England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT REGISTRY
BUSINESS & PROPERTY COURTS IN MANCHESTER
COMPANIES INSOLVENCY LIST
(CHANCERY DIVISION)

		Manchester County Court and Family Court Hearing Centre Manchester Civil and Family Justice Centre 1 Bridge Street West Manchester Greater Manchester M60 9DJ
		17 May 2018

1. JUDGE EYRE QC: I have to rule on an application to appoint Mr Woolridge and Mr Rowley as administrators of Baltic House Developments Ltd ("the Company"). The Company was engaged in development of a property in Liverpool.
2. In very short form, the history is this. Funds for the development of that property were obtained from investors, many of whom are resident in the Far East. The structure was in essence for funding to be upfront. The development of the building came to a halt, and it is apparent there is no prospect of completing that development without further funding going in.
3. In a little more detail, taking the history in large part from the summary of the facts in the skeleton argument of James Morgan QC who appears for the Applicant, and who has been opposed by Mr Passfield of counsel, the position was this. There was incorporation on August 2015. The Company was a single-purpose vehicle acquiring, as I said, a site in Liverpool at Norfolk Street in that city. Units were sold off plan to investors, many of whom are in the Far East. The investors were to pay 70 per cent of the purchase price upfront, the balance being paid on completion. On completion there were to be 250-year leases. There were over a hundred potential purchasers or purchasers/investors, and sums in excess of £12 million were received by the Company. A charge was granted to Baltic House Buyers Ltd acting as nominee for the purchasers. There were also charges in favour of Lancashire Mortgage Corporation, and the Schemes (effectively sundry pension schemes). The exhaustion of the Company's funds came in about January 2017, and it was in June of that year that the Company wrote to the solicitors on behalf of the purchasers saying that there was no prospect of completion by the relevant longstop dates and that funding of a further £11 million was needed.
4. That is the background, and it is against that background that two of the investors have petitioned for the Company's liquidation, and that the administration application is made. Originally the applicants sought the appointment of Mr Lord of Bridgestones and Mr Hancock as administrators, butthey now seek the appointment of Mr Rowley and Mr Woolridge of FRP Advisory. There have been detailed witness statements from Mr Griffiths, director of the Company; rather shorter witness statements from Mr Lai and Mr Cheung, the petitioning creditors; but substantial and detailed witness statements from Mr Lynch, a solicitor for the petitioning creditors. Mr Lynch goes into considerable detail in his witness statement about the timetable and the stages at which the applicant and its solicitors have taken various steps. It suffices to say that a lot of what has been done has been at the eleventh hour.
5. Originally Mr Lord, one of the two initially proposed administrators, took the view that administration was an appropriate course and that he was happy to be appointed as administrator. I should say that the application was initially made without having annexed to it the report from Mr Lord, although a draft report had been prepared. Mr. Lord's initial assessment set out in an estimated outcome statement of the position as at 15 March 2018, which appears at page 305 in the bundle before me, envisaged there being a better recovery in administration and in liquidation. This was at a comparatively modest level, being the difference between a dividend to unsecured creditors of 23.3 pence in the pound in administration as opposed to 20.3 pence in the pound in liquidation. A report was prepared by Mr Lord, and that appears at page 511 and following in the bundle. At that stage the thrust of that report was to say that the way forward was to be the sale of the property in its current incomplete state. I should say that a conditional contract for the sale of the property in the sum of £2 million has been agreed. At paragraph 12.4 of that report, Mr Lord said this:

"If the sale of the main asset is rescinded, it is highly unlikely the joint administrators will seek to find finance to complete the project in the Company's name. The nature of the work done and the insolvent situation with the contractors who have carried the work make it very difficult to provide the warranties needed, to pass building inspections, to obtain the required insurances and generally comply with the health and safety requirements in continuing with such a project."

