In this English case, a secured lender (Nationwide) appointed administrators to three companies. However, before appointing, Nationwide had:
- Disposed of its interest through a participation arrangement to Promontoria (Carlisle) Limited (Promontoria), and
- Taken direction from Promontoria, as required under the participation arrangement.
The grantors' shareholder (who was also a creditor) sought to have the administrators' appointment terminated under the Insolvency Act on the basis that Nationwide's motives were improper, as Nationwide had deferred to Promontoria in making the decision to appoint and was attempting to stifle ongoing litigation between the companies and Nationwide.
The shareholder was unsuccessful in establishing an improper motive and having the administrators' appointment terminated.
The Court also set out the following considerations relevant to such decisions in the UK:
- An improper motive is necessary to engage the court's jurisdiction to terminate the appointment, but will not necessarily result in an order for termination
- To establish an improper motive the shareholder needed to show that Nationwide's motives were not in harmony with the statutory purposes of administration and were causative of the decision to appoint
- The improper motive may become "of relative insignificance" if the statutory purpose is likely to be achieved despite an improper motive.