England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY

		Manchester Civil Justice Centre 1 Bridge Street West Manchester M60 9DJ
		20th February 2013

1. JUDGE HODGE QC: This is my extemporary judgment on an application by Mr Martin Holgate and his son, Mr Paul Holgate, against the joint administrators of Arthur Holgate and Son Limited (to which I shall refer as "the company") who are Mr John Charles Reid and Mr William Kenneth Dawson, Case number 2148 of 2012. By an application notice dated 31^st January 2013, the applicants seek an order pursuant to paragraph 74 of schedule B1 to the Insolvency Act 1986 and/or the court's inherent jurisdiction to control its officers:

(i) directing the respondents not to enter into any binding obligation for the sale of the business or assets of the company until further order;

(ii) revoking the deemed approval of the proposals and the notice given in that regard dated 11^th April 2012;

(iii) revoking the determination pursuant to rule 2.106(5A) of the Insolvency Rules 1986 of the basis for the respondent's remuneration;

(iv) requiring a creditors' meeting to be held pursuant to paragraph 51 of schedule B1 to the Insolvency Act 1986 and making consequential provision as to the date for circulation of any revised proposals and the date of the meeting; and

(v) making provision for the costs of the application.

2. On this application, Mr Paul Tindall (of counsel) appears for the applicants and Mr Mark Cawson QC appears for the respondent joint administrators. The evidence in support of the application comprises three witness statements by the first-named applicant, Mr Martin Edmund Holgate, dated 31^st January, 13^th February and 20^th February 2013, together with exhibits MEH1 through to MEH3. The third of those witness statements was only produced this morning, during the course of the hearing itself. The evidence in opposition to the application comprises two witness statements from Mr John Charles Reid, one of the joint administrators, dated 8^th February and 15^th February 2013, together with exhibit JCR1. The evidence on the application comprises some two lever arch files of papers, together with certain loose documents that were handed in during the course of the application itself. Mr Reid's second witness statement and Mr Holgate's third witness statement are also not included within the two application bundles. In addition, I have received, and had pre-read, detailed written skeleton arguments from Mr Tindall, dated 15^th February, and from Mr Cawson, also dated 15^th February.
3. The application came on for hearing at about 20 to 1 on the morning of Monday, 18^th February, the date listed for the hearing of the application. Mr Tindall addressed me for about two hours over both sides of the luncheon adjournment. It was, by then, apparent that the application was not going to be capable of being disposed of on the Monday, irrespective of how late the court sat that day. Accordingly, Mr Cawson addressed me for about 30 minutes on the afternoon of day one. Because the court was not sitting on the following day, the matter was then adjourned until 10 o'clock this morning – Wednesday, 20^th February. Mr Cawson addressed me for about a further hour and a half this morning, making two hours of oral submissions in total; and Mr Tindall then replied for about 40 minutes. Mr Cawson, unfortunately, is not available this afternoon. For that reason, this extemporary judgment may be a little briefer than I would otherwise have liked.
4. As I have indicated, the application is made pursuant to paragraph 74 of schedule B1 to the Insolvency Act 1986 as amended. That says:

"A creditor or member of a company in administration may apply to the court claiming that:

(a) the administrator is acting or has acted so as unfairly to harm the interests of the applicant (whether alone or in common with some or all other members or creditors), or

(b) the administrator proposes to act in a way which could unfairly harm the interests of the applicant (whether alone or in common with some or all other members or creditors)."

On such an application, by paragraph 74(3):

"The court may:

(a) grant relief;

(b) dismiss the application;

(c) adjourn the hearing conditionally or unconditionally;

(d) make an interim order;

(e) make any other order it thinks appropriate."

By 74(4):

"In particular, an order under this paragraph may:

(a) regulate the administrator's exercise of his functions;

(b) require the administrator to do or not do a specified thing;

(c) require a creditors' meeting to be held for a specified purpose;

(d) provide for the appointment of an administrator to cease to have effect;

(e) make consequential provision."

By 74(6):

"An order may not be made under this paragraph if it would impede or prevent the implementation of [amongst other things]:

(c) proposals or a revision approved under paragraph 53 or 54 more than 28 days before the day on which the application for the order under this paragraph is made."