6. There is before me now a revised estimated outcome statement setting out the position as at 28 March 2018. That shows a very much more marginal potential benefit in administration. The difference in very short terms relates to the funds which Mr Lord had hoped might be achieved from realisation of other debts. The view is now taken (or was taken at the time of preparation of the estimated outcome statement) that such realisation will not be practicable or achievable. I will deal in a little more detail with what Mr Lord says about that in a moment. The revised estimated outcome statement at page 551 of the bundle shows a dividend to unsecured creditors in administration of 14.5 pence in the pound and to unsecured creditors in liquidation of 13.2 pence in the pound. That difference is not very substantial. The difference is the result of the increased fees which that document predicts will be incurred in liquidation as opposed to the costs of administration. The document proceeds on the basis that in liquidation there will be liquidator's fees of a touch over £300,000 being 15% of realisations.
7. I said that Mr Lord was initially prepared to act as administrator. He changed his mind and indicated he was no longer prepared to accept appointment. The reasons for that are set out to some extent in his letter of 28 March 2018 at page 546 and following of the bundle. He explains matters at page 548. He identifies there what he says are materially significant matters which had come to light since the issue of the administration application. One of those he says is the reduction in realisable debts. He said this:

"My initial understanding was that the Company had realisable debts of approximately £5 million. That no longer appears to be the case, which has detrimentally impacted on the estimated outcome to the extent I now see little difference in outcome between administration and liquidation. A number of the debts which were listed in the Company's accounts filed at Companies House for the period ending 31 December 2016 have proved to be irrecoverable. In addition I am not certain that the Company have the funds with which to generate the debts. They are not trade debts, they are in the main intercompany loans, but my investigation showed that it would have been difficult for the Company to have had such large sums to loan other companies within the group. Other companies within the group appear to be facing financial difficulty, and of the six debts originally considered as due and payable, I now consider that only two may have a chance of significant recovery."

8. He mentions concerns as to the change in position in respect of the charge in respect of Baltic House Buyers Ltd and then says this:

"Lack of support from creditors

At the outset I was aware of the petition presented by two unsecured creditors of the Company. The petitioner has subsequently filed a witness statement dated 20 March 2018 setting out he is the representative of a number of unsecured creditors of the Company when the value of unsecured creditors opposing the application totals a touch over £5 million. Although I am of the view that the Company property could be realised in order to make a distribution to one or more secured or preferential creditors, therefore satisfying one of the statutory purposes for administration, I consider that it would be difficult for me to proceed with the administration appointment and in particular to get the administrator's proposals agreed without the support of the 'investor' creditors, who may or may not be unsecured. The petitioners have indicated they wish to see a liquidator of their choice appointed, and they say that this is the wish of a very significant proportion of those creditors."

