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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Baltic House Developments Ltd v Cheung & Anor  EWHC 1525 (Ch) (17 May 2018)
Cite as:  Bus LR 1531,  EWHC 1525 (Ch),  WLR(D) 387
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BUSINESS & PROPERTY COURTS IN MANCHESTER
COMPANIES INSOLVENCY LIST
Manchester Civil and Family Justice Centre
1 Bridge Street West
B e f o r e :
(Sitting as a High court Judge)
| BALTIC HOUSE DEVELOPMENTS LTD
|- and -
|WING KEUNG CHEUNG & PO SHING PATRICK
8th Floor, 165 Fleet Street, London, EC4A 2DY
Tel No: 020 7404 1400 Fax No: 020 7404 1424
Web: www.dtiglobal.com Email: email@example.com
(Official Shorthand Writers to the Court)
MR S PASSFIELD (instructed by Mishcon de Reya LLP) appeared on behalf of the Respondents
Crown Copyright ©
"If the sale of the main asset is rescinded, it is highly unlikely the joint administrators will seek to find finance to complete the project in the Company's name. The nature of the work done and the insolvent situation with the contractors who have carried the work make it very difficult to provide the warranties needed, to pass building inspections, to obtain the required insurances and generally comply with the health and safety requirements in continuing with such a project."
"My initial understanding was that the Company had realisable debts of approximately £5 million. That no longer appears to be the case, which has detrimentally impacted on the estimated outcome to the extent I now see little difference in outcome between administration and liquidation. A number of the debts which were listed in the Company's accounts filed at Companies House for the period ending 31 December 2016 have proved to be irrecoverable. In addition I am not certain that the Company have the funds with which to generate the debts. They are not trade debts, they are in the main intercompany loans, but my investigation showed that it would have been difficult for the Company to have had such large sums to loan other companies within the group. Other companies within the group appear to be facing financial difficulty, and of the six debts originally considered as due and payable, I now consider that only two may have a chance of significant recovery."
"Lack of support from creditors
At the outset I was aware of the petition presented by two unsecured creditors of the Company. The petitioner has subsequently filed a witness statement dated 20 March 2018 setting out he is the representative of a number of unsecured creditors of the Company when the value of unsecured creditors opposing the application totals a touch over £5 million. Although I am of the view that the Company property could be realised in order to make a distribution to one or more secured or preferential creditors, therefore satisfying one of the statutory purposes for administration, I consider that it would be difficult for me to proceed with the administration appointment and in particular to get the administrator's proposals agreed without the support of the 'investor' creditors, who may or may not be unsecured. The petitioners have indicated they wish to see a liquidator of their choice appointed, and they say that this is the wish of a very significant proportion of those creditors."
"It is clear both these parties know the site well and have sufficient experience and resource not only to maximise value but also to work with the administrators for the best maximised returns."
"The aim would be to complete the build-out of the development. Based in Singapore, we can communicate with the investors who had previously invested their money into the property to work with them and on their behalf to rescue the project and a much better outcome than would occur on liquidation."
"We see this support being either to purchase the property outright from these administrators with a view to developing the same, or to provide funding within the administration to allow the development to be completed. Clearly this would be subject to a due diligence process on how best to maximise the position for the stakeholders."
"We would suggest that we are one of only a very small group of potential or realistic purchasers for this property given its nature and history. We would have the capability to make this property a success."
"If the petitioners are not satisfied that the property is freshly developed by the administrators and the steps taken in the investigation which will be outlined to them during the initial phase of the process, it is clearly within their gift to reject the administrators' proposals and transition the case into liquidation, but I would argue it is more appropriate to do so after a site development build strategy is explored given the expressions of interest obtained."
"(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) [rescue] 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."
"(4) The administrator may perform his functions with the objective specified in sub-paragraph (1)(c) only if—
(a) he thinks that it is not reasonably practicable to achieve either of the objectives specified in sub-paragraph (1)(a) and (b), and
(b) he does not unnecessarily harm the interests of the creditors of the Company as a whole."
"There is no dispute about the applicable principles. There has to be a real prospect that the administration order will achieve the purpose. That does not mean that I need to be satisfied that on the balance of probabilities there will be a better outcome upon administration as compared with winding up. There has to be a real prospect. It is not enough to show a real prospect that administration would achieve no worse an outcome. The prospect of a better result must be shown. However, I venture to think that if an administration can be shown in all but the most unlikely circumstances to produce a result no worse than liquidation, and if it can be shown that there are reasonably possible circumstances in which administration can in fact produce a better result so that paragraph 11(b) [now 3(1)(b)] is satisfied, that will be a significant factor when it comes to exercising a discretion whether or not to make an order."
"It is necessary first in my judgment to understand that the discretion provided to the court in paragraph 13 of schedule B1 is of a wide and general nature, not constrained in any way … Nothing that I say today should be taken as limiting the factors that can properly be considered. The circumstances are likely to be infinitely variable. The interests of secured creditors, preferential creditors, unsecured creditors and the Company itself will change from case to case."
Epiq Europe Ltd hereby certify that the above is an accurate and complete record of the proceedings or part thereof.
This transcript has been approved by the Judge