England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
IN THE CHANCERY DIVISION

		Royal Courts of Justice
		8th November 1999

MR. JUSTICE NEUBERGER:

Introduction

This application raises an issue of some importance to those involved in the administration of companies under Part II of the Insolvency Act 1986 ("the 1986 Act"; references to sections are to sections of that Act). The issue is whether, without a specific direction of the court, an administrator of a company appointed under s.8(3) can dispose of any or all of the assets of the company prior to the approval of his proposals by the company's creditors at a meeting pursuant to s.24. The issue is one which is not easy to resolve, partly because the relevant provisions in the 1986 Act are unclear, partly because the scheme of the administration regime can be said to call either of the two competing views into question, and partly because the authorities on the topic are in conflict.

The facts of the matter are simple and, in general terms, familiar. Messrs. Neville Kahn and Roger Marsh ("the administrators") of PricewaterhouseCoopers, were appointed joint administrators of two related companies, T & D Industries plc and T & D Automotive Ltd ("the companies") on 15 October 1999 by Mr. Justice Evans-Lombe pursuant to s.8(3) (a), (b) and (d) on the petition of a creditor of the companies, Burdale Financial Ltd. Some two weeks after that order the administrators decided that they wished or may wish to dispose of some or even all of the assets of the companies as a matter of some urgency.

All I need say in relation to that is that their concerns and wishes seem to me to be reasonable. Accordingly, they issued the summons which is now before me. By that summons they seek a determination that no directions of the court are necessary before the administrators are able to make such a disposal or such disposals, or, in the alternative, a direction that the administrators be authorised to make such a disposal.

The statutory provisions

The determination of the first and main question raised on the summons involves consideration of the effect of certain provisions of the 1986 Act. The court's power to appoint an administrator of a company arises under s.8(3) of which provides:

"The purposes for whose achievement an administration order may be made are:

(a) the survival of the company, and the whole or any part of its undertaking, as a going concern;

(b) the approval of a voluntary arrangement under Part I;

(c) the sanctioning under section 425 of the Companies Act of a compromise or arrangement between the company and any such persons as are mentioned in that section; and

(d) a more advantageous realisation of the company's assets than would be effected on a winding up;

and the order shall specify the purpose or purposes for which it is made."

Section 14 is entitled "General Powers" and it includes:

"(14)(1) The administrator of a company:

(a) may do all such things as may be necessary for the management of the affairs, business and property of the company, and

(b) without prejudice to the generality of paragraph (a), has the powers specified in Schedule 1 to this Act; and in the application of that Schedule to the administrator of a company the words 'he' and 'him' refer to the administrator."

"14(3) The administrator may apply to the court for directions in relation to any particular matter arising in connection with the carrying out of his functions."

Schedule 1 contains 23 paragraphs, including the following:

"(1) Power to take possession of, collect and get in the property of the company and, for that purpose, to take such proceedings as may seem to him expedient."

"(2) Power to sell or otherwise dispose of the property of the company by public auction or private auction or private contract or, in Scotland, to sell, feu, hire out or otherwise dispose of the property of the company by public roup or private bargain."

"(4) Power to appoint a solicitor or accountant or other professionally qualified person to assist him in the performance of his functions."

"(7) Power to effect and maintain insurances in respect of the business and property of the company."

"(11) Power to appoint any agent to do any business which he is unable to do himself or which can more conveniently be done by an agent and power to employ and dismiss employees."

"(13) Power to make any payment which is necessary or incidental to the performance of his functions."

"(14) Power to carry on the business of the company."

"(18) Power to make any arrangement or compromise on behalf of the company.

"(20) Power to rank and claim in the bankruptcy, insolvency, sequestration or liquidation of any person indebted to the company and to receive dividends, and to accede to trust deeds for the creditors of any such person."

"(21) Power to present or defend a petition for the winding up of the company."

Section 15 is concerned with the power of an administrator to deal with charged property. The effect of subsections (1) and (3) is that an administrator may dispose of the company's charged property, unless the charge is a floating charge, only with the authority of the court.

Section 17 is entitled "General duties" and I must quote it in full.

"17(1) The administrator of a company shall, on his appointment, take into his custody or under his control all the property to which the company is or appears to be entitled.

17(2) The administrator shall manage the affairs, business and property of the company:

(a) at any time before proposals have been approved (with or without modifications) under section 24 below, in accordance with any directions given by the court, and

(b) at any time after proposals have been so approved, in accordance with those proposals as from time to time revised, whether by him or a predecessor of his.