9. I should say that the investors were protected by a number of unilateral notices in addition to the protection they had by way of the charge in favour of Baltic House buyers Ltd.
10. So, Mr Lord and Mr Hancock have dropped out of the picture, and Mr Rowley and Mr Woolridge are put forward. The secured creditors, LMC and the Schemes have no objection to the application for appointment of the administrators. There is a significant question mark over the position of Baltic House Buyers Ltd. There is before me an indication signed by Mr McNally as a director of that company that the Company resists and objects to the application, but there is at the very least scope for question as to Mr McNally's status. The documents purporting to appoint him as director appear to have been signed by him. Also the latest report from FRP Advisory, the firm of Mr Rowley and Mr Woolridge, reports conversations which one or other of those gentlemen had with Ms Sang, who undoubtedly was a director of the Company, indicating that she is unaware of the appointment of Mr McNally and is not herself opposing on behalf of BHB Ltd the appointment. I will proceed on the basis that, at best, the status of Mr McNally and the stance of that company is a matter of question.
11. There is some scope for debate as to the precise number of investor/creditors who have joined with the petitioning creditors in opposing the administration application, but on any view there is a substantial body of the investors who, as matters currently stand, are pressing for liquidation rather than for administration. I have said that the latest estimated outcome statement proceeds on the basis of there being fees of a touch over £300,000 which are likely to be incurred in liquidation. A letter has been provided from Louise Brittain, a partner in the insolvency practitioners firm of Wilkins Kennedy, saying in part that the 15 per cent realisation fee payable to the Official Receiver would be only payable from realisations actually made by the Official Receiver if the Official Receiver were to remain as liquidator. That would not be payable if there were to be a private liquidator. That is common ground. Ms Brittain goes on to say that if she were to be appointed as liquidator she would act on the basis either of a ten-per-cent realisation basis or for a fixed fee less than the costs of administration, and she says that, accordingly, compulsory liquidation would be a cheaper option than administration.
12. Mr Morgan QC for the Applicant said there was some ambiguity in that and that it could be read as having the effect that the ten-per-cent realisation basis of payment could generate in the circumstances which might eventuate a greater cost than the estimated costs in administration. I am compelled to the view that that suggestion is an unrealistic analysis of what is likely to happen if there were to be a liquidation and Ms Brittain were to be appointed. I must proceed on the basis that it would be likely that if she were to be appointed it would on the basis of taking whichever of those two headings generated the lesser fees rather than the greater.
13. I interpolate at this point the fact that it is sensibly conceded by Mr Morgan QC that if this matter were to move to a compulsory liquidation, there would be appointment of a private liquidator in due course and that the matter would be unlikely to remain with then liquidator being the Official Receiver. I will explain in due course in a little more detail the caveats that Mr Morgan QC places on that concession.
14. The witness statements contain some criticism of the approach taken by Mr Woolridge and Mr Rowley. To some extent Mr Passfield echoed that criticism in his submissions, in effect saying that there is an undue eagerness on their part (putting it bluntly) to retain the job and this might be colouring their assessment of the matter and so might have had an impact on the further material to which I will turn in a moment or two. For his part, Mr Morgan QC referred to criticism of Ms Brittain which is contained in the witness statements. Reference is made there to the fees that have been generated and the time taken in the liquidation of a different company where she is the office holder. In addition Mr Morgan QC suggests that, this being a case where potentially a substantial investigation might be needed of the affairs of the Company, Ms Brittain in her pitch for the job has put too low a limit on the likely fees. He suggests that this is potentially an indication that she would not be doing a proper and full job.
15. I do not accept the criticism that is going either way, neither the criticism of Messrs Rowley and Woolridge nor that of Ms Brittain. I will proceed on the basis that whoever ends up being appointed as an office holder, whether liquidator or administrator in this matter, if they are any of the persons whose names have been mentioned in these papers, will be an independent, properly professional insolvency practitioner acting with proper diligence and proper expedition. To the extent that Ms Brittain ends up, if appointed, having committed herself to an unrealistically low level of fees she would nonetheless do the job properly, taking as it were the hit that would be caused by that. Similarly, Mr Woolridge and Mr Rowley, even if appointed at the behest of the Company and with the support of Mr Griffiths, would act entirely properly in making all such investigations as are necessary to check what the position is and would take all steps necessary to seek proper redress. I have already adverted to some of what Mr Lord said about the intercompany dealings. It apparent (to adopt Mr Passfield's phrase) something has clearly gone wrong with this company, and it is also immediately apparent that there will be scope for a degree of investigation and questioning by an office holder. I proceed on the basis that administrators, properly appointed, would do that in the same way as a liquidator would.
16. The application proceeded until yesterday on the footing that the relevant statutory provision and the relevant statutory purpose was that set out at schedule B1, paragraph 3(1)(c) of the Insolvency Act, namely the realisation of property in order to make a distribution of one or more secured or preferential creditors. In very short terms, what was contemplated was the sale of the property in its current incomplete state, either by way of completion of the current conditional contract or by way of finding another purchaser if on investigation it was found that a better price could be obtained. The application proceeded on the footing that such a sale would be achieved and would be achieved more effectively and at a lower cost in administration than in liquidation.
17. But matters changed yesterday (and indeed I think this other material was only served first thing this morning). Nowt at the eleventh hour the stance being adopted is that this is a matter which falls under paragraph 3(1)(b), namely achieving a better result for the Company's creditors as a whole than would be likely if the Company were to be wound up. The rationale for that is set out in a report from FRP Advisory of 16th May 2018. That report is not annexed to a witness statement, but, entirely properly and sensibly, Mr Passfield takes no point about that, and I have and considered the report. It is a report from Mr Woolridge, and it says first that there has been further assessment of the matter by Landwood Chartered Surveyors, who had provided a valuation of the property, and that they now accept that the current offer of £2 million appears acceptable, although both they and FRP Advisory agree a full marketing campaign should be conducted to test the market. However, the real thrust of the report is that Mr Woolridge says that what has been happening is that the proposed administrators have been "in extensive discussions with other potential interested parties including local developers as well as certain Far East investors". He says that it is clear from site visits as well as these discussions that the site has a number of practical challenges (it is apparent from the papers that that is a conservative view of what the position is). The report says there are "a number of practical challenges, as well as other more peripheral issues, which reduce the appeal or likely realisation on a liquidation or a forced sale basis, but essentially we believe that these could be overcome in administration". Mr. Woolridge explains that discussions have progressed with two parties in particular in order to establish their ability to work with the administrators to maximise realisation. In short he says that two potentially interested parties are lined up with a view to negotiations either with them being involved in buying out the site with a view to building it out or providing funding to the administrators to build out the site. He says these discussions were undertaken with a view to the interested parties working with the administrators to either build out the site or acquire the same. He says this:

