Facts:
This case concerned an application by the joint Administrators of Central Properties Holding Limited (“CPH“) seeking various orders relating to the extension and termination of their appointment, as well as their discharge.
The Administrators had applied for an extension of the administration, which had already been granted at the point of the current decision. The purpose of the extension was to enable a company voluntary agreement (“CVA“) to be proposed. The Administrators also applied for i) an order for the termination of their appointment, conditional on a successful CVA; and ii) an order for their discharge from liability, conditional on the termination of their appointment.
Issues:
Administrators who are appointed out of court under paragraphs 14 or 22 of Schedule B1 of IA 1986 can terminate an administration under paragraph 80 if they think that the purpose of administration has been sufficiently achieved. This process simply requires the administrators to file a notice with the court and the register of companies. Where administrators are appointed by a court order, such as was the case with CPH, this option is not available.
Administrators appointed by court order may, subject to relevant conditions, be able to move the company into creditors’ voluntary liquidation or dissolution without a further court order. However, in the case of CPH, the Administrators proposed a solvent exit via a CVA. The Administrators therefore requested a pre-emptive order, under paragraph 79 of Schedule B1 of IA 1986, which would allow for the termination of their appointment, and subsequent discharge from liability, once a successful CVA had been completed.
Decision:
While the Court determined that it had jurisdiction to make conditional orders such as those being sought, it refused to make the orders at this stage of proceedings.
The Judge’s rationale for this decision can be divided by two key elements: the remaining duties of the Administrators and the discharge from liability.
Remaining duties of the Administrators:
The Judge considered the Administrators’ argument that there would be little substantive work left for the Administrators to do following the approval of a CVA. Whilst this was anticipated, the Judge considered it relevant that once the CVA had been approved, the Administrators were to remain officers of the company for the duration of the CVA itself. In fact, it was a key element of the CVA that the Administrators would continue in office for the duration of the CVA, in order to avoid the directors being able to exercise their powers once again. It was not appropriate to make orders prescribing what was to happen after a further period of their control of the company until a later date.
Discharge from liability:
The Judge also highlighted that while the CVA was expected to lead a distribution to creditors within six months of approval, the Administrators anticipated “at least the possibility” that there will be a delay in achieving this. For example, if a creditor challenged the adjudication of their debt, which was a real possibility.
If the Administrators’ release had already been ordered by reference to the completion of the CVA, and termination of their appointment, then there could be a dispute over adjudication which would impact the question on whether the CVA could successfully complete. It was not desirable for the issue of the Administrators’ discharge to potentially become “tangled up” with a dispute in a CVA.
Overall:
The judge declined to make the orders being sought. However, it was highlighted that the same relief could be sought once the CVA had successfully completed.
Takeaway:
This case affirms the Court’s previous decision (Re Lehman Brothers International (Europe) (in administration) [2022] EWHC 1369 (Ch)) regarding the availability of conditional orders for discharge. However, it also once again demonstrates the cautious approach of the Court in making such an order where there is an element of unpredictability, for example a possibility for delay or uncertainty regarding the path the administration will follow. Although the argument was run that an order made at an early stage would help to minimise the costs of a future application, this was not enough for the Court to divert from its conservative approach.