England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

		Royal Courts of Justice 7 Rolls Building Fetter Lane London, EC4A 1NL
		11 April 2018

INDEX	Para
A. Introduction	1
B. Dramatis personae	5
C. The facts	38
D. The Issues	251
E. The claims against the Administrators
1. Did the Administrators act in breach of duty from the outset in their approach to the administration?	252
2. Did the Administrators act in breach of duty in relation to the appointment of APAM?	326
3. Did the Administrators act in breach of duty by failing to obtain a proper price for Angel House?	371
4. Did the Administrators act in breach of duty by failing to explore and pursue a funded rescue?	549
5. Did the Administrators act in breach of duty by failing to exercise their own independent judgment?	588
6. Was any such breach of duty by the Administrators a breach of fiduciary duty?	614
7. Was any breach of duty by the Administrators the cause of loss for which AHDL should be compensated?	627
F. The claims against Dunbar	689
8. Is Dunbar liable for any breaches of duty on the part of the Administrators by reason of its interference in the conduct of the administration?	696
9. Is Dunbar liable in damages for procuring breaches of duty by the Administrators?	710
10. Is Dunbar liable in damages for conspiring with APAM to injure AHDL and/or Ms. Davey by unlawful means?	718
11. Has Dunbar acted in bad faith towards Ms. Davey or so as to prejudice Ms. Davey in such a way as to cause the Guarantee to be discharged?	772
12. If the Guarantee is not discharged under Issue (11), for what sum is Ms. Davey liable?	779
G. Conclusions	782

MR JUSTICE SNOWDEN :

A. INTRODUCTION

1. This judgment follows the trial of two claims relating to the conduct of the administration of Angel House Developments Limited ("AHDL" or "the Company"), a property development company that is now in liquidation.
2. The first claim is brought by Ms. Julie Anne Davey ("Ms. Davey") who is the sole shareholder, and was, at the relevant times, the sole director of AHDL. She was also the guarantor of its indebtedness to Dunbar Assets plc ("Dunbar") to the extent of £1.6 million, plus interest and costs. Ms. Davey brings the claim pursuant to paragraph 75 of Schedule B1 of the Insolvency Act 1986 which empowers the court to inquire into potential misfeasance by an administrator at the behest of a creditor or contributory. Ms. Davey seeks the award of compensation to AHDL against Mr. James Money ("Mr. Money") and Mr. Jim Stewart-Koster, who were at the relevant time the joint administrators of the Company ("the Administrators").
3. In essence, Ms Davey alleges that the Administrators breached their duties as administrators of AHDL by conducting a "light touch" administration in which they failed to exercise independent judgment and instead paid excessive regard to the interests and wishes of Dunbar which had appointed them; that they failed to take steps to involve Ms. Davey in the administration that would have led to the rescue and survival of AHDL; and that they sold the main asset of AHDL, a commercial office property known as Angel House, 225 Marsh Wall, Docklands, London E14 ("Angel House") at a significant undervalue in reliance on unsuitable agents, Alliance Property Asset Management Limited ("APAM"), whom Dunbar had in effect chosen for them to use.
4. The second claim is a claim by Dunbar against Ms. Davey to recover enforcement costs allegedly incurred by it under Ms. Davey's personal guarantee. That claim is the subject of a defence and counterclaim by Ms. Davey, who took an assignment from the liquidator of AHDL's claims against Dunbar in relation to the sale of Angel House. The counterclaim alleges (i) that Dunbar so directed or interfered in the conduct of the administration as to make the Administrators its agents, and that it was therefore liable for their breaches of duty, (ii) that Dunbar procured the breaches of duty by the Administrators, and/or (iii) that Dunbar conspired with APAM to cause AHDL and/or Ms. Davey loss by unlawful means, namely by deliberately causing the Administrators to carry out a limited sale process for Angel House so as to realise insufficient monies to enable the secured indebtedness to Dunbar to be repaid, leaving AHDL liable for the balance and Ms. Davey liable on her personal guarantee.

