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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Lehman Brothers Europe Ltd v Re Insolvency Act [2020] EWHC 1369 (Ch) (29 May 2020) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2020/1369.html Cite as: [2020] EWHC 1369 (Ch) |
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8243 of 2008 |
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
7 Rolls Buildings, Fetter Lane, London EC4A 1NL |
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B e f o r e :
____________________
IN THE MATTER OF ![]() ![]() ![]() ![]() ![]() ![]() |
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AND IN THE MATTER OF THE INSOLVENCY ACT |
____________________
____________________
Crown Copyright ©
MR JUSTICE HILDYARD:
(1) All the creditors have now been paid in full, and havereceived
statutory interest on their claims;
(2) LBEL's sole shareholder has
received
significant distributions in
respect
of the surplus;
(3) HMRC and former creditors have been given notice of the present application, the intention to seek a decision without a hearing and the opportunity to object both in terms of the procedure and as to the substance: but no objection (nor any indication of a wish to participate in the process) has been
received
from any of them;
(4) The application is also made in the unusual circumstances of the present "lockdown" made necessary by COVID-19, and there is a special incentive to do all that may
reasonably
be done to ensure the safe conduct of business and to conserve the
resources
of the parties and the court.
(1) Mr Schwarzmann was appointed under paragraph 22 of Schedule B1 to the Act on 23 September 2008. The position inrelation
to Mr Schwarzmann's discharge from liability is dealt with in the Administrators' proposals for the then prospective administration dated 14 November 2008 ("the Proposals"), which provided that his discharge would take effect at a time determined by the creditors' committee, or (if no creditors' committee has been appointed) by the general body of creditors.
(2) Mr Downs, Ms Bruce and Mr Macnamara were all appointed as Administrators by order of the Court dated 2 July 2018, which provided that they were to obtain their discharge on the same basis as those administrators originally appointed on 23 September 2008 (i.e. the basis set out in the Proposals, as
referred
to above), such that the "discharge provided by paragraph 98(1) of Schedule B1 of the Act will take place... at a time appointed by the
resolution
of the creditors' committee or, if there is no committee, by
resolution
of the creditors or in any case at a time specified by the court..."
(1) Where a person ceases to be the administrator of a company (whether because he vacates office byreason
of
resignation,
death or otherwise, because he is
removed
from office or because his appointment ceases to have effect) he is discharged from liability in
respect
of any action of his as administrator.
(2) The discharge provided by sub-paragraph (1) takes effect—
(a) in the case of an administrator who dies, on the filing with the court of notice of his death,
(b) in the case of an administrator appointed under paragraph 14 or 22, at a time appointed byresolution
of the creditors' committee or, if there is no committee, by
resolution
of the creditors, or
(c) in any case, at a time specified by the court.
…
(4) Discharge—
(a) applies to liability accrued before the discharge takes effect, and
(b) does not prevent the exercise of the court's powers under paragraph 75.
(1) Why it was that the issue of the time at which the Former Administrators' discharge should take effect was not put to the Creditors Committee before its disbandment; and
(2) Whether the fact that LBEL is in liquidation, and has been so for many months, in any way affects the power of the court or its exercise.
Mr Riddiford provided helpful supplemental submissions accordingly.
(1) First, norestriction
is expressed in paragraph 98 of Schedule B1 to the Act such as to prevent a former administrator from making an application under paragraph 98(2)(c).
(2) Secondly, paragraph 98(2)(c) is, on the contrary, conspicuously non-prescriptive asregards
the question of the standing
required
to make an application, stating simply that the discharge takes effect "in any case, at a time specified by the court". This is in contrast to other provisions of Schedule B1 where the question of standing is provided for in detail. See, for example, the detailed standing provisions set out in paragraph 91(1) of Schedule B1 to the Act[2]. Accordingly, the better view is that: (i) any person with a sufficient interest in the matter of an administrator's discharge (or of a former administrator's discharge[3]) has standing to make such an application; and (ii) the administrator (or former administrator) in question plainly qualifies as a person with a sufficient interest in the matter.