5. In the course of submissions, I have also been taken to a number of other provisions in schedule B1 to the 1986 Act. In particular, I have been taken to provisions relating to: administrator's proposals in paragraph 49; the requirement for an initial creditors' meeting in paragraphs 51 and 52; the business and result of an initial creditors' meeting at paragraph 53; revision of administrator's proposals in paragraph 54; further creditors' meetings in paragraph 56; and the general duties of administrators in paragraph 68.
6. I have also been taken to various provisions of the Insolvency Rules, including, in particular, the provisions as to deemed approval of administrator's proposals in rule 2.33(5). That provides that:

"Where the administrator has made a statement under paragraph 52(1) [to the effect, amongst other things, that the company has insufficient property to enable a distribution to be made to unsecured creditors otherwise than out of the prescribed part] and has not called an initial meeting of creditors, the proposals sent out …. will (if no meeting has been requisitioned under paragraph 52(2) [by creditors of the company] within the period set out in rule 2.37(1) [of the Insolvency Rules]) be deemed to have been approved by the creditors."

I have also been taken to Insolvency Rule 2.37, relating to meetings requisitioned by creditors. In particular, I have been taken to (3), which provides that:

"The expenses of summoning and holding a meeting at the request of a creditor shall be paid by that person, who shall deposit with the administrator security for their payment."

However, it should be noted that by (5):

"The meeting may resolve that the expenses of summoning and holding it are to be payable out of the assets of the company as an expense of the administration."

7. In practical terms, the company's business and assets are represented now by a single caravan park known as Brandedleys and situated near Dumfries in Scotland. It is said that the administrators have acted, and are proposing to act, in such a way as to cause unfair harm to the applicants' interests, both as creditors and members of the company, and, indeed, to the interests of the unsecured creditors as a whole. More specifically, it is said:

(i) that the strategy adopted by the administrators harms the interests of creditors because the company can, and should, be rescued as a going concern and that this will produce a better result for the creditors as a whole; and

(ii) that that harm is unfair because:

(a) it is the very purpose of administration to rescue the company as a going concern, if possible, and to achieve the best possible result for the creditors as a whole;

(b) the administrators proceeded on a wrong basis in dispensing with the usual requirement for a creditors' meeting; and

(c) it is the policy of schedule B1 that, in the circumstances which actually existed, the unsecured creditors should have had a voice in the administration.

8. Particular reliance is placed upon the threefold hierarchy of objectives of administration set out in paragraph 3(1) and, in particular, the fact that, by paragraph 3(3), the administrator is required to perform his functions with the objective of rescuing the company as a going concern unless he thinks either:

(a) that it is not reasonably practicable to achieve that objective; or

(b) that the objective specified in (1)(b) would achieve a better result for the company's creditors as a whole.

The objective specified in (1)(b) is that of 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).

9. It is the applicants' case that the company has a viable business in the shape of its sole remaining caravan park; that it has a manageable level of debt to general creditors, who are said to be supportive of the object of rescuing the company as a going concern; and that the company has an ostensible debt to the bank, which is not going to be paid out of trading profits, but which arises wholly or largely from an interest rate hedging product taken out in 2007 as to which there is a mis-selling claim. It is said that the need to sell the caravan park only arises if the mis-selling claim is not going to enable the bank to be paid. However, the bank or the administrators want to sell it while this remains unknown. I should point out that the administrators were appointed by the bank in its capacity as a qualifying floating charge holder on 1^st February 2012.
10. By an order that I made on 4^th March 2013, the joint administrators' term of office has been extended for a further year to 31^st January 2014. It is said by the applicants that the selling of the park would prejudice the other creditors because it prevents the company being rescued as a going concern, which is the preferred strategy under the administration regime, and is likely to result in a better return to creditors as a whole. Rescue as a going concern would be via a company voluntary arrangement. The general creditors, it is said, would do better under a company voluntary arrangement because contributions would be possible. They would also be able to go on trading with the company. It is said that the general creditors have indicated a considerable measure of support in principle but that, so far, they have been denied any input into the administration process because the administrators proceeded under the deemed approval provisions, thereby dispensing with any creditors' meeting. It is said that the administrators' grounds for doing so do not bear scrutiny.
11. Mr Tindall submits that the court has to strike a balance, bearing in mind that:

(a) if the park is sold without a meeting being called, the possibility of a CVA will be denied; but

(b) on the other hand, if a sale of the park is put on hold long enough to give the general creditors a voice, the possibility of selling the park will be preserved.

Mr Tindall emphasises that the court is not being asked to prevent a sale until the mis-selling claim has been determined, but only to allow the creditors as a body to decide whether any sale should be put off until then. It is said that that is what the statutory scheme envisages by the provisions regarding creditors' meetings. In his reply, Mr Tindall emphasised that the applicants are not seeking to interfere with the administrators' judgment but merely to allow the creditors to influence the judgment of the administrators. If a creditors' meeting is called, all of the creditors, including the bank (to the extent that it is not secured), will have such voting rights as are given to them by the rules.