B. DRAMATIS PERSONAE

5. Before setting out a basic chronology of the facts and analysing the issues, I shall first give a brief dramatis personae, indicating my impressions of the witnesses from whom I heard live evidence. I should record at the outset that a very great deal of what occurred in the administration was apparent from the contemporaneous documents and in the end very little actually turned on issues of individual recollection or credibility.

The witnesses of fact

Julia Davey

6. Ms. Davey is generally known as Julia Davey. She was born in 1959 and grew up in Leeds as one of a family of 15 children. She became involved in the property industry in the London Docklands in the early 1990s and in about 1997 she negotiated a contract with Kent County Council to house asylum seekers. In the late 1990s Ms. Davey moved back to Leeds and in October 2000 she incorporated Angel Group Limited ("AGL"). That company began to let properties to the Home Office to house asylum seekers, and it obtained a substantial contract to provide such accommodation to the UK Border Agency in about 2005-6. The group headed by AGL grew into a substantial business. By 2007 it employed several hundred staff and owned a wide range of properties. Ms. Davey remained its owner and controller. The headquarters of the group was at Angel House, a four storey office block that had been built in the early 1990s.
7. Ms. Davey's witness statements served prior to the trial were very lengthy and contained a substantial amount of inadmissible and irrelevant opinion, submission, speculation and innuendo. I required them to be edited before Ms. Davey gave evidence, but they retained some of their earlier character, alleging a conspiracy between Dunbar and APAM and exhibiting a sense of indignation that Ms. Davey had lost control of her companies and had been pursued by Dunbar on her personal guarantee. Compared to the forthright tone of her witness statements, I thought that Ms. Davey deliberately kept herself in check and exercised restraint giving evidence and being cross-examined in the witness box.
8. There were aspects of Ms. Davey's evidence that did not ring true. One example was her evidence in relation to her understanding of the basis for the value placed upon Angel House in the accounts of AHDL at the time she acquired the Company from AGL in 2011. Another related to her knowledge and involvement in the business of AHDL, and in particular the assertion that she was wholly unaware of the actions of AHDL's general manager, Mr. Jack French in making a proposal for a joint venture to Dunbar in the period prior to the Company going into administration. I also consider that she was rather evasive and vague about her sources of funding during the administration, and inconsistent in her evidence as to the merits of the 2012 planning application for Angel House. Ms. Davey's perspective of events was also (and perhaps inevitably) suffused with her view of the merits of her own case.
9. Subject to those qualifications, I consider that Ms. Davey generally tried to give accurate evidence. In the end, however, largely because she was not directly involved in the administration for much of 2013, much of Ms. Davey's evidence turned out to be of little relevance to the issues that I had to decide concerning the conduct of Dunbar and the Administrators.

Mervyn Clarke

10. Mr. Clarke was a certified chartered accountant who acted as an adviser to Ms. Davey during the administration. He gave evidence about his contact with the Administrators on Ms. Davey's behalf and also about his involvement with both AHDL's and Ms. Davey's business affairs. Although Mr. Clarke generally gave forthright and accurate answers in cross-examination, he was inclined to be an advocate for Ms. Davey's cause. At times he was also defensive when challenged on parts of his evidence, in particular in relation to dealings with Mr. Eastwood. As with Ms. Davey, in the end much of Mr. Clarke's evidence was not directly relevant to the issues that I had to decide.

Susan Wheldon

11. Ms. Wheldon was a consultant architect and designer who had been a director at Douglas Wallace Designers and Architects when she met Ms. Davey. After leaving that firm, she was engaged by Ms. Davey to oversee and organise the creation of a development scheme for Angel House and to manage the 2012 planning application. Ms. Wheldon gave evidence about that planning scheme. She was a careful and accurate witness who gave clear evidence, but ultimately it was really only background to the issues that I had to decide.

