1. Insolvency Seminar Central Court, November 2015

2. “Successive office-holders- liquidators reviewing the conduct of administrators” Stephen Davies QC

3. Administrations: From breathing space to one-stop shop Cork Report Ss. 8 to 27 IA 1986 Part X EA 2002 and Sch B1 Historical perspective - Exeter City Council v Bairstow [2007] 2 BCLC 455 Subsequent liquidation issues - Re MK Airlines Ltd [2013] 1 BCLC 9 Attempted over-reaching ? Portsmouth City FC [2013] EWCA Civ 916 Straight to dissolution

4. Failing to anticipate trouble Taking appointment: after negotiating a pre-pack without consulting creditors or any advertising - Clydesdale Finance Services v Smailes [2011] 2 BCLC 405 following wrongful disposal of assets by directors frustrating purpose of administration - Coyne v DRC Distribution [2008] BCC 612 contrary to professional ethical guidelines - Hellas Telecommunications [2011] EWHC 3176 (Ch) after protracted IBR and ignoring director’s complaints about conflicts - Davey v Croxen [2015] EWHC 2372 (Ch)

5. TRANSFER OF CONTROL ON TERMINATION Liquidation – Independent liquidator - ? Statutory duty to realise assets including causes of action against administrators and LAPSO exception – Re Top Brands [2015] 1 BCLC 546 Dissolution – beyond investigation ?- Barclays Bank v Registrar of Companies [2015] EWHC 2806 (Ch) Back to management ? – Nimmo and Fraser [2013] CSOH 120 and Hotel 42 The Calls [2013] EWHC 3925 (Ch) statutory charge and questions of solvency CVA – to fund transfer back to management - Rhino?

6. ADMINISTRATORS’ DOCUMENTS Receivers: 1. Material held by receiver and potential conflict between debenture-holder and liquidator- Re Trading Partners; Akers v Lomas [2002] 1 B.C.L.C. 655 2. Material held by receivers – no strategy documents - Re Delberry [2010] 1 BCLC 383 3. Material held by administrative receivers - Re Corporate Jet; Green v Chubb [2015] 2 BCLC 95 Contrast statutory office of administrators/liquidators - administrators and liquidators no more than successive agents of same principal? C.f. - SNR Denton UK LLP v Kirwan [2012] IRLR 966

7. Liquidator’s review of administrator’s conduct In which capacity was the administrator acting at the relevant time and therefore what are the potential defences? Statutory agent (statute) – breach of statutory duty and statutory relief? Fiduciary (equity) – duties of loyalty – strict liability? Professional negligence – making and acting on business judgments – Bolitho test? Officer of the court – duty to act honourably – is it actionable and the discretion of the court? Outside his duties/powers – e.g. Invalid appointment, trespass or ultra vires ?

8. MOVING BETWEEN THE OBJECTIVES (1) Para 3(1) (a) Objective 1 - rescuing the company as a going concern (b) Objective 2 - achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up without first being in administration (c) Objective 3 - realising property in order to make a distribution to one or more secured or preferential creditors By paragraph 3(2), he “must perform his functions” in the interests of the company’s creditors as a whole By paragraph 3(3), he must perform his functions with Objective 1 unless he thinks that either: (a) it is not reasonably practicable to achieve that objective; or (b) that Objective 2 would achieve a better result for the company’s creditors as a whole

9. MOVING BETWEEN THE OBJECTIVES (2) By paragraph 3(4), he may perform his functions with Objective 3 “only if- (a) he thinks that it is not reasonably practicable to achieve either [Objective 1] or [Objective 2], and (b) he does not unnecessarily harm the interests of the company as a whole.” By paragraph 5, he is an officer of the court with duties to act in accordance with standards of fairness over and above what may be required by the strict application of law. By paragraph 69, in exercising his functions under Sch B1 he acts as an agent of the Company(owing a fiduciary duty to the Company to exercise his statutory powers and perform his functions with the aim of protecting the Company as principal and, in particular, to exercise his powers in good faith, for a proper purpose and/or not irrationally.