12. Mr Tindall refutes any suggestion that the prospects of selling the caravan park may be lessened if the court grants the application. Mr Tindall also submits that it is not open to the administrators to rely upon the delay in bringing this application when, on the facts that they knew in February and March of last year, they should have been calling the meeting that the applicants have now been forced to go to court to obtain. It is also said that there would already have been a meeting had the administrators not stifled Mr Holgate's attempt to requisition one by estimating costs at what is said to have been an absurd level, and demanding an unlimited undertaking from Mr Holgate to meet those costs, subject to any resolution that might have been made at the consequent creditors' meeting.
13. Mr Tindall also submits that there has been a fundamental change of circumstances since the administrators' proposals were deemed to have been approved. That is because the FSA announced, at the end of June last year, that Barclays and other major banks had agreed to provide redress to customers who had been mis-sold interest rate hedging products. That review, it is said, amounts to a material change in circumstances. Mr Tindall submits that the caravan park is a viable business proposition. He says that the general creditors are manageable and supportive of a rescue of the company as a going concern. He submits that the bank's debt represents losses due to hedging products, and that the prospects of a mis-selling claim against the bank are reasonable and may well operate more or less to negate the indebtedness to the bank.
14. Mr Tindall lays great emphasis upon the fact that, on his submission, the administrators ought to have called a creditors' meeting to approve their proposals in the first place. On the information that was known to the administrators, certainly by the time they announced that the proposals were deemed to have been approved, the administrators could not properly have taken the view that there would be insufficient property to enable a distribution to be made to unsecured creditors, otherwise than out of the prescribed part. On that basis, there should have been a creditors' meeting held back in March of last year.
15. The chronology is that the administrators' proposals were dated 22^nd March 2012, and notice of deemed approval was given on 11^th April 2012. Although Mr Holgate had requisitioned a meeting, he had withdrawn that request in response to the request for an indemnity in relation to the costs of convening the creditors' meeting. The document at page 189 of exhibit MEH1 estimated the costs in a total sum of £21,900, although what Mr Holgate was required to undertake to do was to pay, and accept personal liability for, the expenses of summoning and holding the meeting in accordance with rule 2.37(3) of the Rules. In the absence of any resolution of the meeting otherwise addressing the issue of costs, he was required to express his understanding that the expenses noted of £21,900 were not a fully exhaustive list of potential costs and were an estimate only, and that the demand letter might exceed the estimate and include categories of costs not noted above. Amongst the expenses in respect of which the estimate was given, there were approximately some 44 hours of work by insolvency practitioners at the average rate of some £372 per hour charged by the insolvency practitioners in question. Those were Mr Tindall's written submissions in summary.
16. In his oral submissions, Mr Tindall accepted that, in the light of the evidence given in Mr Reid's second witness statement, he could not say that the administrators did not have a positive belief, at the time they had formulated their proposals, that the company had insufficient property to enable a distribution to be made to unsecured creditors, other than out of the prescribed part. That was accepted as a result of what is said at paragraph 4.5 of Mr Reid's second witness statement that:

"At the time, the administrators issued our proposals on 22^nd March we positively believed that there would not be a distribution to unsecured creditors, other than by virtue of the prescribed part, on the basis of the administrators' belief at that stage that monies would not be realised from the hedge mis-selling claim as it had already been settled."

