Angelic Interiors Ltd ((in Administration))
| Jurisdiction | England & Wales |
| Judge | Frith |
| Judgment Date | 29 November 2022 |
| Neutral Citation | [2022] EWHC 2974 (Ch) |
| Docket Number | Case No: CR-2016-001622 |
| Court | Chancery Division |
[2022] EWHC 2974 (Ch)
Deputy Insolvency and Companies Court Judge Frith
Case No: CR-2016-001622
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Royal Courts of Justice
Rolls Building, Fetter Lane
London EC4A 1NL
Edoardo Lupi (instructed by Jones Day) for Ian Colin Wormleighton and Daniel Francis Butters in their capacity as the First and Second Joint Administrators of Angelic Interiors Limited.
Andrew Mace (instructed by JMW Solicitors LLP) for Andrew Lawrence Hosking and Carl Jackson in their capacity as the Third and Fourth Joint Administrators of Angelic Interiors Limited.
Robert Amey (instructed by Herbert Smith Freehills LLP) for Lloyds Bank plc.
Hearing dates: 7 October 2022 and 29 November 2022
Approved Judgment
This judgment was handed down remotely by circulation to the parties' representatives by email. It will also be sent to the National Archives for publication. The date and time for hand-down is deemed to be 10.30 a.m. on 29 November 2022.
Deputy Insolvency and Companies Court Judge
This is an application for directions made pursuant to Paragraph 63 of Schedule B1 of the Insolvency Act 1986 (the “Act”) by Ian Colin Wormleighton and Daniel Francis Butters of Teneo Financial Advisory Limited in their capacity as the First and Second Joint Administrators of Angelic Interiors Limited (the “Company”). The directions they seek concern the issue as to whether they should send a notice to the Registrar of Companies pursuant to paragraph 84(1) of the Act to the effect that the Company has no property which might permit a distribution to its creditors. They further seek directions pursuant to paragraph 76(2)(a) of Schedule B1 of the Insolvency Act 1986 for an order, if appropriate, that the term of office of their appointment and that of Mr Andrew Hosking and Mr Carl Jackson of Quantuma LLP as the Third and Fourth Administrators of the Company, should be extended to a date to be fixed. I shall refer to Messrs Wormleighton and Butters as the “ Teneo Administrators” and Messrs Hosking and Jackson as the “ Quantuma Administrators”. They were represented by Mr Edoardo Lupi and Mr Andrew Mace, respectively at the hearing before me.
The administration of the Company is one of several administrations involving related companies. These administrations have in turn led to the issue of several highly contentious proceedings involving commercial lenders, the office holders that were appointed and other parties that became embroiled within their insolvent estates. Most were instigated by the former director and principal shareholder, Ms Julie Davey. It was at her behest that the Quantuma Administrators were appointed pursuant to the order of Charles Hollander QC (sitting as a Deputy High Court Judge) by an order dated 1 st July 2016. Their principal role was to act as “conflict” administrators with a view to investigating potential claims that may exist against Lloyds Bank plc (the “Bank”) as the principal secured creditor and other potential defendants including McBrides Accountants LLP, a firm of accountants who had provided financial advice to the Company. These included inter alia claims arising from alleged mis-selling of Interest Rate Hedging Products (“ IRHP”) and allegations of professional negligence. The relationship between the Teneo Administrators and the Quantuma Administrators was governed by a Memorandum of Understanding dated 7 December 2016 (the “Angelic MoU”). The Angelic MoU defined, in considerable detail the role of both pairs of administrators and the division of administrator responsibilities between them.
The Bank appeared as an interested party to the application in its capacity as the principal and only current secured creditor of the Company. In evidence filed on behalf of the Teneo Administrators and the Bank, I was informed that to date, the Bank has been paid £19.4 million in the administration, with a further final payment of approximately £500,000 expected. On present calculations it currently faces a £17 million shortfall in its claims against the Company. The Bank's claims represent in the region of 95% of the Company's aggregate debts. It is by far the largest creditor, and it is supportive of the position that is adopted by the Teneo Administrators in their application. The Bank was represented by Mr Robert Amey at the hearing before me. I am grateful to all Counsel for their detailed oral and written submissions.