Suzanne Wilson

12. Ms. Wilson was a Senior Associate Director of Planning at CgMS which is a firm providing consultancy advice on the combined disciplines of planning and development (among other things). Ms. Wilson assisted Mr. Nick Spall of CgMS from about 2012 in relation to the planning application and process relating to Angel House. Ms. Wilson gave clear and accurate evidence, but as with Ms. Wheldon, and as with Mr. Leeson and Mr. Lea (below), her evidence was ultimately not central to the issues that I had to decide.

Mark Leeson

13. Mr. Leeson was a Director of Architecture at McBains Cooper, and lead co-ordinator of the design and planning of the Angel House development proposal and 2012 planning application. Mr. Leeson gave evidence concerning the scheme and the position of the project team who were owed substantial arrears of fees by AHDL during 2012 and 2013. He was a candid witness who gave concise and clear answers in a neutral manner.

Malcolm Lea

14. Mr. Lea was a property developer who at the relevant time worked at Greenside Solutions. He gave confident and candid evidence about the McBains Cooper scheme and the 2012 planning application and about the advice he gave to Ms. Davey in relation to Angel House.

Perry Kurash

15. Mr. Kurash had a background in property finance. He gave evidence about his role as a consultant working for AHDL from 2009 to late 2012 and his relationship with its then manager, Mr. French, with whom he shared an office. Mr. Kurash was not an impressive or reliable witness. I thought, in particular, that he was deliberately evasive and vague about the exact nature of his role and working relationship with Mr. French and about Ms. Davey's involvement and knowledge of events at Angel House. In the end, very little of Mr. Kurash's evidence was relevant or of assistance.

Jonathan Fenwick

16. Mr. Fenwick was involved in the commercial property industry and gave evidence relating to his involvement in making offers for Angel House. Mr. Fenwick was a very self-confident individual who was prone to exaggeration and inaccuracy in giving evidence. I sense from the contemporaneous evidence to which I shall refer, that this probably reflected the way he conducted his business activities in the property market. I did not think that Mr. Fenwick was a reliable witness.

Andrew Connaughton

17. Like Mr. Fenwick, Mr. Connaughton was involved in identifying and procuring development opportunities in the London property market. He gave evidence of his involvement in appraising and making offers for Angel House with colleagues operating under the Capital & Oriental name. Although Mr. Connaughton's written statements contained elements of advocacy and unsubstantiated opinion and hearsay, his oral evidence was given in a candid and engaging manner, though at times lacking in detail. It included, in particular, some helpful and frank insights into the "dark arts" of property buying.

James Money

18. Mr. Money is a licensed insolvency practitioner. At the time he was appointed joint administrator of AHDL with Mr. Stewart-Koster, both were partners in PKF (UK) LLP. That firm merged with BDO LLP on 29 March 2013, following which they both became partners in BDO. Mr. Money was, of course, central to the events in issue in this case.
19. On occasions, for example in relation to the issue of whether Ms. Davey was co-operative with the Administrators, Mr. Money was a little too eager to advance a case against Ms. Davey as a means of defending his own position. On other occasions he was (understandably) apt to be defensive of Mr. Christopher Sandall ("Mr. Sandall") who was the manager with day-to-day conduct of the administration, and who was not tendered to give evidence. Mr. Money also had a limited and in some respects inaccurate recollection of the detail of some of the early events in the administration, including his view as to the value of Angel House and how he had obtained a copy of a valuation report from Savills. That said, I am quite satisfied that for the most part Mr. Money gave accurate evidence, and that he did so honestly.

Paul Stenson

20. Mr. Stenson was a manager who had worked for Dunbar since September 2011. He took over the day-to-day supervision of the AHDL loan account in early 2012 and was responsible for recovery of the loan and the associated personal guarantee given by Ms. Davey. He was central to the events in this case.
21. Despite the nature of the allegations made against him by Ms. Davey in her pleadings, evidence and submissions, which were plainly tantamount to allegations of dishonesty and bad faith in conducting a covert conspiracy with APAM, Mr. Stenson gave his evidence in an open, neutral and accurate manner, with commendable equanimity. Although I thought that Mr. Stenson had some curious views as to valuation of property for provisioning purposes, in my judgment he was an obviously honest and credible witness.

