“[13.] So as things stand today, Michael has made an offer to purchase the business and assets of the Company for the sum of£5,750,000 and Ivy has proposed a refinance which, if completed, would enable the Company to be rescued as a going concern. Both Michael and Ivy have evidenced that their offers are fully funded such that each option is viable and realistic. [14.] However, the statutory scheme (Paragraph 3 Schedule B1 1986 Act) produces a hierarchy of objectives, such that the administrators must perform their functions with the objective of rescuing the Company as a going concern (sub-paragraph 3(1)(a)) unless they think that it is not reasonably practicable, or that the objective specified in sub-paragraph 3(1)(b) would achieve a better result for the creditors as a whole. [15.] In short, if the administrators now consider that Ivy's proposed refinancing would lead to the creditors being paid in full and the Company being rescued as a going concern, they are bound to perform their functions in order to bring about that result. However, that necessarily entails a substantial revision to the proposals previously approved by the creditors, albeit by the deemed consent procedure. [16.] Therefore, the critical issue for me today, as I see it, is whether there is proper justification for bypassing Paragraph 54(1) Schedule B1 1986 Act requiring the administrators to seek prior approval of the creditors to the revised proposals. [17.] I am persuaded that there is a proper justification for making the direction sought pursuant to Paragraph 68 Schedule B1 1986 Act reflecting the changed circumstances and for the following reasons: a. in the event that I did not make the direction sought today, then effectively what would happen is that the administrators would seek by way of the deemed consent procedure approval from the creditors of the revised proposals; b. in the event that there were no objections, then the revised proposals would be approved by way of deemed consent; c. in the event that Michael objected, and it would in practice only be Michael, then a creditors’ meeting would be called for a majority decision to be taken; d. Kingsford and Bewdley combined account for 85% of unsecured creditors (including Michael's claim, which although disputed, would be admitted for voting purposes). Kingsford and Bewdley are controlled by Ivy, who is promoting the refinancing. It is, therefore, inevitable that any meeting, if called, would approve the revision to the administrators’ proposals; e. the order sought is permissive - it does not mandate the administrators to go with Ivy's proposed refinancing; f. the terms of the order provide that notice be given to Michael so that he have an opportunity to put forward any alternative proposal. There was some debate as to whether or not such an alternative proposal was likely or realistic, but either way, Michael will be given that opportunity, which is only fair in all the circumstances; and g. if I do not make the direction sought, then inevitably there will be further delay and cost in the context of an administration where the costs to date are already some£500,000 . [18.] In my judgment, the draft order strikes a careful, reasonable and proportionate balance between progressing the administration whilst at the same time giving Michael an opportunity to put forward any alternative proposal in circumstances where the rescue of the Company as a going concern is now a realistic option consistent with the first statutory objective. For all those reasons, I approve the draft order submitted on behalf of the parties.”
“The Applicant’s solicitors shall serve a copy of this order on Audey Loveridge and Melinda Rose Doherty, along with copies of [the Insolvency Application and the Injunction Application] and the evidence filed in support of those applications. Any application by Audey Loveridge and Melinda Rose Doherty to be joined as a respondent in either application shall be made within 14 days of service.”
“(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. … (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.”
“[255] Given the range of interests to be addressed under paragraph 3 of Schedule B1, the use of the expression that the administrator “thinks” rather than, for example, “reasonably believes” is a clear indication that Parliament intended a degree of latitude to be given to an administrator in deciding upon the objective to be pursued, and that he is not lightly to be second-guessed by the court with the benefit of hindsight. In Lightman & Moss on the Law of Administrators and Receivers of Companies, 6th ed (2017), para 12-022 it is suggested, by reference to case law and the legislative debate upon this provision, that the appropriate standard of review by the court should be one of good faith and rationality. This would mean, for example, that an administrator’s decision not to pursue the first objective will only be open to challenge if it were made in bad faith or was clearly perverse in the sense that no reasonable administrator could have thought that it was not reasonably practicable to rescue the company as a going concern. I agree with that approach.”