17. Mr Tindall submits that, whatever the position may have been at the date of the proposals on 22^nd March, that position had changed by the time they were deemed to have been accepted by the joint administrators on 11^th April. Mr Tindall submitted orally that the bank would not be prejudiced, and might well benefit, from ongoing trading on the part of the company whilst the mis-selling claim was pursued. The harm which he alleges will be suffered on the part of the applicants and other unsecured creditors is that of being deprived of the opportunity of seeing a rescue of the company as a going concern. He submits that the creditors should have been consulted back in March and April of last year in the circumstances which actually pertained at that time.
18. In reply, Mr Tindall acknowledged that the company would have to remain in administration whilst the mis-selling claim was addressed and concluded. He acknowledged that a CVA could only be considered after the mis-selling claim had been settled. That was because the company would need the benefit of the statutory moratorium contained within paragraph 43 of schedule B1 and, in particular, would need the benefit of the restriction contained within paragraph 43(2), whereby no step may be taken to enforce security over the company's property except with the administrators' consent or the permission of the court. Mr Tindall submitted that, if the purpose of the administration were to be the rescue of the company as a going concern, the court would not permit, and the administrator could not properly consent to, the secured creditor, Barclays, enforcing its security by sale of the caravan park because that would run counter to the whole objective of rescuing the company as a going concern.
19. Mr Tindall submitted that the FSA review amounted to a change of circumstances; but he also relied, as a further change of circumstances, upon the existence of a viable alternative to a sale of the caravan park in the form of continuing trading. He relied, in particular, upon a letter written by Paul Lawton, for and on behalf of the Lawton Group – apparently, registered in Dubai – according to which there would be funds amounting to some £150,000 effectively available to enable the company to continue trading, and after allowing for monies presently held in escrow on account of pitch fees; and also the fact that a supplier of caravans has confirmed its willingness, even whilst the company remains in administration, to continue supplying caravans for sale, effectively on a sale and return basis, as long as the applicants continue to be involved in the management of the company.
20. Mr Cawson submits that this application is misconceived. He says that there may, or may not, be a good cross-claim against Barclays Bank, and the administrators have appointed separate solicitors to investigate and provide independent advice on the claim. However, he says, the administrators are not in funds to pursue that claim further, and the applicants have made it clear that they, and their family, whilst prepared to fund the claims, are not prepared to do so whilst the present administrators remain in office. Mr Cawson submits that, contrary to Mr Holgate's suggestions that the Brandedleys business is viable, it traded at a loss prior to administration; and, despite the administrators' best efforts, it has continued to trade at a loss thereafter. Indeed, it is said that it has only proved possible to continue trading with the provision of further facilities by the bank.
21. Mr Cawson relies upon the fact that the administrators have received advice that a better price can be obtained for the caravan park if it sold as a going concern. However, even then, subject to the cross-claim, it is said that there will be a substantial deficiency for the bank. The bank's pre-administration indebtedness amounted to some £1.4million; and the bank has advanced a further £160,000 during the course of the administration for which it is entitled to assert priority. It is said that the most recent indications are that the caravan park is likely to be sold for a figure in the order of £1.1million. Bearing in mind that there will also be the costs of the administration to be defrayed, Mr Cawson estimates that at least £500,000 will remain as an unsecured debt to Barclays, subject, of course, to the outcome of the mis-selling claim.
22. Mr Cawson submits that the administration has now been on foot for over a year, and a purchaser has been found for the caravan park. If a sale is delayed, there is a real danger that the purchaser will be lost. Further, he says that it is unlikely, on the evidence, that the company will have sufficient funds to continue to trade beyond June. He submits that the bank is likely to be seriously prejudiced if the sale goes off. It is against that background that the view of the administrators is that the only sensible course would be for them:

(i) to conclude the sale without delay, thereby maximising the realisation of the value of the caravan park and its business;

(ii) to pay the bank out of the sale proceeds; and

(iii) for the administrators then to petition to wind up the company, leaving it to the unsecured creditors to choose a suitable liquidator to pursue the cross-claim against the bank, funded by the applicants and/or other creditors.

In those circumstances, it is the administrators' belief that properly balancing the interests of unsecured creditors if the claim against the bank is a good one and the interests of the bank itself, bearing in mind that the claim against it has yet to be established, the appropriate course is to sell the caravan park.

23. Mr Cawson submits that it is wrong to assume that the caravan park is a viable business and that the company can continue to trade whilst the claim against the bank is being pursued. The course of action proposed by the administrators, it is said, does not involve them in acting in a way that would unfairly harm the interests of the applicants, or not performing their functions as quickly or efficiently as reasonably practicable so as to satisfy the threshold requirement for relief under paragraph 74. If there is merit in the mis-selling cross-claim, then it can be pursued after a sale of the caravan park, for the benefit of unsecured creditors, by a liquidator of the company.
24. Mr Cawson invited the court to allow the administrators to get on with selling the caravan park. If the company continues to trade, it will only incur losses for the unsecured creditors, even if the mis-selling claim were to succeed. He submits that there is a very real danger of losing the present purchaser in what is said to be a difficult market. Mr Cawson challenges the expressed support of the creditors. He submits that the letter that was circulated to creditors, which can be found at page 36 of exhibit MEH2, is deeply flawed. He says that the fourth paragraph stated that the administrators would not consider a CVA despite, it was said, offering a better return to creditors than if the company were to remain in administration because the bank would not approve any form of CVA proposal. Mr Cawson submits that that was not a fair account in the light of a letter from Deloitte dated 12^th October 2012 (at page 51 of exhibit JCR1).
25. Mr Cawson also says that the fifth paragraph of Mr Holgate's letter of 21^st November 2012 to unsecured creditors was also misleading. That paragraph read:

"As you will recall, the proposals which were deemed approved state that there would be no return to the unsecured creditors. Crucially, the proposals also stated that the company's claim against the bank had been compromised when it had not. The proposals also stated that there would be no return to unsecured creditors."

