One Blackfriars Ltd, Re

Factual and Procedural Background

The Applicants were appointed as joint liquidators of Company A on 30 March 2016. The Respondents were former administrators of Company A, appointed by a syndicate of banks led by Company B. Company A had defaulted on a loan facility provided by the Syndicate, secured by a legal charge held by Company B. The Site, a plot of land in The City, was marketed and sold by the administrators’ agent, Company C, to a third party in December 2011 for £77.4 million.

The Applicants alleged that the administration was mishandled by the former administrators from the outset, specifically that the Site was sold at an undervalue and that breaches of duty caused the loss of a chance to rescue Company A as a going concern. The allegations focused on three main areas: failure to act independently and in accordance with legal duties; failure to properly assess the value of the Site including its planning potential; and failure to market and sell the Site properly, resulting in sale at an undervalue.

The former administrators denied breach of duty, contending that Company A was insolvent and that their decisions, including the sale of the Site at market value, were reasonable and supported by professional advice from planning and marketing consultants.

The trial was conducted remotely due to the Covid-19 pandemic, utilizing a virtual courtroom with live video and electronic document management. The court found that the remote format did not disadvantage the assessment of witness credibility or the conduct of the trial. Public access was facilitated by live streaming the proceedings.

The factual background included detailed history of Company A’s ownership, planning permissions for the Site, the impact of the global financial crisis on the project, joint venture arrangements, loan facilities, default events, and the steps leading to the appointment of the former administrators. The administration process, marketing, bidding, and sale of the Site were extensively documented and scrutinized.

Procedurally, the Applicants issued claims alleging breach of duty by the former administrators. Permission to bring the claims was granted in April 2018. The Respondents served their Defence, and the Applicants served a Reply. Case management conferences and amendments to pleadings followed, culminating in a full trial.

Legal Issues Presented

1. Whether the former administrators breached their statutory and common law duties in conducting the administration of Company A.
2. Whether the former administrators improperly agreed to a "light touch" administration that fettered their independent judgment.
3. Whether the appointment of Company C as marketing agent was appropriate and whether they were independent.
4. Whether the former administrators failed to properly assess the value of the Site, including its planning potential.
5. Whether the marketing and sale process of the Site was adequate and conducted to obtain the best reasonably obtainable price.
6. Whether the former administrators failed to pursue or obtain revised planning consent that could have enhanced the Site’s value.
7. Whether the former administrators should have negotiated overage provisions or conditional contracts.
8. Whether the former administrators failed to exercise independent judgment and acted under undue influence of the secured creditors.
9. Whether the sale of the Site was at an undervalue and whether losses resulted from any breaches.
10. The appropriate standard of review of the administrators’ decisions and the scope of fiduciary and statutory duties owed.

Arguments of the Parties

Applicants' Arguments

• The former administrators agreed pre-appointment to conduct a "light touch" administration, effectively allowing the secured creditor to guide the administration, impairing their ability to independently determine the correct statutory objective.
• The appointment of Company C was inappropriate due to a conflict of interest arising from their prior advisory role to the secured creditor.
• The former administrators failed to properly assess the Site’s value, neglecting to obtain independent valuations or fully consider the planning potential.
• The marketing and sale process was inadequate, limited in scope, and designed to depress bids, including alleged "re-education" of the market to accept offers below £100 million.
• The former administrators failed to pursue a varied planning consent that would have enhanced the Site’s value and did not investigate or act on planning uplift potential.
• The sale contract lacked overage provisions or conditions on planning permission, resulting in a loss to creditors.
• The former administrators failed to exercise independent judgment and subordinated their duties to the interests of the secured creditor syndicate.
• The Site was sold at an undervalue, causing loss to the creditors and Company A.