17(3) The administrator shall summon a meeting of the company's creditors if:

(a) he is requested, in accordance with the rules, to do so by one-tenth, in value, of the company's creditors, or

(b) he is directed to do so by the court."

I must now turn to sections 23 to 25. Section 23(1) states:

"(23)(1) Where an administration order has been made, the administrator shall, within 3 months (or such longer period as the court may allow) after the making of the order:

(a) send to the registrar of companies and (so far as he is aware of their addresses) to all creditors a statement of his proposals for achieving the purpose or purposes specified in the order, and

(b) lay a copy of the statement before a meeting of the company's creditors summoned for the purpose on not less than 14 days' notice."

Sections 24(1) to (4) are in the following terms:

"24(1) A meeting of creditors summoned under section 23 shall decide whether to approve the administrator's proposals.

24(2) The meeting may approve the proposals with modifications, but shall not do so unless the administrator consents to each modification.

24(3) Subject as above, the meeting shall be conducted in accordance with the rules. [The Rules are the Insolvency Rules 1986]

24(4) After the conclusion of the meeting in accordance with the rules, the administrator shall report the result of the meeting to the court and shall give notice of that result to the registrar of companies and to such persons as may be prescribed."

Section 25 sets out the procedure which the administrator must adopt if he wishes to make revisions to proposals approved at a s.24 meeting, as I will call it. The procedure only applies if those revisions have to appear to him to be substantial - see subsection (1)(a). Such revisions must be laid before and approved by a further creditors' committee summoned for that purpose with at least 14 days' notice - see subsection (2)(b).

The issue

Subject to the court ordering otherwise under s.l7(3)(b) or s.23(l), a creditors' meeting under s.24 thus cannot take place less than 15 days, or more than three months after the administrator is appointed. In fact, the minimum gap is almost always bound to be significantly more than 15 days, as the meeting cannot be called, and the 14 days prescribed by s.23(l)(b) cannot therefore start to run, until the administrator has finalised and communicated his proposals for implementing the administration order, which, as one would expect and as experience demonstrates, can often take a long time in many cases.

What is the position if the administrator wishes to dispose of some or even all of the assets of the company in the mean time? That is a problem which can, indeed does, frequently arise, scarcely surprisingly, bearing in mind the circumstances which can give rise to an administration order, especially where the order is made under s.8(3) (d) .

There are two possible answers to that question. The first, favoured by Mr. Richard Adkins, Q.C., who appears on behalf of the administrators on the present summons, is that unless there is anything in the administration order to the contrary, which would be unlikely, the administrator can effect such a disposal without the leave of the court, albeit that an administrator may well be advised to come to court under s.14(3) in exceptional circumstances before effecting the disposal. The alternative answer is that no such disposal can be made unless leave is obtained by the administrator. I shall refer to these two alternative views as "the first interpretation" and "the second interpretation" respectively.

The statutory language

In a sense, the issue between the two interpretations revolves around the meaning of the words "in accordance with any directions given by the court" in s.17(2)(a). The first interpretation involves reading these words as meaning "in accordance with such directions, if any, as are given by the court", ie, until the administrator's proposals are approved at a s.24 meeting, the administrator can exercise the powers conferred on him by s.14 and Schedule 1 ("the s.14 powers"), save to the extent that a direction from the court otherwise requires.

The second interpretation involves reading the words in s.17(2)(a) as meaning "only to the extent specifically permitted by any directions given by the court" i.e. until the administrator's proposals are approved, he can only exercise his section 14 powers if and so far as sanctioned by the court. It appears to me that as a matter of language either construction is plainly permissible. However, reading ss.14(1) and 17(2) together, I consider that the first interpretation, albeit not plainly, is the more natural not least because of the word "directions". If the second interpretation is correct, the word "permission" or "sanction" would appear to me to be more appropriate. There is also,

I think, some force in Mr. Adkins's point that the second interpretation involves replacing the word "any" in s.17(2)(a) with the word "the".

Further, s.14(1) appears to give an administrator unqualified powers, namely the s.14 powers, subject to the implied obligation to keep to the purposes for which the administration order was made under s.8(3). Section 17(2) then imposes qualifications on the exercise of those powers. To my mind, the more natural reading of the latter section involves the s.14 powers being cut down only to the extent, if any, that the order under s.8 provides, rather than the s.14 powers being exercised only to the extent, if any, that the order under s.8 permits.