“[204.] In my view, where a Company in administration is balance-sheet solvent, the Administrators have a duty to have regard to the interests of the Company’s members as a whole when deciding on the appropriate course of action. Paragraph 74 of Schedule B1 itself makes this plain. It is drafted in a way that gives members a remedy where the acts of the administrators cause unfair harm to them and it contemplates that the interests of the members as a whole are central to the question of what if any relief should be granted. That duty will be particularly significant where the position of creditors is unaffected by the decision that they take. It follows that, if there is more than one alternative way forward, but there is no material difference between them in either achieving or failing to achieve the first statutory objective (paragraph 3(1)(a)), I think that administrators should normally adopt the course of action which is most likely to be in the interests of the members as a whole.”
“[206] ….. the Administrators having given careful thought to their duties…. were correct to conclude that they were required to have regard to the impact which their decision on how to proceed may have had on the antecedent claims…… [and] it would not be in the interests of the Company’s members as a whole for the Administrators to take any steps which impaired the Company’s ability to pursue those claims. [207] It follows that, in my judgment, the Administrators have not caused unfair harm to the Applicants as members in the way that they have approached a difficult administration. Their relief under paragraph 74 of Schedule B1 must be dismissed. …… [210] Finally, I should add this by way of postscript…. [it was] submitted that the creditors would and could be paid out of the proceeds of sale of the Property, but thereafter the obvious course would be for the Company to go into liquidation, at which stage the antecedent claims could be pursued by liquidators or sold to a third party litigation funder or indeed sold to any one or more of the existing shareholders…… [211] However, it is not obvious to me why the Company should not go into liquidation before the Property is sold. The Administrators are under a duty to apply to the court under paragraph 79(2) of Schedule B1 where they think that the purpose of administration cannot be achieved in relation to the Company. It is of course their case that the first objective cannot be achieved, and I have held that they were justified in reaching that conclusion.”
“(1) A creditor or member of a company in administration may apply to the court claiming that– (a) the administrator is acting or has acted so as unfairly to harm the interests of the applicant (whether alone or in common with some or all other members or creditors), or (b) the administrator proposes to act in a way which would unfairly harm the interests of the applicant (whether alone or in common with some or all other members or creditors). (2) A creditor or member of a company in administration may apply to the court claiming that the administrator is not performing his functions as quickly or as efficiently as is reasonably practicable.”
“We are informed by [Ivy’s] representative in Audey’s divorce proceedings that Michael has been joined to the matrimonial case, specifically the s.37 application made by Audey’s wife in regards to the transfer of Breton Park’s shares. We are further informed that Michael has failed to file his evidence in response before the prescribed date (being24 February 2021 )………. Please can you confirm whether Michael intends to take an active part in those proceedings (as required by the family court) as this will obviously have a bearing on the position in respect of Breton in the company claim. Any decision by the family court will be binding on your client even if he fails to engage with those proceedings. It would also be odd for him to not defend her application (as the Court can order the transfer of his shares back to Audey Loveridge) yet maintain his claim in the Unfair Prejudice proceedings (which can only be pursued if he is a shareholder).”
