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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 >> AM Holdings Ltd v Batten & Anor  EWHC 934 (Ch) (26 April 2018)
Cite as:  EWHC 934 (Ch)
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
Fetter Lane, London EC4A 1NL
B e f o r e :
(sitting as a Deputy Judge of the High Court)
| AM HOLDINGS LIMITED
|- and -
|(1) MARK CHARLES BATTEN
(2) STEPHEN JOHN LE PAGE
Ben Valentin QC (instructed by Linklaters LLP) for the Respondents
Hearing dates: 20–21 March 2018
Crown Copyright ©
Kelyn Bacon QC (sitting as a Deputy Judge of the High Court):
The AMH administration proceedings
Pre-action applications and correspondence
The claims and applications
i) that the administrators did not have the power to sell the properties, because the administration order made by the Guernsey Court did not specify the purpose for which it was made;
ii) that even if they did have the power to sell the properties, the administrators breached their duties by deciding to sell the properties rather than attempting to refinance the companies' debt; and
iii) that the properties were in any event sold at an undervalue.
Tests for permission, strike out and summary judgment
"(1) The court may examine the conduct of a person who –
(a) is or purports to be the foreign representative in relation to a debtor; or
(b) has been or has purported to be the foreign representative in relation to a debtor.
(2) An examination under this paragraph may be held only on the application of –
(a) a British insolvency officeholder acting in relation to the debtor;
(b) a creditor of the debtor; or
(c) with the permission of the court, any other person who appears to have an interest justifying an application.
(3) An application under subparagraph (2) must allege that the foreign representative –
(a) has misapplied or retained money or other property of the debtor;
(b) has become accountable for money or other property of the debtor;
(c) has breached a fiduciary or other duty in relation to the debtor; or
(d) has been guilty of misfeasance."
"An application under sub-paragraph (2) may be made in respect of an administrator who has been discharged under paragraph 98 only with the permission of the court."
The construction point
"(1) With effect from 11:18am on 9 August 2011 the Administration Orders be discharged pursuant to section 283 of the Companies Law and that the fees incurred by the Joint Administrators as set out in the affidavit of Mark Batten sworn on 8 August 2011 be fixed and the Applicants are entitled to payment of those fees from the Companies' assets in priority to all other claims.
(2) On the making of the order pursuant to section 382 of the Companies Law at paragraph 1 above, the Applicants shall vacate office pursuant to section 384(1)(c) of the Companies Law and further shall be released and discharged from all liability both in respect of their acts and omissions in the administrations and otherwise in relation to their conduct as joint administrators, except to the extent that they have incurred personal liability by virtue of section 379(4) of the Companies Law."
"Release of administrator
385. (1) A person who has ceased to be the administrator of a company (or cell, as the case may be) has his release with effect from –
(a) in the case of a person who has died, the time at which notice is given to the Court that he has ceased to hold office,
(b) in any other case, such time as the Court may determine.
(2) Where a person has his release under this section he is, with effect from the time of release, [and subject to subsection (4),] discharged from all liability both in respect of his acts and omissions in the administration and otherwise in relation to his conduct as administrator, except to the extent that he has incurred personal liability by virtue of section 379(4).
(3) However, nothing in this section prevents the exercise, in relation to a person who has his release under this section, of the Court's powers under section 422."
"General powers of an administrator
379. (1) The administrator may do all such things as may be necessary or expedient for the management of the affairs, business and property of the company (or cell, as the case may be).
(2) Without prejudice to subsection (1), and unless the Court orders otherwise, the administrator has the powers specified in Schedule 1.
(3) The administrator may apply to the Court for directions in relation to –
(a) the extent or performance of any function, and
(b) any matter arising in the course of his administration,
and on such application the Court may make such order, on such terms and conditions, as it thinks fit.
(4) In performing his functions the administrator is deemed to act as the company's agent (or the protected cell company's agent in the case of a cell), but shall not incur personal liability except to the extent that he is fraudulent, reckless or grossly negligent or acts in bad faith."
i) the Guernsey courts apply similar principles of statutory construction to those applied in England;
ii) in construing legislation the Guernsey courts are entitled to have regard to the travaux préparatoires, and the joint memorandum records the experts' agreement that there are no other travaux relevant to the construction of s. 379 that have not been cited in the two expert reports;
iii) it is relevant to consider the surrounding legal and factual circumstances, including in particular the practical consequences of the opposing interpretations contended for by the parties (a point that both Mr Swan and Mr Adkins rely upon, although unsurprisingly referring in each case to different consequences that are said to be relevant);
iv) it is relevant to consider the interaction between s. 379 and other provisions of the 2008 Law; and
v) it is relevant to consider the policy of the statute.
"is concerned with the position of the administrator as agent of the company during the course of the administration and that, accordingly, any construction of the extension of the limitation provided in the second clause should be a logical corollary, or incidence, of the administrators' position as an agent."
"In exercising his functions and powers the Administrator is deemed to act as the agent of the protected cell company, and shall not incur personal liability except to the extent that he is fraudulent, reckless or grossly negligent, or acts in bad faith."
"Remedy against delinquent officers
422. (1) Where in the course of the winding up of a company it appears that any person described in subsection (2) –
(a) has appropriated or otherwise misapplied any of the company's assets,
(b) has become personally liable for any of the company's debts or liabilities, or
(c) has otherwise been guilty of any misfeasance or breach of fiduciary duty in relation to the company,
the liquidator or any creditor or member of the Company may apply to the Court for an order under this section.
(2) The persons mentioned in subsection (1) are –
(a) any past or present officer of the company,
(b) any other person who, directly or indirectly, is or has been in any way concerned in or has participated in the promotion, formation or management of the company.
(3) On an application under subsection (1) the Court may examine the conduct of the person concerned and may order him –
(a) to repay, restore or account for such money or such property,
(b) to contribute such sum to the company's assets,
(c) to pay interest upon such amount, at such rate and from such date,
as the Court thinks fit in respect of the default, whether by way of indemnity or compensation or otherwise."
The merits of AMH's claims
The administrators' power to sell the properties
374. (1) Subject to the provisions of this section, if the Court –
(a) is satisfied that a company (or a cell of a protected cell company) does not satisfy or is likely to become unable to satisfy the solvency test, and
(b) considers that the making of an order under this section may achieve one or more of the purposes set out in subsection (3),
the Court may make an under this section (an "administration order") in relation to that company (or that cell, as the case may be).
(3) The purposes for the achievement of which an administration order may be made are –
(a) the survival of the company (or cell, as the case may be), and the whole or any part of its undertaking, as a going concern, or
(b) a more advantageous realisation of the company's (or cell's as the case may be) assets than would be effected on a winding up,
and the order shall specify the purpose for which it is made."
"The appointment of the Joint Administrators and each of them under s. 374 of the Companies Law shall take immediate effect upon the making of the Orders and they shall be entitled to forthwith exercise all powers and functions as Joint Administrators."
"Power to sell or otherwise dispose of the property of the company by public auction or private contract."
The alleged breaches of duty in deciding to sell the properties
The alleged sale at an undervalue
The estoppel point and related arguments
"it is declared and agreed that the administrators shall incur no personal liability whatsoever or howsoever arising and whether formulated in contract or tort or by reference to any other right or remedy under or in connection with this agreement or any transaction instrument, assurance, agreement, covenant, deed or other arrangement, document or act relating to this agreement."