"It is clear both these parties know the site well and have sufficient experience and resource not only to maximise value but also to work with the administrators for the best maximised returns."

18. Letters are attached from two companies. One is a letter from Mr S Foo of Muloot. There is no company name on the document or the footer, although it does purport to come from Muloot.com Ltd. Mr Foo says that he acts on behalf of group of investors based in Singapore and represented in the United Kingdom by Muloot.com Ltd. He confirms their representatives were admitted to the property. They wish to record a sincere interest in working with the FRP as joint administrators, and they say this:

"The aim would be to complete the build-out of the development. Based in Singapore, we can communicate with the investors who had previously invested their money into the property to work with them and on their behalf to rescue the project and a much better outcome than would occur on liquidation."

19. The letter says that the investors are in a position to achieve those objectives as they have got funding readily available.
20. Then there is a letter from Mr Elliot Lawless, director of Elliot Property Construction Ltd. He says that his company is a significant and active property investor and developer based in Liverpool, with a strong track record in developments of the nature undertaken by the Company. He refers to a website showing successful property developments completed in the past five years. He has visited the property and knows it well and has a sincere interest in working with the FRP as administrators. He says this:

"We see this support being either to purchase the property outright from these administrators with a view to developing the same, or to provide funding within the administration to allow the development to be completed. Clearly this would be subject to a due diligence process on how best to maximise the position for the stakeholders."

21. Mr. Lawless explains that they have got experience in dealing with off-plan sales and investors in Hong Kong and so would be well placed to communicate with the investor group were he, with them, to try and achieve a rescue of the property. He goes on to say this:

"We would suggest that we are one of only a very small group of potential or realistic purchasers for this property given its nature and history. We would have the capability to make this property a success."

22. As I have said, Mr Woolridge in his report annexes those letters and he comments on the question marks which Ms Sang raises over Mr McNally's position as director of BHBL. He goes on to say this:

"If the petitioners are not satisfied that the property is freshly developed by the administrators and the steps taken in the investigation which will be outlined to them during the initial phase of the process, it is clearly within their gift to reject the administrators' proposals and transition the case into liquidation, but I would argue it is more appropriate to do so after a site development build strategy is explored given the expressions of interest obtained."

23. I take it that in fact where he refers to the petitioners there, Mr Woolridge in fact means the creditors as a body and is accepting that if he and his colleague are appointed and their proposals are not accepted, then the matter will fall away and there will have to be a liquidation.
24. The relevant statutory provisions are set out in schedule B1 of the Insolvency Act. For current purposes the relevant provisions are, first, paragraph 3(1):

"(1) The administrator of a company must perform his functions with the objective of—

(a) rescuing the Company as a going concern, or

(b) 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), or

(c) ) realising property in order to make a distribution to one or more secured or preferential creditors."