Ross Connolly

22. Mr. Connolly was Head of Restructuring at Dunbar and had been in that role since September 2014. He was Mr. Stenson's line manager, reporting to Mr. Kieran Gilmartin ("Mr. Gilmartin") who was Dunbar's Chief Restructuring Officer. Mr. Connelly became involved in the AHDL facility in late 2012 and again was central to Dunbar's involvement in this case.
23. Like Mr. Stenson, Mr. Connolly was an honest witness. He also faced allegations of bad faith and conspiracy and was cross-examined (at times aggressively) on them. He managed for the most part to remain composed and to give accurate evidence, albeit that from time to time (and perhaps understandably) he sought to meet fire with fire and to trade questions with Mr. Davies.

Two other relevant individuals

24. In addition to the witnesses who gave evidence, there were two other individuals who featured prominently in the chronology, but who did not give evidence.

Bernard Eastwood

25. Mr. Eastwood was Ms. Davey's chosen funder for her attempt to rescue AHDL from administration in November and December 2013. Mr. Eastwood had various business interests including Blackcube Group Limited ("Blackcube"), which was described in evidence as an investment company based in London and Belfast.
26. A signed witness statement from Mr. Eastwood was served on behalf of Ms. Davey in 2015. It was comparatively brief and made a series of allegations and complaints against the Administrators concerning their approach to the funded rescue proposal. However, it contained very little detail. A much longer witness statement from Mr. Eastwood was served after opening submissions had been exchanged and shortly before the start of the trial. I adjourned an application by Ms. Davey to adduce that second witness statement to give Mr. Eastwood the opportunity to produce some of the relevant documents to which he referred in the statement. However, no such documents were produced, and in spite of the trial timetable being adjusted to accommodate Mr. Eastwood, shortly before he was due to give evidence I was informed that he had decided to travel to the US. He apparently told Ms. Davey's solicitors that he was on a "marketing trip" and had decided to stay in the US "for my own business purposes" rather than travel back to the UK to give evidence.
27. For reasons that will become apparent later in the judgment, I think that it is clear that Mr. Eastwood would have faced some difficult questions over the contents of his witness statement in relation to his support for Ms. Davey's bid and his ability to finance it. I have little doubt that Mr. Eastwood's failure to attend in the face of efforts by Ms. Davey's solicitors to procure his attendance was deliberate and due to concern over such a prospect. In the circumstances I cannot place any weight on Mr. Eastwood's statements.

William Powell

28. Mr. Powell was the director of APAM who was responsible for the provision of advice to the Administrators in relation to the management and ultimate sale of Angel House. He was plainly a central character in the events in this case, not least because he was the individual at APAM who must, on Ms. Davey's case, have conspired with Mr. Stenson and Mr. Connolly to procure the sale of Angel House at an undervalue. Mr. Powell did not provide a witness statement and did not appear as a witness.
29. For Ms. Davey, Mr. Davies QC suggested that there was something suspicious in the fact that Mr. Powell had not been called as a witness by Dunbar and that I could draw an adverse inference from his absence. I do not think that I can draw any such inference. The simple fact is that Ms. Davey carried the burden of proof, and had chosen not to sue APAM notwithstanding her allegation that they had conspired against her. There was no obligation upon Mr. Powell to volunteer to give evidence and no obligation upon Dunbar to summon him to do so.

The expert witnesses

Paul Wolfenden

30. Mr. Wolfenden is a chartered surveyor, a Fellow of the Royal Institution of Chartered Surveyors and the principal of an eponymous real estate advisory business. He was previously employed as a director of DTZ, and was a consultant to a newly formed firm of commercial real estate advisers that acquired the trading name of John D. Wood in 2009 after the collapse of the long-established firm of the same name. He was instructed by Ms. Davey's solicitors to give his opinion on the marketing and value of Angel House.
31. Whilst there were some aspects of his evidence that I thought were helpful, I regret that I did not find Mr. Wolfenden to be a satisfactory expert witness. The tenor of his reports and many of his answers in cross-examination seemed to me to be designed to advance Ms. Davey's case rather than give independent evidence. Mr. Wolfenden was also rather inaccurate and at times (for example in relation to his use of comparables) his evidence as to his method and sources was very vague. Moreover, as I shall explain later in this judgment, some of his critical opinions, for example as to the price per square foot (psf) that might be achieved for sale of completed residential flats after redevelopment of Angel House, seemed to be entirely subjective and not supported by adequate objective evidence or explanation. As I shall explain, he also made a significant error in his report in this regard which he then sought to justify on other grounds.