Mr. Adkins's other points on construction do not seem to me to carry much weight. He says that there is no reference in the title to Schedule 1 to any sanction being required before the section 14 powers can be exercised, and that this can be contrasted with the express reference to the need for sanction for the exercise of the liquidator's powers under Part I or Part II of Schedule 4. However, it can equally fairly be said that the title to Schedule 1 can be contrasted with the express reference to the absence of the need for sanction in Part III of Schedule 4. Further, the fact that the power of the administrator to apply for directions under s.14 (3) is discretionary does not seem to me to take matters further. It is perfectly consistent with the second interpretation: the administrator need not apply unless he wishes to exercise some or all of his powers.

In favour of the second interpretation it can be said that the purpose of s.17(1), which otherwise appears to overlap with the power given in para.1 of Schedule 1, is to make it plain that the administrator does not need the direction of the court or the approval of creditors under s.17(2) to take the company's property into his custody and control. However, I consider me that such a technical approach to construction is probably too subtle for the rather mediocrely drafted provisions of Part II of the 1986 Act.

The policy of the administration scheme in the 1986 Act

It seems to me that the first interpretation derives support from the point that, if the administrator cannot sell all of the company's assets without a direction from the court prior to a s.24 meeting, then he cannot exercise any of his s.14 powers without such sanction. As a matter of construction, it appears inevitable that any Statutory fetter (whether express or implied) on one of the section 14 powers contained in Schedule 1 must apply to all of the powers.

It can be said with considerable force that it cannot have been envisaged that the administrator would have to obtain the court's express sanction before he could appoint a solicitor or other professionally qualified person for any purpose, before he could carry out any part of the business of the company, before he could effect any insurance, or before he could make a claim in bankruptcy proceedings or defend a winding-up petition. To some extent, that point might be met by the original administration order giving the administrator certain specific powers in the same way as when the court appoints a provisional liquidator. However, in many cases neither the administrator nor those applying for the administration order will know precisely what the administrator will want to do. Administrators have a more flexible role and their powers are substantially wider than those of a provisional liquidator. Additionally, the period between the appointment of an administrator and the s.24 creditors meeting will often - indeed will normally in my experience - be substantially longer than the average provisional liquidator's tenure.

If consideration had to be given at the hearing of the administration petition as to which section 14 power the administrator should be directed to exercise, the cost and time taken in preparing and considering the petition could be considerably extended, not an attractive proposition. Further, if the court considers giving directions at the time it makes administration orders, it seems to me that it will in practice either have to give administrators a virtual carte blanche to act on many matters based on information before the administrator has even been appointed, or the court can expect many applications by administrators for many directions. If the court gives a wide degree of discretion to the administrator, one wonders what the purpose of s.17(2)(a) might be if the second interpretation is correct. If the court gives no, or only narrow, directions to the administrator on the making of the administration order, then there is a danger that it will be faced with a mountain of applications from administrators so that they can exercise their s.14 powers.

It seems to me that there is a powerful argument for saying that the fewer applications which need to be made to the court by administrators the better. From the point of view of the court, it is obviously undesirable to have a potential plethora of applications by administrators, many of them urgent, many of them pretty trivial even if important to the administration in question. Administration is meant to be a more flexible, cheaper and comparatively informal alternative, with a potentially less destructive result, to liquidation. From the viewpoint of an administration, the second interpretation involves administrators in potential delay and expense, if administrators have to apply for directions every time that they wish to do something, or at least something not contemplated and specifically permitted when the administration order is made.

I would also question whether there is any real benefit in the great majority of cases for anyone if administrators have to apply for directions under 17(2)(a) on the basis of the second interpretation. The application will normally be made by the administrator without notice, and the court will be told what action the administrator wants to take and why he wants to take it. Save where the issue is whether he has power to take that action as a matter of law, it will normally be an administrative or commercial decision. The court almost always will conclude that the answer is either obviously favourable, or that the decision is a commercial or administrative one for the administrator on which the court has nothing useful to say.

Getting authority from the court would therefore normally be a waste of time and money, unless its effect was to ensure that the administrator is thereafter free from any liability to anyone, including the creditors, as a result of the court's direction. That would be a surprising result, not least because the very people who might have a claim against the administrator based on the course that he proposes to take would normally not appear or be able to make representations.