(3) Thirdly, other provisions of paragraph 98 contemplate that the question of the timing of an administrator's discharge may, in certain cases, arise for determination only once the administrator is no longer in office. In particular, paragraph 98(3A) provides as follows (emphasis added): "In a case where the administrator isremoved
from office, a decision of the creditors for the purposes of sub-paragraph (2)(b), or of the preferential creditors for the purposes of sub-paragraph (2)(ba), must be made by a qualifying decision procedure." Where the
relevant
creditors fail to make the decision contemplated by paragraph 98(3A) – whether through inadvertence or otherwise – the former administrator would presumably be able to avail himself of paragraph 98(2)(c) and apply to the Court for an order fixing the date of his discharge (this at a time when, necessarily, he had already become a former administrator). The express words of paragraph 98(2)(c) support this view – noting that the words "in any case", as used in paragraph 98(2)(c), must include at the very least all cases expressly contemplated by paragraph 98 itself (which includes the case of the administrator who is "
removed
from office" (paragraph 98(3A)).
(4) Finally, it is also right to note that the date on which the Court typically orders that an administrator's discharge will take effect under paragraph 98(2)(c) of Schedule B1 is a date after the termination of the administration. In these circumstances it would be surprising if paragraph 98(2)(c) of Schedule B1 included an impliedrestriction
to the effect that an application could only be made prior to the administration's termination.
"96. In my view, there are no good grounds to depart from what I was told is the usual practice of ordering that an administrator be discharged from liability under paragraph 98 of Schedule B1 to take effect 28 days after he has filed his finalreport.
The
reason
that it will usually be right to order such a discharge is that the administrator will no longer
retain
in his hands the assets of the company out of which he is entitled to meet any liability properly incurred by him, so that it is unfair to leave him on risk generally. In so far as there is a good arguable case against him of improper conduct or misfeasance, that can be proceeded with after the discharge is given, in accordance with paragraph 98 of Schedule B1
read
with paragraph 75."
"…As will be apparent, and as I understand is the ordinary practice, the trigger for the discharge sought is 28 days after (as the application puts it) the filing of the finalreceipts
and payments account with the
Registrar
of Companies, save in
relation
to claims made before that date. I can quite see that that is, in practical terms, a perfectly workable solution, but it did strike me, albeit possible out of an abundance of caution, that, in truth, as will be apparent from my description of paragraph 98(1), the court's discretion to determine when the discharge should take effect is premised on the conditions of paragraph 98(1) having been satisfied, the prominent condition being that the person concerned should have ceased to be administrator of the company. In point of detail, that does not happen until
registration
under paragraph 84(4) of the notice to be given under paragraph 84(1) and, therefore, in absolute strictness, I think it is preferable that the order should be drawn so as to
reflect
the clockwork I have described."
Note 1 ie https://www.pwc.co.uk/services/business- Note 2 Paragraph 91(1) of Schedule B1:
“(1) Where the administrator was appointed by administration order, the court may Note 3 An order under paragraph 98(2)(c) of Schedule B1 may be made in restructuring/administrations/non-lbie-companies/lehman-brothers-europe-limited-in-administration.html
[Back]
replace
the administrator on an application under this sub-paragraph made by—
(a) a creditors’ committee of the company,
(b) the company,
(c) the directors of the company,
(d) one or more creditors of the company, or
(e) where more than one person was appointed to act jointly or concurrently as the administrator, any of those persons who
remains
in office. [Back]
relation
to a former administrator. Indeed, on 20th March 2019 this Court granted an order discharging a former administrator of
Lehman
Brothers
International (
Europe)
(in administration), Mr Guy Parr, on an application by the company’s then-current administrators. See
Re
Lehman
Brother
International (
Europe) (in administration) [2019] EWHC 2370 (Ch). [Back]