Mr Cawson submits that that was a misleading statement of the joint administrators' present position, which is that the mis-selling claim is presently being considered by their legal advisors, and that the joint administrators have not discounted the prospects of pursuing a mis-selling claim which, if successful, might well result in some return to unsecured creditors.

26. In my judgment, there is substance at least in that element of Mr Cawson's criticism of the terms of the letter of 21^st November. I am less satisfied that there is force in his criticism of the fourth paragraph, relating to a CVA. However, I am satisfied that the terms of the fifth paragraph were misleading in describing the present attitude of the joint administrators to the mis-selling claim, and were also calculated to produce a response favourable to the applicants from any secured creditor, who would feel that he had no prospect of any return at all unless he supported the applicants' position. I, therefore, consider that there is force in Mr Cawson's point that, if the matter were to be put fairly to creditors at a meeting, they might well not maintain their support for the applicants' position of seeking to rescue the company as a going concern.
27. Mr Cawson also challenged the viability of a CVA. Reliance was placed, amongst other things, upon the opposition of Barclays as secured creditor. It seems to me that Mr Tindall, effectively, confessed and avoided that part of Mr Cawson's submission by acknowledging that the company would have to remain in administration whilst the mis-selling claim was pursued, and that a CVA would only be practical after the mis-selling claim had been concluded. Mr Tindall fairly acknowledged that the company would need the benefit of the statutory moratorium against any realisation by the bank of its security, and that that could only be achieved through the medium of administration and not that of a CVA. Mr Cawson's main challenge to the viability of the proposals was that there was no sufficient evidence that the caravan park was trading, or could conceivably trade, profitably in administration. There was simply no sufficient evidence to that effect.
28. Mr Cawson submitted that there was no harm to the applicants by the administrators' present proposals of selling the caravan park, and certainly no harm that could be said to be capable of operating unfairly towards them. Mr Cawson pointed out that, under paragraph 74, the applicants must show that the administrators are acting, or have acted, or propose to act, in a way that would unfairly harm the applicants' interests. Not only must they show that the administrators' actions would cause them harm, but that they would do so unfairly. Reliance was placed upon observations of Mr Justice Blackburne in the case of Four Private Investment Funds v Lomas [2008] EWHC 2869 (Ch); [2009] 1 BCLC 161 at paragraphs 34 to 37. Mr Cawson also submitted that, in reviewing the actions of administrators properly performing their functions in good faith, the court ought to give them a wide margin of appreciation. In that regard, reliance was placed upon observations of Mr Justice Lewison in the case of Re Trident Fashions PLC (No. 2) [2004] EWHC 293 (Ch); [2004] 2 BCLC 35 at paragraph 39.
29. Mr Cawson also relied upon observations of Mr Justice Blackburne in the Four Private Investment Funds case at paragraph 48. What Mr Justice Blackburne said there was this:

"Where, as here, there is no suggestion that the administrator is acting improperly, it would, in my judgment, run flatly contrary to the nature and purpose of an administration if the court were to interfere in the detailed day to day management of the administration in the way that this application seeks. Of course, the administrator must seek to balance the need to proceed with the administration in the interests of creditors as a whole against the desirability of responding to legitimate enquiries from individual creditors and others. But, in the absence of some plainly wrongful conduct on the administrator's part, it is for him to decide where the balance lies. The fact that another administrator might have gone further than these administrators have done in responding to the applicants' request for information or that, if left to itself, the court might feel that the enquiry should be answered, is beside the point."

Those observations were uttered in the context of a case where administrators had declined to divert time and resources from the general conduct of the administration in order to investigate, and respond to enquiries for disclosure of information about, assets. The effect of those observations is to discourage a court from seeking, effectively, to micromanage the administrator's conduct of an administration.

30. Mr Cawson also relies upon the restriction contained within 74(6)(c), which prohibits the making of an order under paragraph 74:

"if it would impede or prevent the implementation of …. proposals or a revision approved under paragraph 53 or 54 more than 28 days before the day on which the application for the order under this paragraph is made."

Mr Cawson submits that here, no meeting had been convened under paragraph 53 because the administrators thought, for the purposes of paragraph 52(1)(b), that the company had insufficient property to enable a distribution to be made to unsecured creditors other than out of the prescribed part.

