Out-Law Legal Update | 15 Apr 2021 | 1:55 pm | 3 min. read
The liquidators’ allegations were far-reaching, including that the administrators had failed to act independently and in accordance with their legal duties; to properly assess the value of the site, in particular its planning potential; and to market and sell the site at value. The High Court rejected each allegation, dismissing the claim in its entirety. The court also commented on the effectiveness of the trial being held remotely.
Administrators were appointed over One Blackfriars Limited (the company) in October 2010. The company’s main asset was a site in Blackfriars, London with development potential. A valuation of £140 million for the site was obtained in October 2008, with a further valuation post-appointment suggesting a valuation in the region of between £43 and £48m.
Following a marketing process run by CBRE, the site was sold to St George Group plc in October 2011 for £77.4m. The company was dissolved in January 2013, and liquidators appointed in March 2016.
The joint liquidators brought a claim against the administrators of the company, alleging that the administration had been mishandled. The administrators denied these allegations.
The trial was heard remotely over a five-week period in the summer of 2020. The judgment was recently handed down. The court found that the administrators had fully complied with their duties.
The liquidators’ claims can be summarised under three headings: that the administrators had failed to act independently and in accordance with their legal duties; that they had failed to properly assess the value of the site, in particular its planning potential; and that they had failed to market and sell the site at market value.
Solicitor, Pinsent Masons
Although this judgment is fact-specific, it demonstrates that administrators can reasonably rely on advice from competent professional agents and consultants.
The court rejected the allegations of breach of duty in their entirety. The detailed judgment is useful in summarising the scope of administrators’ duties following the decision in the 2018 Davey v Money case. Although this judgment is fact-specific, it demonstrates that administrators can reasonably rely on advice from competent professional agents and consultants.
The court found that the administrators had properly and genuinely considered the purpose of the administration, reasonably concluding that the first objective of administration – rescuing the company as a going concern – was unlikely to be achieved. However, they did not completely disregard that this objective could be achieved if an investor was found to refinance the debt.
The administrators were entitled to pursue the third objective – that is, realising property in order to make a distribution to one or more secured or preferential creditors following a discussion as to where the value of the site was likely to break. The decision as to which objective is reasonably and practicably achievable is a matter for the judgement of the administrators.
Throughout the administration, the administrators were found to have had due regard to the interests of all creditors, and not just the syndicate of lenders that had appointed them, in light of the advice they had received from their professional advisers. The administrators had no reason to doubt the validity of the professional advice they had been given, and there was no conflict of interest that prevented the administrators from appointing the same property agents as had previously advised the syndicate of lenders. The administrators had given due consideration to the advice received in relation to planning, marketing and sales matters from their advisers. In the circumstances, it was reasonable for them to take account of their professional advisers and not to seek amended planning permission for the site, instead leaving interested purchasers to consider the position with their own expert advisers.
The route that the administrators chose to conduct the marketing and bidding process at the site to understand what value the site would reach in the market was reasonable in the circumstances, according to the court. A properly conducted marketing process and a fair and appropriate bidding process was a reasonable method by which to determine the market value of the site, rather than obtaining an independent valuation. The court found that the administrators had taken reasonable steps at every stage in the sale and marketing process to ensure that the site was sold for the highest price reasonably obtainable in the circumstances. As such, it had not been sold at an undervalue.
The judgment also considers the use of remote trials. The judge noted that he did not feel disadvantaged in his ability to assess the reliability or credibility of witnesses by hearing witness evidence remotely. It was also noted that the remote hearing allowed greater public access than if it had been heard in a traditional courtroom.
Co-written by Yazmin Russ of Pinsent Masons.
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