25. I need not trouble with paragraph 3(2). Paragraph 3(3) says:

"(3) The administrator must perform his functions with the objective specified in sub-paragraph (1)(a) [rescue] unless he thinks either—

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

(b) that the objective specified in sub-paragraph (1)(b) would achieve a better result for the Company's creditors as a whole."

26. And then paragraph 3(4) says:

"(4) The administrator may perform his functions with the objective specified in sub-paragraph (1)(c) only if—

(a) he thinks that it is not reasonably practicable to achieve either of the objectives specified in sub-paragraph (1)(a) and (b), and

(b) he does not unnecessarily harm the interests of the creditors of the Company as a whole."

27. Although there was some difference between Mr Morgan QC and Mr Passfield as to the precise language in which the relevant test should be formulated, there is not in substance a difference between them.They are both agreed that the test is properly set out in the judgment of Warren J in Auto Management Services Ltd v Oracle Fleet UK Ltd [2007] EWHC 392 (Ch) at paragraph 3, where his Lordship said this:

"There is no dispute about the applicable principles. There has to be a real prospect that the administration order will achieve the purpose. That does not mean that I need to be satisfied that on the balance of probabilities there will be a better outcome upon administration as compared with winding up. There has to be a real prospect. It is not enough to show a real prospect that administration would achieve no worse an outcome. The prospect of a better result must be shown. However, I venture to think that if an administration can be shown in all but the most unlikely circumstances to produce a result no worse than liquidation, and if it can be shown that there are reasonably possible circumstances in which administration can in fact produce a better result so that paragraph 11(b) [now 3(1)(b)] is satisfied, that will be a significant factor when it comes to exercising a discretion whether or not to make an order."

28. In my judgment the passage there falls into two halves divided by the word "however". The approach I intend to take is as follows. A real prospect needs to be shown that the statutory purpose will be achieved. If that is not established, then there is no jurisdiction to make the order. I pause to say it is also necessary for the jurisdiction to exist that the Company is or is likely to be unable to meet its debts, but in the circumstances of this case there is no doubt that such is the position and that that requirement is satisfied. So a real prospect needs to be shown. If that is shown, the court has the power to make the order. But it then becomes a matter for the court's discretion whether the order should actually be made. In exercising that discretion the degree of risk of a worse outcome and the extent to which a potential outcome might be worse in administration than in liquidation then become relevant to the exercise of the discretion.
29. I have also to advert to the effect of the provision in paragraph 3 (4) that "The administrator may perform his functions with the objective specified in sub-paragraph (1)(c) only if (b) he does not unnecessarily harm the interests of the creditors of the Company as a whole". Mr Passfield expressed it in this way. If administration is more costly than liquidation, then that would amount to there being unnecessary harm to the creditors of the Company as a whole, so that the administrator would not be able to perform his functions. That being so, he would not be able to achieve his objective and, therefore, there would be in those circumstances no real prospect of the objective being achieved and accordingly no jurisdiction to make the order. Mr Morgan QC substantially accepted that position.
30. In my judgment that is a correct analysis, subject to one caveat or gloss or addition. The test cannot simply be whether administration is more costly than liquidation, although that will be a very powerful factor in looking to see whether there is unnecessary harm to the interests of the creditors of the Company as a whole. In addition the court has to take account of potential benefits in administration as opposed to liquidation. An assessment must be made as to whether, in circumstances where administration is more costly than liquidation, those benefits outweigh the additional cost. This is because if there are benefits in administration which outweigh the additional cost of a liquidation, then in those circumstances the additional cost would not be an unnecessary harm. It would be a potential harm, but if it were to be the price for a benefit which outweighs that harm, then it would not be an unnecessary harm.
31. Even if my analysis as to jurisdiction (or I should say Mr Passfield's analysis) as to the effect of paragraph 3(4)(b) on jurisdiction is not correct, clearly the question of whether or not an administrator could act without causing unnecessary harm to the creditors of the Company as a whole would be a potent and probably compelling factor in the exercise of the court's discretion as to whether or not to make an order.
32. I have been helpfully referred to the further decision of Warren J in El Ajou v Dollar Land (Manhattan) Ltd [2005] EWHC 2861 (Ch). There, taking matters from the headnote, the position was that Warren J took the view that where there was a financial benefit in administration which was trivial as compared to liquidation, the balance was in favour of winding up rather than administration because the creditors were entitled to the advantage of "the complete independence and objectivity of the Official Receiver" and the small element of control by their influence over who might be appointed liquidator in succession. In my judgment what was happening there was that Warren J was taking account of that as a factor in the exercise of his discretion rather than treating it as a matter going to jurisdiction. It is clearly a matter which is relevant to discretion.
33. I have also been referred to the recent decision of the Court of Appeal in the case of Rowntree Ventures Ltd & Anor v Oak Property Partners Ltd & Anor [2017] EWCA Civ 1944, where the Chancellor addressed the discretion that is open to the court in these circumstances and said this at paragraph 24:

"It is necessary first in my judgment to understand that the discretion provided to the court in paragraph 13 of schedule B1 is of a wide and general nature, not constrained in any way … Nothing that I say today should be taken as limiting the factors that can properly be considered. The circumstances are likely to be infinitely variable. The interests of secured creditors, preferential creditors, unsecured creditors and the Company itself will change from case to case."

34. So I have a wide discretion but must exercise it judicially, taking account of the interests of all the relevant parties and the purpose of the legislation.
35. I have already said there is no dispute that this company is hopelessly insolvent, and so that element of my jurisdiction is established.
36. The next question I have to address is whether there is a real prospect of the purpose set out in paragraph 3(1)(b) being achieved namely the achievement of 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). The burden is on the Applicant to show such a real prospect. I remind myself that such a real prospect does not have to be established on the balance of probabilities. The Applicant does not have to show it is more likely than not that such a result will be achieved, but there must be something more than speculation. There must be something of substance and reality.
37. The proposition that is put forward here is that there is a real prospect of either completion of the development or a sale to a party prepared to give enhanced funding because of the potential completion. That proposition has been put forward at the eleventh hour. The report of FRP Advisory setting out that new line of approach, that new proposition, is dated yesterday. Mr Morgan QC says we can see from the report and from the correspondence that there has been investigation and there have been site visits. These things take time to sort out. Far better, he says impliedly, that a properly formulated proposition is put forward, albeit at the eleventh hour, than that something half-baked is put forward earlier. If what was put forward were cogent and compelling: if even at the eleventh hour there was material which indicated clearly a real prospect of achieving the statutory purpose: then the fact that it has come at the eleventh hour would not stand against it. Inevitably in matters of this kind potential administrators are acting to some extent against the clock. They are finding out new material and carrying out investigations. So cogent material, even coming late, can show a real prospect of achieving the statutory purpose. However, inevitably the court must look carefully at material that comes at the eleventh hour and must consider with care whether it does show material which is cogent and compelling, albeit in the context that what must be shown is a real prospect and not something established on the balance of probabilities.
38. The material here is by no means cogent or compelling and is on proper analysis very limited. There are two letters. That from Mr Foo gives no details of who stands alongside him: gives no details of the funding which is said to be readily available; and makes no commitment to moving this matter forward. Similarly that from Mr Lawless gives no details of the funding and resources, let alone the price that might be prepared to be paid. Mr. Lawless makes the point that any further move forward by Elliot Property Construction Ltd will be subject to a due diligence process. It is also significant that Mr Lawless, understandably in seeking to reinforce his company's negotiating position vis-à-vis the administrators, points out that "There are only very few of us who might be in the position of being interested in this property". As I said one can understand why Mr Lawless makes that point in his letter to the potential administrators but it does, in my judgement, detract from the argument that there is a real prospect of achieving a better realisation by way of build-out. What Mr Lawless is saying is, "We are potentially interested but we will have to go through all this due diligence, and if not us, there will not be many others likely to be interested".
39. I remind myself of the comparatively low hurdle that the Applicant has to surmount, but even in the light of that low hurdle, I am not satisfied that it has shown a real prospect of achieving the better result as is required for an order to be made.
40. I should say that if I had been satisfied of that, then I would not have exercised my discretion against the making of the administration order. Rather, I would in those circumstances in my discretion have made that order. I take account of the creditors' preference for liquidation, but in respect of this new proposal it is a fair point, made I think in Mr Woolridge's report and certainly made by Mr. Morgan QC on behalf of the applicant, that the creditors have not been made aware of this possibility. Certainly I cannot say that the creditors would be pressing for liquidation in favour of administration if there were a real prospect of a better return through build-out.