Marcus Forgham

32. Mr. Forgham is a director of Lambert Smith Hampton, a firm of consultant surveyors, and is also a Member of the Royal Institution of Chartered Surveyors. He was instructed by the Administrators' solicitors on the issues of the marketing and value of Angel House. Mr. Forgham gave cautious and careful evidence.

Victoria Seal

33. Ms. Seal is a consultant to Knight Frank LLP and a Member of the Royal Institution of Chartered Surveyors. She was previously a partner of Knight Frank. She was instructed by Dunbar's solicitors on the issues of marketing and value of Angel House. Ms. Seal was a most impressive expert witness who was clearly highly knowledgeable in her field, had done her research thoroughly and was in command of her material. Her approach to the valuation was based on appropriate data and methodology, and in cross-examination she gave instinctively crisp and precise answers, being prepared to acknowledge contrary points where appropriate.

Malcolm Shierson

34. Mr. Shierson is a chartered accountant and licensed insolvency practitioner, a Fellow of the Institute of Chartered Accountants in England and Wales and a member of the Insolvency Practitioners Association. He was instructed as an expert witness by Ms. Davey's solicitors on the issue of the appropriate conduct of an administration.
35. Although I did not agree with all of his views, I thought that Mr. Shierson was an excellent witness who showed commendable regard for the duties of an expert witness to give objective assistance to the court. He adhered to his overall opinions and explained them clearly, but was prepared to make sensible concessions where appropriate.

Finbarr O'Connell

36. Mr. O'Connell is a chartered accountant and a licensed insolvency practitioner at Smith & Williamson LLP. He is also a member and former president of the Insolvency Practitioners Association. He was instructed as an expert witness by the Administrators' solicitors on the issue of the appropriate conduct of an administration.
37. Like Mr. Shierson, I thought that Mr. O'Connell was an expert witness who sought fairly to present his opinions and to assist the court. Ultimately, I thought that there was little difference in view between himself and Mr. Shierson on many matters.

C. THE FACTS

38. I set out below a basic (albeit lengthy) chronology of events as a basis for my discussion of the Issues. I do so largely on the basis of the documentary evidence and find the factual matters set out below to have been established.

