In Re Swiss Cottage [2022] EWHC 1495 (Ch), junior creditors argued that administrators appointed to two companies had exceeded their powers and breached their duties when selling two properties.

Background

Administrators were appointed to the companies in October 2013. They engaged estate agents to sell the companies' assets, two luxury properties in London. The properties were sold for a combined total of around £62 million. The primary secured funder of the companies received the whole of their principal amount. The junior creditors received nothing. They argued that the administrators had exceeded their powers in certain contractual arrangements and had breached their duties by ignoring junior creditors' interests and following an inadequate marketing strategy.

  • The administrators did not exceed their powers as the contracts did not ignore the statutory limitations on administrators or the actions required for completion to take place.
  • The administrators lacked care including confusing the junior creditors' identities and various shortcomings in the statement of proposals. However, the technical deficiencies in the administrators' conduct did not cause loss to the junior creditors.
  • The properties had been sold for their market value or for the best price reasonably achievable.
  • The junior creditors would not have acted differently had the administrations been conducted appropriately.

Key takeaways

The courts are reluctant to interfere with the commercial decisions of officeholders that are properly made. In this case:

  • The administrators were entitled to rely on the professional advice of the agents that the properties had been properly marketed.
  • The technical deficiencies in their conduct did not have "serious consequences" and the "passive" junior creditors would not have contributed further funding to create a longer marketing period and a different outcome.