31. Mr Cawson relies upon rule 2.33(5) of the Insolvency Rules, the effect of which is that the proposals set out under paragraph 49 and rule 2.33 were deemed to have been approved by the creditors given that no meeting was, effectively, requisitioned under paragraph 52(2). Mr Cawson submits that paragraph 74(6)(c) applies equally to a deemed approval by creditors pursuant to rule 2.33(5) as it does to an actual approval as a meeting under paragraph 53 approving the proposals is deemed to have taken place. Mr Cawson relies upon the provisions of paragraph 68(1) which, he says, clearly apply to a deemed approval. He says that that would make sense as the clear policy reason behind paragraph 74(6)(c) is to limit the time for challenging proposals once the proposals have begun to be implemented.
32. Mr Tindall, in his reply, submitted that, on a proper analysis of the proposals, there was nothing in them which would run counter to the course which he invites the court to adopt. He submits that, looking at the proposals themselves, there is nothing requiring the administrators to realise the company's principal asset in the form of the caravan park. Therefore, Mr Tindall submits, paragraph 74(6)(c) is simply not engaged and is no obstacle to the success of the present application. Mr Tindall, in closing, submitted that it is fundamental to his clients' case that there ought to have been a meeting of creditors back in March or April of last year because, by the time approval was deemed to have been given to the original proposals, it could no longer properly have been considered by the joint administrators that the company had insufficient property to enable a distribution to be made to unsecured creditors otherwise than out of the prescribed part.
33. Those were the submissions. I turn then to my conclusions. I accept that Martin Holgate, at least, has established that he is a creditor of the company in a substantial sum and that he, therefore, has the necessary standing to bring this application as a creditor, as well as a member, of the company. I find, on the evidence, that it is simply not possible for the court to conclude that the caravan park constitutes a viable business, or that the company can be rescued as a going concern. As Mr Tindall recognised in his written skeleton argument (at paragraph 20), the parties accuse each other of failing to make necessary expenditure, and of making unnecessary expenditure, in relation to the caravan park. The court cannot really resolve disputes of that kind on an application of the instant kind. In my judgment, it is equally not possible for the court to conclude that the caravan park represents a viable continuing business. The evidence of the joint administrators is that it cannot be traded profitably; and the evidence, such that it is, produced by the applicants has not persuaded me that that is wrong.
34. The evidence comprises largely a very short witness statement, to which I have not previously made reference, but which I have borne fully in mind, from Mr Thomas Duncan Hopkinson. That witness statement is dated 9^th February 2013. It refers to, but does not exhibit, certain historic management accounts. As Mr Cawson submitted, those management accounts have been requested by the administrators in the past and have not been forthcoming. I am not satisfied by what Mr Hopkinson says that the caravan park presently constitutes a viable business, or that the company can be rescued as a going concern.
35. I acknowledge that the unsecured creditors may be supportive of a CVA in due course, given that that may represent the only prospect of a dividend to them in the company's present situation. However, I accept, as I have already indicated, Mr Cawson's submission that the letter of 21^st November 2012 is not as even-handed or as measured as Mr Tindall would assert. I find that it is impossible to predict how the unsecured creditors would respond if the true position were to be put fully and fairly to them.
36. I accept that the mis-selling claim against the bank is neither fanciful nor entirely speculative; it has a real prospect of success. The quantum of the claim is less certain; but I am prepared to accept that it may approach the level of the bank's pre-administration indebtedness, although I see no reason to think that it would be effective to cancel out the benefit of the ongoing bank facility – presently amounting to some £160,000 - that the bank has been affording to the administrators post-administration. It seems to me that the way in which the administrators have been dealing with the pitch fees – amounting to some £60,000 – is entirely appropriate. What they are doing in relation to those is simply releasing them on a month by month basis. That seems to me to be entirely proper in the circumstances.
37. On the unchallenged evidence of Mr Reid, on behalf of the joint administrators, it cannot be said that, at the time, the administrators formulated their proposals, they did not genuinely hold the opinion that the company had insufficient property to enable a distribution to be made to unsecured creditors other than out of the prescribed part. Indeed, Mr Tindall did not seek to challenge that; and, when I enquired whether he would wish to cross-examine Mr Reid on the point, he indicated that he was not making such an application.
38. I find that the administrators acted perfectly properly in requiring an undertaking by Mr Holgate to meet the costs of the initial meeting of creditors which he had requisitioned. I find that Mr Holgate was deterred from pursuing his requisition of a meeting by the estimated level of costs provided by the administrators. I find that the costs within that estimate may well have proved exaggerated; but I am not satisfied that they were deliberately exaggerated by the administrators with a view to deterring Mr Holgate from pursuing his requisition of a meeting. In my judgment, the administrators were acting cautiously in looking at a worst case scenario for the costs. In any event, Mr Holgate could only have been required to meet such costs as were reasonably and properly incurred. Further, his liability for those costs would, under the rules, have been subject to any contrary resolution passed at the meeting. I find that Mr Holgate was deterred by the estimate of costs from pursuing the requisition of a meeting; but I do not consider that he was acting reasonably in abandoning – as I find he did – his requisition of a meeting. I find, as a result, that it cannot be said that the proposals were deemed approved in any way improperly. In my judgment, there was a proper deemed approval for the administrators' proposals.
39. I hold as a matter of law that the restriction in paragraph 74(6)(c) extends to proposals which are deemed to have been approved under Insolvency Rule 2.33(5). When one looks at paragraph 68(1) of schedule B1, requiring the administrator of a company to manage its affairs, business and property in accordance with any proposals approved under paragraph 53, it seems to me clear that that subparagraph contemplates, and extends to, proposals deemed to be approved under Insolvency Rule 2.33(5). Otherwise, it seems to me that there would be a gap in the scheme of schedule B1. It seems to me that I have to apply a consistent interpretation to the provisions of schedule B1 and, therefore, I should construe paragraph 74(6)(c) as also extending to a deemed approval under Insolvency Rule 2.33(5). Proposals approved under paragraph 53 should bear the same meaning in paragraph 74(6)(c) as the words there in paragraph 68(1). I accept Mr Cawson's argument to that effect.
40. I reject Mr Tindall's submission that, properly construed, the proposals do not prevent the rescue of the company as a going concern, involving the retention of the caravan park. I acknowledge that the proposals are not expressed as clearly as one might wish. There is nothing in section 8 – the statement of proposals pursuant to paragraph 49 of schedule B1 – that, in terms, says that the property in the form of the caravan park is to be sold by the administrators. However, it seems to me, looking at the statement of proposals as a whole, that it is implicit that the administrators will actually dispose of the caravan park.
41. In paragraph 2.3 it is said that:

"Until such time as a full investigation into the company's purported claim against the bank has been explored, the administrators are of the view that the first objective – namely, rescue of the company as a going concern – is unlikely to be achieved. Accordingly, the purpose of the administration is said to be objective B – to achieve a better result for creditors than would be obtained through an immediate liquidation of the company. The purpose of the administration is expected to be achieved through a sale of the business and assets of the company, as discussed in section 3.2. Should the administrators form the opinion that the purpose of the administration would be objective A, creditors will be notified in accordance with rule 2.45 of the Rules."

42. Insolvency Rule 2.45 relates to revision of the administrators' proposals. In other words, it seems to me clear that rescue of the company as a going concern is not one of the proposals in respect of which there was a deemed approval. That is made clear by succeeding sections of the proposals. In paragraph 3.1 it is said that:

"The administrators concluded that selling the park as a going concern would maximise recoveries for the company's creditors. Accordingly, the park continues to trade as normal whilst a going concern sale is pursued."

43. Paragraph 3.2 refers to instructions to GVA to value and market the business and assets of the company for sale. Paragraph 3.3 is headed "sale of business" and makes it quite clear that what is being proposed is a sale of the caravan park. At paragraph 4.1, it is said that:

"In light of the ongoing discussions over the sale of the company's assets, the administrators have determined that the disclosure of a current estimate and the value of the company's net property would seriously prejudice the company's commercial interests."

44. The whole tenor of the proposals is that there will be a sale of the caravan park. It is against that background that paragraph 8 of the proposals states that:

"Following the realisation of assets and resolution of all matters in the administration, and as quickly and efficiently as is reasonably practicable, the administrators should implement the most cost effective steps to formally conclude the administration. This may include distribution of funds to unsecured creditors provided court permission is obtained, and then the dissolution of the company or, alternatively, seeking to put the company into creditors' voluntary liquidation or compulsory liquidation, depending on which option will result in a better realisation for creditors."