41. So the applicant is driven back to the line of attack which was being put forward until yesterday, namely the achievement of the purpose in paragraph 3(1)(c), the realization of the property in order to make a distribution to one or more secured or preferential creditors. That must be considered against the background that I have already set out with the effect that the jurisdiction under that limb is only established if the administrator will be able to achieve that purpose without causing unnecessary harm to the creditors as a whole. In the circumstances here, I accept in the light of the correspondence from Ms Brittain, that administration is likely to be more costly than liquidation. The question then becomes one of whether there is any benefit in proceeding in administration which makes that additional cost worthwhile such as to enable me to say the cost does not amount to unnecessary harm.
42. The points made by Mr Morgan QC were these. He accepted as a matter of reality and common sense that this is a case where it is likely that the liquidation, if there is liquidation, will be by a private liquidator rather than by the Official Receiver remaining in post. But he said first that there is no certainty about that and that the benefit in terms of costs of liquidation only comes if the Official Receiver is out of the picture. So he said that there is a benefit in proceeding to administration in removing that potential risk. He also says that there is a benefit in administration in that if an administration order is made, the administrators will be in post from the making of the order, whereas if there is a move to liquidation, there will be a delay until a private liquidator is appointed, during which time the Official Receiver will be in post. Mr Morgan QC accepted that in the circumstances of this case that delay is not likely to be a substantial one, but there will be a delay nonetheless. He also said there is a benefit in that an administrator has power under paragraph 71 to move to remove security on the property of the Company. This will enable an administrator to achieve the removal of the protection given to the investors by their unilateral so as to enable the current conditional sale to become unconditional. Mr. Morgan QC says it is not crystal clear that that is the position in liquidation because there is no equivalent statutory power. However, Mr Morgan QC realistically accepts that this is a limited benefit because he and Mr Passfield have referred me to the unreported decision of Snowden J in the case of In the Matter of Alpha Students (Nottingham) Ltd, (a decision in December 2015 but which does not indeed appear even to have a neutral citation number). There Snowden J exercised a similar power in the case of a liquidation. So at best the benefit of the paragraph 71 power in administration is that it is a power where the administrator can point to the provisions of the schedule to the Act rather than to the approach indicated by Snowden J.
43. I have reflected on whether my jurisdiction has been established in the light of the approach I have set out in terms of the account to be taken of unnecessary harm, and I have concluded that it does not. Administration is likely to be more expensive than liquidation in the particular circumstances of this company and in the light of what is likely to happen in terms of appointment of a liquidator and the approach to be taken. The benefit in administration as opposed to liquidation is marginal at best. In my judgement that potential benefit does not outweigh the potential harm of the additional expense. Therefore that harm cannot be said to be unnecessary, such that, following the reasoning through, an administrator would not be able to carry out the 3(1)(c) purpose, and, therefore, that purpose cannot be shown to have a real prospect of being achieved. However, even if I were wrong on that, and there were shown to be a real prospect such as to give me jurisdiction, I would exercise my discretion against making an appointment of an administrator in the circumstances of this case. This in the light of the views of the creditors, where at least a substantial body of creditors prefer liquidation to administration: where there would not be the change of circumstances as to a potential build-out to be put to them: and where, even if I am wrong and the benefit of administration is such as to outweigh the enhanced cost, that benefit and the degree of outweighing is marginal at best and would not justify in my assessment making an administration order in the circumstances of this case.
44. It follows that the application is dismissed.

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This transcript has been approved by the Judge