Such applications as I have entertained on the basis that the second interpretation applies have been little less than formalities, and the decisions I have seen of other judges and consultations with other judges indicate that their experience in general is the same. If the court is told that a particular offer is very attractive and has to be accepted in three days or it will be withdrawn, so that it cannot wait until the creditors' s.24 meeting, and that the administrator's advisers are strongly of the view that the offer should be accepted, is it really right, at least in the absence of special circumstances, for the court to stand in the way? Equally, can it be right in those circumstances to give the administrators the apparent benefit of a court order to invoke against creditors who subsequently complain about the course that he has taken?

The primary -- indeed, I believe the only -- real problem with the first interpretation is that it would seem surprising if an administrator should be effectively completely free to exercise his s.14 powers as he wishes until the creditor's s.24 meeting, and only thereafter can the creditors constrain him by the terms of the approved administrator's proposals as amended, if at all, or by rejecting the administrator's proposals. Indeed, the importance of the creditors having control over the administrator's actions could be said to be emphasized by the provisions of s.25.

Thus, if the first interpretation is correct, an administrator should sell the whole undertaking of the company before the creditors even knew of his proposal to take that course. Against that, it is fair to say that the second interpretation gives the administrator no latitude whatever to do anything before the s.24 meeting without a direction from the court, whereas even if the creditors have approved specific proposals, the administrator can still depart from their decision without their consent, or even, it appears, their knowledge, providing that the departure is not in his view "substantial".

One answer, albeit by no means a wholly satisfactory answer to this, if the first interpretation is correct, is that, at least in an appropriate case, the administrator can informally discuss the proposal with at least some of the creditors. He can also apply to the court for directions under s.14(3). The directions could in an appropriate case consist of, or include, an order that the administrator summons an urgent meeting of the creditors pursuant to s.14(3)(b). This point underlines the contention that the first interpretation does not render pointless the reference to the directions of the court in s.17(2)(b). In that connection, it can further be said that where there is a dispute between the administrator and third parties, including the creditors, it may be appropriate for either or both to apply to the court for appropriate directions.

The cases

The first relevant case is a decision of Mr. Justice Vinelott given on 21 January 1987 in Re Charnley Davies Ltd.

The decision is unreported but the effect was described in another judgment involving the same company, 19 90 BCC 605, where Mr. Justice Millett said this at 610G-611A:

"On Wednesday, 21 January [1987] Mr. Richmond [the administrator in that case] applied to the court for directions. The application was made ex parte to Vinelott J. under sec.14(3) of the Act. Mr. Richmond was concerned as to the extent of his powers, and in particular whether he had power to dispose of all or the major part of the company's undertaking in advance of the creditors' meeting and without first obtaining the directions of the court. This depended on the relationship between sec.14(1) and 17(2) of the Act and the effect of sec.17(2)(a). Mr. Richmond was advised by counsel that he could sell the entire undertaking of the company in advance of the creditors' meeting if he considered that such a course was in the best interests of the company and its creditors, and that he did not need the sanction of a court order to do so. Despite the confident nature of that advice, Mr. Richmond decided that the safest course would be to raise the question with the court. Vinelott J. confirmed the advice which Mr. Richmond had received. He made no formal order to this effect, but rule that the words 'any directions' in sec.17(2)(a) meant 'the directions, if any'".

That passage does not carry with it any express doubts or approval of the view of Mr. Justice Vinelott, but it is fair to say that, if anything, it appears to me that Mr. Justice Millett agreed with Mr. Justice Vinelott. I suspect that Mr. Justice Millett would have thought it right to express any disagreement he had with, or even any doubts he felt about, Mr. Justice Vinelott's view, but it is fair to say that it is hard to detect any approval or disapproval of the decision.

The next case to which I should make reference is the decision of Mr. Justice Peter Gibson in Re Consumer & Industrial Press Ltd (No.2) 1988 4 BCC 72. In that case the administrators had wished to sell some property of the company which was subject to a fixed charge. They therefore needed the approval of the court pursuant to s.15(2) and (3); Mr. Justice Peter Gibson refused them such approval, primarily on the basis that he considered that they had delayed unreasonably. However, he had observations to make at p.73 which could be said to have some bearing on the present case. He said this:

"The problem that arises is this. The scheme of the Act requires an administrator to send a statement of his proposals to all creditors, to enable the creditors at a meeting to determine whether or not the proposals should be implemented. If an order were given under sec.15 allowing the joint administrators to dispose, in effect, of all the assets of the company, there would be no point in having a meeting of creditors."