45. I, therefore, conclude that the course which the applicants are inviting the court to pursue is, indeed, one that would impede or prevent the implementation of the approved proposals. Since the proposal was deemed approved more than 28 days before the day on which the application for this order was made, that, in my judgment, is a fatal obstacle to the success of the application. However, I also conclude, for the reasons that I have given, that the applicants have also failed to pass the other threshold condition of demonstrating that the administrators are acting, or have acted, or are proposing to act, either unfairly, or unfairly to harm the interests of the applicants. In my judgment, on the evidence, the applicants have not made out their contention that the business of the caravan park is presently viable, or that it is possible to rescue the company as a going concern. For all of those reasons, therefore, I would dismiss the application.
46. Had I taken a different view, I would probably have refused the application in the exercise of the court's discretion. As I have indicated, I take the view that Mr Martin Holgate acted unreasonably in not pursuing the requisition for an initial creditors' meeting. In those circumstances, it would not be a proper exercise of the court's discretion now to order the convening of a meeting, with the expenses of doing so being treated as an expense of the administration. Mr Holgate has the right, under paragraph 56, to request the administrators to summon a creditors' meeting since, on the evidence, his debts would appear to amount to at least ten per cent of the total debts of the company. Of course, if he does so, he will, subject to any resolution at the meeting, be responsible for the costs of doing so. However, it seems to me that, if he wants a meeting, he should bear the costs of that, subject to whatever may otherwise be resolved at the meeting itself.
47. During the course of the hearing, Mr Tindall referred the court to the provisions of Insolvency Rule 2.109, which relates to creditors' claims that remuneration or other expenses are excessive. Mr Tindall did so in connection with the relief sought at paragraph 3 of the application notice seeking the revocation of the determination pursuant to rule 2.106(5A) of the Insolvency Rules of the basis for the respondents' remuneration. The short answer to that is that there is no application by the court presently under Insolvency Rule 2.109. The application notice is, in terms, under paragraph 64 of schedule B1 or the court's inherent jurisdiction. The application notice does not set out any of the grounds mentioned in Insolvency Rule 2.109(1A); and, as Mr Tindall accepted, no notice of such grounds has yet been given to the joint administrators. It would, therefore, be inappropriate for the court to be doing anything pursuant to Insolvency Rule 2.109. In particular, I would not, within the context of the present application, make any order extending time under Insolvency Rule 2.109(1B).
48. The present application is not advanced under paragraph 68 of schedule B1. By paragraph 68(2):

"If the court gives directions to the administrator of a company in connection with any aspect of his management of the company's affairs, business or property, the administrator shall comply with the directions."

That is subject to the restrictions in paragraph 68(3). Paragraph 68 says nothing about the identity of the person who may apply for directions under paragraph 68. Paragraph 63 of schedule B1 empowers the administrator of a company to apply to the court for directions in connection with his functions. The notes to that paragraph, in the current edition of Sealy and Milman, recognise that:

"Although [paragraph 63] confers standing only on an administrator, it is possible that a creditor may also apply for directions under the court's general power to exercise control over administrators as officers of the court."

Reference is then made to Re: Mirror Group Holdings Ltd [1993] BCLC 538 at 543, an authority that was not put before me.

49. I am prepared to assume, for the purposes of this application, and without full argument, that the court may give directions on the application of a creditor of the company pursuant to paragraph 68. By paragraph 68(3), the court may give directions but only if:

"(c) the court thinks the directions are required in order to reflect a change in circumstances since the approval of proposals under paragraph 53; or

(d) the court thinks the directions are desirable because of a misunderstanding about proposals approved under paragraph 53."

I do not think that there is anything by way of a misunderstanding about the administrator's proposals. Thus, paragraph 68(3)(d) is not engaged.

50. Mr Tindall submits that directions are required in order to reflect a change in circumstances since the deemed approval of the administrator's proposals. As I have mentioned, he relies upon the FSA review of mis-selling claims and the existence of a viable alternative in the form of a possible rescue of the company as a going concern. For the reasons I have given, the second limb of that submission fails on the facts. I am not satisfied that there is a viable alternative to a sale of the company's principal asset in the form of the caravan park. Nor do I consider that the FSA review amounts to a sufficient change in circumstances since the date of the deemed approval of the administrator's proposals.
51. The existence of the FSA review merely relates to the means by which the mis-selling claim may be pursued. It is not clear whether it applies in the present case, or will secure sufficient satisfaction for the company even if it does. In any event, because I am not satisfied that the rescue of the company as a going concern is a viable proposition, it does not seem to me that there is any proper basis for the court to give any directions under paragraph 68 with regard to the holding by the administrators of a meeting of creditors. In any event, for the reasons I have already given, it seems to me that it would not be a proper exercise of the court's discretion to order the convening of such a meeting as an expense of the administration, given that the applicants have the ability to requisition such a meeting themselves under paragraph 56 of schedule B1. For all of those reasons, I would dismiss the present application.
(End of judgment) (Discussions as to costs follow) __________