“[14] Mr Tamlyn submitted, correctly in my view, that because para 74 could be invoked only by a creditor or a member, the reference in it to unfair harm was a reference to unfair harm to an applicant as a creditor or member. It was not intended to provide a facility for someone who merely wished to purchase a claim as an investment. …….. Perversity [15] Mr Tamlyn went on to submit that it was open to the court to interfere with the administrators’ decision not to pursue the claims only if the decision was perverse…….. [16] I do not accept Mr Tamlyn’s submission……., I consider that the wording of para 74 precludes it………, it lays down its own test for interference, a test of unfair harm. That is evidently not the same thing as a test of perversity. To adopt a test of perversity in place of the statutory test would plainly be impermissible…… Differential treatment [17] Mr Tamlyn also submitted that para 74 could not be invoked unless the applicant was complaining of some discrimination between one creditor and another or between one member and another. Unfairness within the paragraph meant, he said, unequal or differential treatment given to Diane (or a class to which she belonged). He accepted that his submission would have the consequence that an idiotic decision by an administrator which affected all creditors equally was incapable of challenge under para 74. [18] The submission has to get over the express wording of para 74(1), which twice refers to harming ‘the interests of the applicant (whether alone or in common with some or all other members or creditors)’. In support of it Mr Tamlyn cites Re Coniston Hotel (Kent) LLP[2013] EWHC 93 (Ch) ,[2013] 2 BCLC 405 in which Norris J said (at [36]), ‘Paragraph 74 does not exist to enable individually disgruntled creditors to pursue administrators for compensation. Its focus is “unfair harm”: and that, I think, will ordinarily mean unequal or differential treatment to the disadvantage of the applicant (or applicant class) which cannot be justified by reference to the interests of the creditors as a whole or to achieving the objective of the administration. (The reference to an administrator acting unfairly to harm the interests of “all other members or creditors”, so that unequal or differential treatment had not occurred, would (I think) only arise in relation to issues concerning the expenses of the administration, or where the administrator was also an office holder in another insolvency and acted unfairly prejudicially as regards the stakeholders in company A in promoting the interests [of] the stakeholders in company B).’ That passage was taken literally in a decision in Northern Ireland, Curistan v Keenan [2013] NICh 13, where an application under the Northern Ireland equivalent of para 74 was rejected because the decision challenged did not discriminate against the applicant. [19] Paragraph 74 requires unfair harm, not merely harm, and the requirement of unfairness certainly prevents a creditor complaining of a disadvantage to his own interests when the disadvantage is justifiable by reference to the interests of the creditors as a whole. But I do not myself see why the requisite unfairness must necessarily be found in an unjustifiable discrimination. A lack of commercial justification for a decision causing harm to the creditors as a whole may be unfair in the sense that the harm is not one which they should be expected to suffer. I am not sure that Norris J had such a case in mind in the passage quoted from Coniston. In Coniston, the applicants (who appear to have been acting in person earlier in the proceedings) had muddled claims for professional negligence against the administrators for acts before the administration commenced with claims for harm suffered by them as members or creditors and the decision, given on a striking-out application, was one of case management. [20] My view is that a differential treatment is not the only form of unfairness capable of satisfying para 74 and so I do not accept Mr Tamlyn’s submission.”
“[27.] The results for 2021, 2022 and 2023 do then improve but in reality are no better than financial years 2015 to 2018. These results ought to be taken into account when considering the rather bold suggestion that the company had shown “significant improvement once Michael was not involved. Comparing those years too, the post-tax profits were: a. 2015:£79,552 b. 2016:£93,216 c. 2017:£108,520 d. 2018:£140,796 …….. g. 2021:£165,213 h. 2022:£41,727 i. 2023:£109,592 ”
“[1] The Loveridge family own and operate a very successful caravan park business in Worcestershire, Warwickshire and Shropshire. They do so in part through five companies and in part through three oral partnerships at will.”
“Our client would be prepared to advance£3.6 million to [Breton] as a loan in return for a charge over the Breton site and its assets. Our client has been in discussions with his lenders, and we understand funds are in place to effect the proposal. The terms of the charge would be negotiated with the Administrators, and our client is confident he would be able to offer more favourable terms to the Company both in respect of repayment terms and interest rates, than any offer from Bewdley. It is intended that the loan would pay off the secured and preferential creditors as well as the Administrators expenses. The loan would also settle claims made by the Unsecured Creditors subject to these being scrutinised and proven…..”
“It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them.””