Former Administrators' Arguments

• The term "light touch" administration was understood as limited day-to-day management work given the secured creditor’s economic interest, not as a fetter on independent judgment or improper control.
• The appointment of Company C was appropriate, reasonable, and in line with market practice. No conflict of interest existed as the interests of the secured creditor and other creditors were aligned at the time.
• The former administrators had sufficient information on the Site’s value, including valuations from reputable sources, and reasonably relied on the market and marketing process to determine value.
• The marketing process was comprehensive, global in reach, and designed to obtain the best price reasonably obtainable. The bidding process was fair, structured, and appropriately conducted.
• The former administrators properly took advice on planning matters from qualified consultants, reasonably decided not to pursue revised planning consent themselves, and left it to potential purchasers to assess planning uplift.
• The decision to accept an unconditional sale without overage provisions was reasonable given market practice, risks, and advice from experts.
• The former administrators exercised independent judgment throughout, did not surrender discretion to the secured creditor, and balanced the interests of all creditors.
• The Site was sold at its market value following a transparent and competitive marketing and bidding process.

Table of Precedents Cited

Court's Reasoning and Analysis

The court undertook a detailed and structured analysis of the facts and law. It began by setting out the statutory framework governing administration under Schedule B1 of the Insolvency Act 1986, emphasizing the hierarchy of objectives administrators must consider and the overriding duty to act in the interests of all creditors.

The court examined the duties owed by the former administrators, distinguishing between statutory, common law, and fiduciary duties, and considered the applicability of the non-delegable duty to obtain the best price. Following Snowden J in Davey v Money, the court rejected extending strict liability to administrators for agents' negligence, provided administrators reasonably relied on competent advice.

The court accepted that the term "light touch" administration was used pre-appointment to describe limited day-to-day management, not as a fetter on discretion or an improper agreement allowing the secured creditor to control the administration. The court found no evidence of improper influence or surrender of discretion.

Regarding the appointment of Company C as marketing agent, the court found it appropriate and reasonable, noting no conflict of interest existed at the time given alignment of creditors’ interests. The court accepted the former administrators’ reasonable reliance on Company C’s advice and competence.

On valuation, the court found the former administrators had sufficient valuation information and reasonably allowed the market to determine the Site’s value through a thorough marketing and bidding process. The court rejected the claim that an independent valuation was essential or that failure to obtain one was negligent.

The court found the former administrators gave proper consideration to the statutory objectives, concluding that Objective 3 (realising property for secured creditors) was appropriate given the circumstances, but they kept an open mind to rescue possibilities. The court rejected the allegation that the administrators failed to think about objectives or improperly predetermined them.

In relation to planning, the court accepted the former administrators acted reasonably in following professional advice not to pursue revised planning consent themselves before July 2011 and reasonably declined to pursue it after July 2011 due to risks, costs, lack of funding, and uncertainty. The court found no evidence of improper influence or failure to investigate planning uplift.

The court considered the sale contract and marketing strategy, concluding that the decision to seek an unconditional sale without overage provisions was reasonable and consistent with market practice and expert advice. The court rejected allegations of inadequate marketing or failure to supervise, finding the marketing was comprehensive, global, and designed to maximize price.

The bidding process was found to be fair, open, and appropriate, with no evidence that the former administrators or Company C sought to depress bids or "re-educate" the market downwards. The court rejected all detailed allegations of market manipulation or undue haste in concluding the sale.

Finally, the court assessed the valuation evidence, preferring the evidence of the former administrators’ expert over the Applicants’ expert due to methodological concerns and lack of credibility in the latter’s valuation. The court concluded the sale price reflected the market value at the time.

Holding and Implications

The court’s final decision was to dismiss the Applicants’ claim in its entirety.

DISMISSED

The court held that the former administrators complied fully with their statutory and common law duties throughout the administration. They acted independently, reasonably, and with due care and skill, properly considered all statutory objectives, and relied appropriately on professional advice. The marketing and sale of the Site were conducted fairly and effectively, resulting in a sale at market value.

The decision directly affects the parties by rejecting the Applicants’ allegations of breach and denying any compensation claim. No new legal precedent was established, and the ruling affirms established principles regarding administrators’ duties, the standard of review, and the role of professional advice in administration sales.