A little later on on the same page he said this:

"I am very unhappy indeed at the suggestion that the court should make an order such as will mean that there can be no useful meeting of creditors. It seems to me that the power that the court undoubtedly has under sec.15 should only be exercised in circumstances in which it can readily be seen that the disposals are really the only sensible course to be adopted and when unsecured creditors have had a chance to say what they think about the proposals in the administration. It seems to me that quite exceptional circumstances would be needed for the court to frustrate that part of the Act which requires a meeting of creditors to consider proposals by the administrators."

While the decision was concerned with the exercise of jurisdiction under s.15, it appears to me that those observations can be said to impinge more generally on the question of the administrator's actions and to suggest that it would, on the face of it at least, be arguably inappropriate for an administrator to dispose of all the assets of the company thereby destroying the purpose of the creditors' meeting and approval under ss.23-25.

The next case to which I should refer is the decision of Mr. Justice Harman in Re NS Distribution Ltd 1990 BCLC 169. In that case the administrator applied for a direction that he could delay the calling of the s.24 meeting, which Mr. Justice Harman thought it right to grant him, and also for directions permitting him to dispose of an asset, namely a lease, owned by the company.

Mr. Justice Harman said at 171E:

"...it seems to me to be a decision which the administrator can and should make for himself without any direction under s.14(3)."

Not surprisingly, Mr. Adkins relies on that observation as support for the proposition that Mr. Justice Harman considered that an administrator could exercise one of his s.14 powers, an important power and, for the purpose of this case, a very relevant power, namely the sale of a substantial asset of the company, without a prior direction of the court even though there had been no meeting of creditors. Read on its own, I see the force of that point. However, it seems to me that that observation has to be read in the context of what Mr. Justice Harman said at 171A-B in relation to Consumer & Industrial:

"The result of that disposal would, as held by Peter Gibson J., have been that the creditors' meeting would become a complete brutum fulmen. The meeting would have nothing to consider and nothing to resolve upon...In those circumstances, said Peter Gibson J., since the approval of the court would effectively frustrate that part of the 1986 Act which required a creditors' meeting, because the meeting would have no useful purpose to serve, it would require quite exceptional circumstances to incline the court to approve such a disposal."

At 171D, immediately before the passage relied upon by Mr. Adkins, Mr. Justice Harman said this:

"The present proposal does not seem to me to be anywhere near the proposal that was before Peter Gibson J....As I have said, the proposal is to sell one asset at a good price under great pressure of time, but it is not a proposal which to my mind frustrates the purpose of the 1986 Act or makes the s.23 meeting serve no useful function."

It seems to me, then, that Mr. Justice Harman appears to have taken the view that a court direction may have been necessary, even if s.15 did not apply, where the administrators were proposing to dispose of all the assets of the company. It does not appear from his judgment that he considered whether a direction of the court was necessary at all in such a case, on the basis that Mr. Justice Peter Gibson was concerned with a case where s.15 applied, whereas Mr. Justice Harman, like me, was not concerned with such a case. Nor does it appear that Mr. Justice Harman had drawn to his attention that as a matter of logic it was hard to see how, if a direction of the court was needed for the disposal of all the assets of the company, a direction of the court was not needed for the disposal of one asset of the company, or indeed for the exercise of the s.14 powers.

The next case to which I must refer is the decision of Mr. Justice Knox in Re Smallman Construction Ltd 1988 4 BCC 784. In that had case the administrator's proposals had been put before, and had received the sanction of, a creditors' s.24 meeting, but the administrators thought that they wished to take was to some extent contrary to the proposals approved by the creditors. Mr. Justice Knox held that it was not so much a matter of the course being contrary to the approved proposals but that there was a gap or lacuna in the approved proposals, and that, given the urgency of the matter and the desirability of the proposed step being taken, he held that he had jurisdiction in those circumstances to approve the course to be taken on the basis that the application was validly made under s.14 (3) .

Mr. Justice Knox was therefore concerned with a slightly different point from that before me. However, I consider that it can be said with some force that, if the administrators are right in the present case and they do not require a direction, there must be a case for saying that if there was indeed a lacuna in the proposals approved by the creditors' committee, a direction of the court may not have been needed in that case. It is not necessary for me to decide that issue because it seems to me (a) that there was no argument as to whether or not a direction was needed in Smallman, (b) the point at issue in that case was different from, although connected to, the point at issue in this case.