10. Common law duty of care He owes the Company a duty to exercise skill and care in the performance of his functions to the standard of a reasonably skilled and careful insolvency practitioner Re Charnley Davies (1987) 3 BCC 408 As part of the Duty of Care, he must take all reasonable steps to acquire information relevant to his decisions, including, if appropriate, taking relevant professional advice. Re Edennote [1996] BCC 718

11. Millett J in Charnley Davies (1) “An Administrator must be a professional insolvency practitioner. A complaint that he has failed to take reasonable care in the sale of a company’s assets is, therefore, a complaint of professional negligence and in my judgement the established principles applicable to cases of professional negligence are equally applicable in such a case. It follows that the Administrator is to be judged, not by the standards of the most meticulous and conscientious member of his profession, but by those of an ordinary, skilled practitioner. In order to succeed the claimant must establish that the Administrator has made an error which a reasonably skilled and careful insolvency practitioner would not have made’’.

12. Millett J in Charnley Davies (2) In the case of licensed insolvency practitioners the courts have emphasised that the standard of care is high because licensed insolvency practitioners are highly skilled and qualified people who accept appointments for which they receive remuneration and act as officers of the court. Furthermore, in a case where the insolvency practitioner has any doubt as to what to do, he has the right to ask the court for directions.

13. Selling Duty Stricter duty than receiver - Silven Properties Ltd v Royal Bank of Scotland plc [2004] 1 WLR 997 Variations: - not free to sell property at a time of their choosing if, in all the circumstances, a better price could be obtained were it to be sold at a later time; - under a duty to take all reasonable steps, including delaying realisation, to obtain the best price for a property that circumstances permitted; and such reasonable steps would usually included formulation of a sales strategy to bring the property to the attention of all probable purchasers and so as to induce such competition over a sufficient period of a sales campaign as would be likely to secure the best price

14. 10 POINTS TO WATCH 1.Para 99 charge – bites on the cause of action 2.Who is the applicant/claimant – para 75 or claim form? 3.Assignment? 4.Permission under para 75(6) ? 5.Funding of claims – LAPSO carve-out 6.Destination of recoveries / control by debenture holder? 7.Liability of debenture-holder? American Express v Hurley [1985] 3 All ER 564 (receivers) and Barclays Bank v Kingston [2006] EWHC 533 (QB) (administrators) 8.Expert evidence x 2 and the insolvency club 9.Red Book v real life – facts first and hypothesis later 10.Professional ethical rules – Hellas

15. Validation orders- - Prospective and retrospective applications Hugh Sims QC, Guildhall Chambers

16. Introduction The relevant sections of the IA 86 The policy, effect & categorisation - a summary Category 1: prospective applications Category 2: retrospective applications but prior knowledge Category 3: retrospective applications in ordinary course of business Category 4: retrospective applications - one off transactions - Wilson v SMC (Re 375 Live)

17. Venn Diagrams

18. Precedents

19. The policy, effect and categorisation Section 127 "In a winding up by the court, any disposition of the company's property…made after the commencement of the winding up is, unless the court otherwise orders, void." Policy v effect Categorisation – four categories

20. Category 1 – prospective applications Re Fairway Graphics Ltd [1991] BCLC 468 Insolvency Proceedings Practice Direction, paragraph 11.8: “...credible evidence...that a particular transaction or series of transactions in respect of which the order is sought will be beneficial to or will not prejudice the interests of all the unsecured creditors as a class....” RC Brewery Ltd v Commissioners for Her Majesty’s Revenue and Customs

21. Category 2 – retrospective qualified With prior knowledge of petition As per category 1 Gray’s Inn

22. Category 3 – retrospective ordinary No notice of petition Ordinary course of business Re Wiltshire Iron Co Denney v John Hudson & Co Ltd Re Tain Construction (Rose v AIB Group)

23. Category 4- retrospective – one off Wilson v SMC (Re 375 Live) [2015] EWHC 870 (Ch), [2015] 2 BCLC 173 The facts The decision

24. Category 4 (Continued) The issue: should or would a court validate a one off transaction after the company had ceased to trade if made as a bona fide purchase for value, or is the sole relevant criteria in this context whether the transaction was at an undervalue, by however small a margin? The arguments – the decision...