not accept this. As noted in Re Atlantic Computer Systems[1990] BCC 859 at page 881 G, the court may exercise control over the administrators as officers of the court and may give direction to that end. So the court has jurisdiction.”
“However, I have no doubt that under the general power conferred by paragraph 74(3), the court could remove an administrator and appoint a replacement.”
“So far as administrators and liquidators are concerned, there is no statutory power which in terms gives the court power to do that which I am invited to do. However, I think that Mr McCormack-Smith is right to say that there is an inherent jurisdiction to grant such relief.”
“Whilst that does not precisely cover this case, it seems to me that it is consistent with those observations to hold that there is a power to add, in appropriate cases, a liquidator in a compulsory liquidation, and if that is right, then it must follow that in an appropriate case where good grounds are shown, a temporary order to that effect may be made.”
“A person may not be appointed as administrator of a company which is in administration subject to the provisions of paragraph 90 to 97 and 100 to 103 about replacement and additional administrators.”
“(1) Where a company is in administration, a person may be appointed to act as administrator jointly or concurrently with the person or persons acting as the administrator of the company ... “(3) Where a company entered administration by virtue of an appointment under paragraph 14, an appointment under sub-paragraph (1) must be made by “(a) the holder of the floating charge by virtue of which the appointment was made, or “(b) the court on the application of the person or persons acting as the administrator of the company ... “(6) An appointment under sub-paragraph (1) may be made only with the consent of the person or persons acting as the administrator of the company.”
“This provision applies in each of the cases covered by paragraphs 103(2) to 103(5). It ensures that anyone already in office is not to have wished on him a newcomer that he does not feel happy to work with, even where the new appointment is made by the court.”
“Further, despite its lengthy and detailed provisions, the 1986 legislation does not constitute a complete insolvency code. Certain long-established judge-made rules, albeit developed at a time when the insolvency legislation was far less detailed, indeed by modern standards positively exiguous, nonetheless survive.”
“Provided that a judge-made rule is well established consistent with the terms and underlying principles of current legislative provisions and reasonably necessary to achieve justice, it continues to apply. And as judge-made rules are ultimately part of the common law, there is no reason in principle why they cannot be developed, or indeed why new rules cannot be formulated. However, particularly in the light of the full and detailed nature of the current insolvency legislation and the need for certainty, any judge should think long and hard before extending and adapting an existing rule, and even more before formulating a new rule.”
“The application, by raising a conflict of interest, required me to decide whether there is a serious issue for investigation, not whether the claims identified for investigation have merit. That is because removal may be ordered if an independent review cannot be carried out because of conflict.”
“The circumstances of the decision-making are, it seems to me, miles away from those considered in Clydesdale Financial Services Limited v Smailes to justify the removal of an administrator and thereby facilitate examination of a pre-packed sale on questionable terms which he himself had negotiated immediately before appointment.”
“Pricewaterhouse ought to be appointed administrators on the grounds that they are already in possession of a great deal of information and that they are able to carry out the administration more cheaply, effectively and quickly on account of their existing knowledge of the company than Touche Ross.”
“The second point to be derived from Commonwealth Bank of Australia v Fernandez is that the judge did not think that there was an absolute bar upon the appointment of administrators who had had a prior business relationship with the secured creditors and had been nominated by them. Instead, he plainly thought that the question of whether the insolvency practitioners could be relied upon to act impartially and in accordance with their duties required an assessment of all the circumstances.”
“The proposed administrator will ordinarily undertake an investigation of the company's affairs and financial position, and consequently offer advice before being appointed, which will include advice on the timing and manner of appointment.”
“There is nothing inherently objectionable about a solicitor acting for both a trustee in bankruptcy or liquidator and a major creditor of the bankrupt or insolvent company. On the contrary, it has been recognised that this may well be convenient because of the creditor's familiarity with the debtor's affairs and because of absence of any real likelihood of a conflict of interest between the trustee and liquidator and the creditor: see In reSchuppan (A Bankrupt)[1996] 2 All ER 664 (Robert Walker J)”
“Prior to the appointment of the administrators, some or all of Alix, the lenders, Ashurst and Savills/JLL have communicated information to Hilton in such a way as to jeopardise the value of the surrender premium and improve Hilton's position under the ROFO.”
“In this particular case, I would expect interim conflict administrators to undertake the following functions: “1. Investigate the background to and circumstances giving rise to the Cola bid. “2. Review the merits and any appropriate strategy for pursing or settling the various claims of the companies in administration. “3. Reconsider with the Administrators the statutory proposals, with a view to bringing into consideration the point of view of the Shareholders (especially the need to evaluate and realise the surrender premium/CAPEX claim). “4. Review the alleged need to sell any of the Hotels pending trial and to report thereon to the Administrators and, if necessary, the court. “5. To the extent necessary to achieve 1 to 4 above, instruct agents, including independent lawyers, to advise on the various claims and independent selling agents for advice. “6. In so far as necessary pending trial, to place the Hotels on the market in a fresh sales process conducted by independent agents.”
“Additionally, where an administrator seeks to sell an asset which is subject to a charge, further statutory considerations intervene. An administrator is generally authorised to dispose of assets subject to a floating charge as if the assets were not subject to that charge: see paragraph 70(1) of Schedule B1 to the 1986 Act. He is not, however, generally authorised to dispose of assets subject to a fixed charge unless the charge-holder gives its consent to such a disposal. The rights of the fixed chargeholder can be overridden by the court granting an order under paragraph 71(1) enabling the administrator to dispose of the property as if it were not subject to the fixed charge, but only if the conditions set out in paragraph 71(2) of Schedule B1 are satisfied, and then only on terms providing for payment of the proceeds to the fixed chargeholder together with any additional amounts necessary to produce the amount determined by the court to be full market value: see paragraph 71(3) . As such, a sale by an administrator of a property subject to a fixed charge will necessarily require the administrator to seek the consent of the holder of the fixed charge to that disposal or to make an application to court if consent is not forthcoming.”