I should next refer to my own decision in Re Montin Ltd 1999 1 BCLC 663. In that case I was asked to give a direction approving a proposal whereby the administrators could sell the whole business of the company prior to the s.24 meeting of creditors on the basis that this was a very beneficial transaction which could only be carried out in very short order. Although I had my attention drawn to the last three cases to which I have referred, no reference was made to Charnley Davies; it was plainly an application made on the assumption that a direction of the court was needed before such a sale could take place. It appears that Montin has been applied and followed and assumed to be right on a number of occasions. I have certainly entertained a number of applications on that basis, and I have had my attention drawn to a decision of Mr. Justice Rimer, Re Osmosis Group Ltd (unreported, 25 May 1999) where he entertained a similar application. He referred to the fact that counsel for the company in that case:

"...did not submit to me that Neuberger J's conclusion in this respect was incorrect or that I should not follow it. On the contrary, the application to me is made on the premise that it was correct and that the joint administrators do need the leave which they seek under s.17(2)(a) before they can effect the proposed sale in the present case. I propose to apply the principle of that part of the decision in Re Montin Ltd and proceed on the basis that the joint administrators do need the leave of the court pursuant to section 17(2)(a) before they can effect the proposed transaction."

Having held that there was no culpable delay, as in Consumer & Industrial, Mr. Justice Rimer held that, on the basis that he had jurisdiction, he should make the direction sought. Faced with a course which the administrator was advised, and believed, was highly beneficial to the company, where the course had to be taken very quickly because the proposed purchaser would otherwise withdraw, Mr. Justice Rimer, like me in Re Montin, appears to have felt that he had little real alternative in effect but to sanction the proposal. This tends to emphasise the point mentioned earlier, namely that in the great majority of cases it seems a little difficult for the court to do anything other than sanction a commercial decision which the administrator reasonably and, on the face of it, justifiably wishes to make.

Conclusion

The three aspects I have considered above, namely the statutory language, the policy of the administration system, and the previous authorities, all have features which could be said with force to support each of the two interpretations. The language of the 1986 Act tends, albeit mildly, to support the first interpretation, in my view. Subject to one substantial point of concern, the policy of the administration system, as it appears from the 1986 Act, and indeed from the Rules, appears to me to favour the first interpretation. Although there are more cases which can, as it were, be prayed in aid in favour of the second interpretation, it seems to me that the only case where the actual point in issue in the present case was considered and decided was in Charnley Davies (unreported, 21 January 1987) and that decision has not been doubted in any occasion where it has been considered.

Indeed, apart from being cited without disapproval by Mr. Justice Millett, it has been referred to and relied on in The Law and Practice of Corporate Administrations by Fletcher, Higham and Trower, 1994, where one finds this in para.5.4 on p.69:

"...in principle, even prior to approval of his proposals, an administrator's statutory powers are fully exercisable, notwithstanding the absence of any specific or general direction from the court."

A footnote to this passage refers to Charnley Davies and then continues:

"This would appear to follow from the fact that the administration order directs that the affairs, business and property of the company are to be managed by the administrator."

So far as the four subsequent cases are concerned, it is a telling point that Charnley Davies was not cited in any of them. Further, there are other grounds for saying that each of them is not in point. Either the case was concerned with a different aspect of the 1986 Act, ie s.15 in Consumer & Industrial and a period when s.17(2)(b) applied in Smallman, or it appears the whole application was predicated on the basis that the second interpretation was correct, and either the court had not even considered the first interpretation as in Montin, or the court, while raising the point that the interpretation may or may not be right, was content to proceed on the assumption that it is correct - in Osmosis.

In these circumstances, it appears to me that the first interpretation is to be preferred, albeit that, as I have to said, the issue is a difficult one. .

I would like to make the following concluding points. First, my conclusion emphasizes the desirability, indeed the need, for administrators to put their proposals under s.23 to the creditors, and to call a creditors' meeting under s.24, as soon as reasonably possible. Naturally, the administrator will need time to get the necessary information and advice before he can properly make his proposals, and in some cases this may inevitably result in a long delay. However, the sooner he makes his proposals the better. Nothing in this judgment should detract from the emphasis placed by Mr. Justice Peter Gibson in Consumer & Industrial on the desirability of administrators being speedy and efficient in the conduct of the administration.