“Unless Ivy is stopped from using Kingsford’s money to refinance Breton ….. [this will] prevent me buying the site at Breton… I do not think the court could adequately compensate me for my loss. It will be difficult for the court to calculate what that loss will be.”
“[41] A number of uncontroversial propositions can be derived from the authorities cited to this court: (i) For a petition to be well founded the acts or omissions of which the petitioner complains must consist of the conduct of the affairs of the company: Re Neath Rugby Ltd, Hawkes v Cuddy[2007] EWHC 2999 (Ch) ,[2008] BCC 390 at [202] per Lewison J; (ii) The conduct of those affairs must have caused prejudice to the interests of the petitioner as a shareholder: ibid; (iii) The prejudice so caused must be unfair: ibid;”
“[68] This does not mean that an overly strict approach should be taken to determining whether Michael has suffered a particular detriment in respect of a particular company. In the context of ss 994–996 it is clear that the conduct must be unfairly prejudicial to the interests of one or more members as members, but in O’Neill v Phillips[1999] 2 BCLC 1 at 15,[1999] 1 WLR 1092 at 1105 Lord Hoffmann stated, by reference to R&H Electrical Ltd v Haden Bill Electrical Ltd[1995] 2 BCLC 280 (‘R&H Electrical’), that ‘the requirement that prejudice must be suffered as a member should not be too narrowly or technically construed……... …….. [103] Whilst the requirement that conduct must be unfairly prejudicial to the interests of a member in his capacity as such must not be too narrowly construed, there are some limits to it……. [104] Mr Anderson relied on R & H Electrical[1995] 2 BCLC 280 . In that case Mr Pitt was a 25% shareholder of Haden Bill and controlled a loan creditor of it, R & H. It was held that Mr Pitt had a legitimate expectation of being able to participate in the management of Haden Bill for so long as R&H remained a significant creditor, such that Mr Pitt’s ouster from management should be remedied by having his shares bought out and the loans repaid. Robert Walker J concluded that the fact that R & H was a separate legal entity from Mr Pitt, and that it was said that the prejudice was to R&H rather than to Mr Pitt as a shareholder, did not make a difference. There was a relationship based on mutual trust, and the loans were procured by Mr Pitt and formed an essential part of the arrangements entered into for the venture (at 294–295). [105] In reaching his conclusion Robert Walker J relied on an earlier decision of Hoffmann J in Re a Company (No 00477 of 1986)[1986] BCLC 376 ,(1986) 2 BCC 99 . In that case a husband and wife had sold a company in exchange for shares in the respondent on the basis of various understandings, including that they would continue to participate as directors and the husband would be employed as managing director. Hoffmann J declined to strike out the petition on the grounds that the wrongs complained of were wrongs done to the petitioners as vendors or as a wrongfully dismissed employee. [106] In each of those cases the court’s approach allowed account to be taken of broader considerations, going beyond the interests of an individual strictly in his capacity as a shareholder, in determining whether the actions taken were unfair. Similarly in Gamlestaden[2008] 1 BCLC 468 , in circumstances where a joint venturer had invested in the joint venture by means of loans as well as shares, it was decided that there was locus standi for the application where the relief would be of real value in facilitating recovery of part of the investment even though the company was insolvent (paras [33] and [36]–[37]). But common to all of these cases was the petitioners’ relationship with the company in question, and the petitioners’ objective of safeguarding the value of their investment in it, whether by share capital or otherwise.”
“If Kingsford uses its money to enable Ivy to refinance Breton… it will not be able to use that money for other purposes. It will be difficult for the court to calculate how much better off Kingsford would have been if had used its money for other purposes….”
“the value of [Breton] to me in retaining and operating its site cannot be measured in monetary terms. Caravan sites can be difficult to source and acquire, and the opportunity to purchase another site similar to Breton…, which is close to my other sites and my home, and one where I have spent years developing the site, my relationships with the residents, employees, supply chain …… is not something that could be replicated.”