The application and its history.
In essence the dispute on the application can be simply stated. The Teneo Administrators consider that the purpose of the administration has been substantially achieved and there is no further property to be realised that may enable a further distribution to creditors. They are of the view that the administration should end, and the Company should move to dissolution pursuant to the provisions of paragraph 84(1) of Sch. B1 of the Act forthwith. The consequence of registering such a notice would be to terminate the appointment of all the Administrators immediately and for the Company to be dissolved three months later. However, by virtue of the division of responsibilities between themselves and the Quantuma Administrators, the Teneo Administrators have no visibility over the present position of the potential claims that the Quantuma Administrators were appointed to pursue and can express no view on their merits. In those circumstances, the Teneo Administrators considered it appropriate for the Court to consider the bases on which the Quantuma Administrators appear to continue to think that there is property which might permit a distribution to creditors other than the Bank. The Quantuma Administrators disagree with this approach. They believe that there are further potential claims they wish to pursue which do constitute property of the Company, and which may enable a further distribution to be made to the general body of creditors. Discussions between the pairs of administrators have not resolved matters. Accordingly, on 30 November 2021, the Teneo Administrators issued the Application so that the Court can give further directions as appropriate.
When the hearing was initially listed before ICC Judge Prentis in December 2021, the Quantuma Administrators filed evidence in the two days that preceded the hearing. To deal with the issues raised in that evidence, the Learned Judge made an order that: (a) the Application should be treated as one for general directions; (b) the parties be given leave to file sequential lists of issues for determination; and (c) the matter be listed for a day, with 1/2 day judicial reading time. The parties complied with those directions and the hearing before me was the final hearing of the Application pursuant to that Order.
The issues for the Court.
The Teneo Administrators filed their list of five issues on 27 January 2022. The Quantuma Administrators filed their list of 7 issues on 1 March 2022. Not surprisingly, there was some duplication. Mr Lupi helpfully condensed these issues in the following manner with which the other interested parties did not demur and which I now adopt.
i) The first key issue is whether the purpose of the administration has been sufficiently achieved, such that the administration should come to an end. The wording here tracks that of Sch. B1, para 79(3) pursuant to which an administrator “ shall” make an application for the cessation of their appointment if the administrator thinks that the purpose of administration has been “ sufficiently achieved” in relation to the company (the “ End of Administration Issue”).
ii) The second key issue is whether there is property in the Company's estate, including any “Third and Fourth Administrators' Potential Claims” and/or any “Third and Fourth Administrators' Potential McBrides Claims” (both as defined in the Angelic MoU) which might permit a distribution to the Company's creditors. The wording here follows Sch. B1, para 84(1). It is concerned with establishing whether the Company has any property which might permit a distribution to creditors (the “ Property Issue”). If there is no such property, the administrator “ shall” give notice of dissolution under para 84(1). There is no discretion to do otherwise.
iii) There is then a series of sub-issues which ultimately relate to the Property Issue and the question of whether the Company has any property, particularly in the shape of the Quantuma Potential Claims (defined below) or the Quantuma Potential McBrides Claims (defined below) – which might permit a distribution to the general creditors. These are:
a) whether the expected value of the Quantuma Potential Claims and the Quantuma Potential McBrides Claims is sufficient to survive the effect of the doctrine of circuity of action. This issue arises, in circumstances where any recovery from their claims would need to exceed £17 million (the value of the Bank's outstanding claims against the Company) to create any tangible financial benefit for the general body of creditors (the “ Circuity Issue”).
b) the Quantuma Administrators seek “ clarification and detail” as to a settlement agreement entered by the first and second liquidators of the Angel Group companies (not the Company) with McBrides Accountants LLP (“ McBrides”) (the “ Settlement Agreement Issue”).
c) the Quantuma Administrators raise 7 issues which are specific to the Bank and appear loosely to concern the prospects of claims they may wish to bring against it (Quantuma List, Issue 7 and the further six “ Specific issues pertaining to the Bank requiring investigation by the Third and Fourth Administrators” (together with Issue 7, the “ Bank Issues”)).
iv) The third key issue is whether in all the...
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