Secondly, my decision tends to emphasize the fact that a person appointed to act as an administrator may be called upon to make important and urgent decisions. He has a responsible and potentially demanding role. Commercial and administrative decisions are for him, and the court is not there to act as a sort of bomb shelter for him.

Thirdly, administrators should not be able to take unfair advantage of the fact that the creditors' rights are, as it were, limited by ss.23-25. There will be many cases where an administrator will be called upon to make urgent and important decisions and where the urgency means that there is no possibility of a s.24 creditors' meeting being called to consider the decision prior to it having to be made. However, the importance of the decision and the time involved may well be such that the administrator should have what consultation he can with the creditors. An obvious case might be where there were three days to make a decision and there were only four creditors of the company, or there were four creditors who make up 80 per cent in value of the total creditors of the company. In those circumstances, it seems to me that the administrator should at least consider consulting those four creditors. Whether he should effect any consultation, with whom he should effect it, how he should effect it, and what decision he should make following any consultation, must be a matter for him to decide by reference to the facts of the individual case.

Fourthly, there will also occasionally be cases where it would be appropriate for the administrator, one of the creditors who is consulted, or some other third party, at least to consider making an application to the court under s.14(3) or otherwise for directions. An example given by Mr. Adkins might be where the administrator wishes to take a course which does not fall within the purposes contemplated by the administration order, either because it is a different purpose under s.8(3) from that for which the administration order was made, or because it is a step different from or even contrary to, that contemplated by the report the court made pursuant to rule 2.2 of the Rules. Another example might be where the creditors do not agree on a particular course and the administrator has good reason for seeking guidance rather than making up his own mind.

Fifthly, particularly in view of what I have just said, while it may well be appropriate for an administrator to make an application where there is a point of principle at stake or where there is a dispute as to the appropriate course and it is possible for there to be an inter partes hearing, it would require a very unusual case before the court could give any real assistance in circumstances where there cannot be a proper hearing inter partes and where the decision is essentially an administrative or commercial one for the administrator. In many cases the administrator may take the view that his consultations indicate fairly clearly what the decision of the creditors' committee is likely to be and he may be able to take a degree of comfort from that.

Sixthly, in an appropriate case, where an application is made under s.14(3) and the proposed course is sufficiently significant and where there is sufficient time, the administrator may think it right to seek a direction from the court for an early and urgent meeting of the creditors on short notice with a view to considering the specific proposal. That appears to me to be an order that the court could made under s.17(3)(b).

Seventhly, I refer back to the observations of Mr. Justice Peter Gibson, echoed by Mr. Justice Harman, to the effect that if the administrators are proposing to dispose of all of the assets of the company prior to the creditors' meeting, this would result in the creditors' meeting being substantially ineffective. That is a factor which, it appears to me, an administrator should bear in mind when he is considering disposing of all or substantially all of the assets of the company prior to the s.24 creditors' meeting. However, the weight to be given to that must inevitably depend upon all the factors in the particular case.

In the event therefore, with those general observations in mind, and emphasizing once again that they are general observations, I conclude that the order Mr. Adkins seeks is one that I can and should make, and therefore I propose to grant it.

It is right to add this. If I had taken a different view and had concluded that the administrators in this case could not take the course that they wished to take without a direction from the court, then, in light of the evidence of Mr. Marsh, I would have thought it right in my discretion to make the direction they seek, while emphasizing, as I did in Montin and as I think Mr. Justice Rimer did in Osmosis, that this does not mean that the court is approving the proposed course in the sense that the administrator is thereby absolved of any liability if it turns out to have been negligent in some way. It is simply to enable the administrator to take that course where otherwise he could not do so.

MR. ADKINS: My Lord, in those circumstances, I would ask your Lordship to make an order in each case in terms of para.1 of the applications down to the words "Insolvency Act 1986" in the fifth line, then an order in para.2, which is an order that the costs of today be granted.

MR. JUSTICE NEUBERGER: I am just wondering whether you want the protection of the in-the-alternative order, but this cannot go further in practice. I suppose one of the creditors could apply to be joined and appeal, but then you have got what I said in my judgment.

MR. ADKINS: Yes, my Lord. All that remains is to thank your Lordship for sitting outside normal court hours.

MR. JUSTICE NEUBERGER: I am grateful to you, Mr. Adkins, and for your skeleton argument and bundle.