TXU (UK) Ltd (in admin) Re
| Jurisdiction | England & Wales |
| Judge | Mr Justice Peter Smith |
| Judgment Date | 20 December 2002 |
| Neutral Citation | [2002] EWHC 2784 (Ch) |
| Docket Number | Case No: 7612 of 2002 |
| Court | Chancery Division |
| Date | 20 December 2002 |
[2002] EWHC 2784 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Peter Smith
Case No: 7612 of 2002
Mr Gabriel Moss QC (instructed by Herbert Smith) for the The Joint Administrators
Hearing dates : 25 November 2002 and 2 December 2002
Approved Judgment
INTRODUCTION
This Judgment arises out of an application made before me on behalf of the Administrators of TXU UK Limited (In Administration) ("the Company") to make a payment in settlement of potential claims against it and/or Powergen.
I acceded to the application and made the Order indicating that I would give reasons for making the Order in a later Judgment, which I now do.
The application was urgent because Powergen, which was contributing towards the settlement, indicated that it would only make its contribution (of £70,000.00) if the settlement was completed by Monday 25 November 2002.
MERITS OF PAYMENT
The Company's solicitors dealing with the potential claims, Messrs Masons, gave advice as to the merits of settlement. That advice was privileged and commercially sensitive and confidential and I do not propose to make any reference to it in detail. Having seen it however, it seems to me that the advice is sensible and that the settlement was likely to be beneficial to either the creditors of the company generally or if it turns out to be insolvent or to its shareholders it turns out to be solvent.
POSSITION OF THE COMPANY
The company is part of a large TXU group of companies described in the evidence before Blackburn J when he made an administration order on 19 November 2002. I do not propose to rehearse that evidence in this Judgment.
JURISDICTION
Under Schedule 1 of the Insolvency Act 1986 (paragraph 18) administrators are given an express power to compromise. In addition there is also an express power to make any payment (paragraph 13) "necessary or incidental to the performance of his functions".
Finally, in this context there is a general paragraph under section 14 (3) I.A. 1986 to apply for directions.
The power under paragraph 13 has received a number of judicial observations. First, in Re WBSL Realisations 1992 Ltd [1995] BCC 1, 118 Knox J express a view that the power to make payments necessary or incidental to the performance of the functions enable administrators to make payments to the creditors of the companies as opposed to making payments in accordance with either a voluntary arrangement or a scheme of arrangement.
In Re Powerstore (Trading) Ltd. and another [1998] BCC 305 Lightman J distinguished WBSL. He declined to make an order in the circumstances of the case before him. The issue was as to whether or not the company should go into compulsory or voluntary liquidation. If the former, the preferential creditors would be ascertained at the date of the making of the Administration Order. If the latter, they were to be ascertained at the date of the resolution to wind up. The result would be that a large number of creditors who would have preferential status if they were to be determined at the date of the Administration Order would not have that status if it were determined at the date of the resolution to wind up. Therefore those creditors who would be thus disadvantaged would only agree to a voluntary liquidation if there preferential status was preserved. The administrators sought an Order in order to do that.
Lightman J determined that the Court could not direct future liquidators to disapply the statutory regime.
He considered a second type or Order where by the administrators would pay creditors or pay funds necessary for the purpose of paying credit to future liquidators on trust to pay the creditors. He determined that whilst administrators had power under section 14 (1) I.A. 1986 to do "all such things that are necessary for the management of the affairs viz the property of the company" that power was only excisable to advance the purpose for which the administration order was made. The...
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