Pre-administration

39. Angel House was originally acquired by a subsidiary of AGL for £7.5 million in February 2005. In May 2007 Angel House was valued by Lambert Smith Hampton at a market value for existing use of £11 million; and at a market value taking into account the prospect of the grant of planning permission for a mixed (office and residential) use scheme, in two towers, of £20 million. The Lambert Smith Hampton report indicated that Ms. Davey was confident of obtaining the necessary planning permission.
40. AHDL was incorporated on 29 March 2007 and originally was a member of the group of which AGL was the ultimate parent. Ms. Davey was the sole director of AHDL. Dunbar provided facilities to the group over a number of years, and in August 2007, Ms. Davey applied to Dunbar on behalf of AHDL for a loan facility of £16 million to be used to refinance existing borrowings in relation to the property (£6 million), for future purchases (£9 million) and interest (£1 million).
41. On 3 September 2007, AHDL was granted a £16 million loan facility from Dunbar which stated that the purpose of the loan was to finance in part (£15 million) the acquisition of Angel House for £20 million, with the remaining £5 million being left outstanding on inter-company loan. The remaining £1 million was to be used to fund the payment of interest which was to be rolled-up to 3 September 2008. The Dunbar loan was to be secured by a specific (fixed) legal charge over Angel House and all monies received from it, a floating charge over the remaining business and assets of AHDL, and a guarantee from AGL to Dunbar of £5 million.
42. Notwithstanding the terms of the Dunbar facility, on 4 September 2007, Angel House was acquired by AHDL for £11 million.
43. After acquiring Angel House, AHDL worked to develop a planning application to the London Borough of Tower Hamlets ("the Council") for the redevelopment of Angel House from its existing use as an office building into a residential tower with hotel, office and retail space. The first planning application made by AHDL in respect of Angel House was submitted on 12 September 2008 and sought permission for a 43 storey tower with 11 storey podium comprising 265 residential units, a 56 bedroom hotel, office and retail space and associated parking at basement level.
44. In relation to any such proposal in Tower Hamlets, a key issue for the Council's planning committee was the extent to which the plan included a proposal to provide affordable housing. For developers, this presented a problem, because the greater the proportion of affordable housing, the less financially attractive the development would be. In the case of Angel House, after the 2008 application had been submitted, AHDL learnt from discussions with the Council's planning officers that unless the application included the provision of 35% affordable housing, it stood very little prospect of success in the planning committee. Ms. Davey then took the view that whilst the application should be reconfigured to provide for 35% affordable housing, if a decision on the application could be delayed, the Council's committee might see from experience of other applications that this was an unrealistic figure and be prepared to approve an application with a lower affordable housing figure. Accordingly, she gave instructions that after the proposal had received approval from the Council's planning officers at 35%, it should be withdrawn before being considered at the planning committee's meeting in April 2009. The intention was that it could be resubmitted later in the year as a "free-go" application.
45. The 2008 planning application was duly withdrawn before the Council's April planning committee meeting, and was then resubmitted on 11 September 2009. The application was due to be considered at the planning committee meeting in February 2010, but shortly before that was due to occur, a second "spoiling" application was submitted in respect of a neighbouring site (Skylines Village) with the result that the consideration of both schemes was deferred.
46. In March 2010, Bishop Beamish, who were valuers engaged by Dunbar, reported that in their view Angel House had an existing use market value of £8.5 million, and a "hope value" to reflect the prospect of obtaining planning permission of an additional £6.875 million, giving a total of £15.375 million.
47. In April 2010, AHDL learnt that the Council's planning officers were recommending that both applications by AHDL and in respect of Skylines should be refused because of their cumulative impact on the plans for other developments in the area. Although attempts were made to persuade the Council's planning officers to recommend AHDL's proposal, these were ultimately to no avail. The Council refused the Skylines application in September 2010 and refused AHDL's application in mid-December 2010.
48. In the interim, the Dunbar facility, which stood at £16.04 million plus interest and fees, had expired on 3 September 2010. In early October 2010, Ms. Davey approached Dunbar seeking a six-month extension, which Dunbar indicated it was willing to approve, provided that the amount outstanding could be reduced to 80% of the value of Angel House that had been reported by Bishop Beamish (£15.375 million) or provided that Ms. Davey agreed to provide an additional personal guarantee and agreed to the payment of a 1% redemption fee on expiry of the facility.
49. Although initially unwilling, in December 2010 Ms. Davey agreed to provide a personal guarantee limited to £1.6 million on the understanding that it would be released if unconditional planning permission was granted, together with payment of a 1% redemption fee. The Dunbar facility was thereafter renewed in the sum of £16.04 million for three months on terms that AGL would continue to provide its £5 million guarantee, and that in addition Ms. Davey would provide a personal guarantee for £1.6 million which would be released on repayment of the facility or grant of planning permission for a new 43 storey tower with 10 storey podium, 56 bed hotel, gym and affordable housing block.
50. Although the promised personal guarantee was not executed, Dunbar took no steps to call the loan in, and in March 2011 discussions took place over the renewal of the facility for a further period. As well as the promised personal guarantee, Dunbar sought additional security to support the £5 million guarantee from AGL.
51. In June 2011 Ms. Davey acquired the shares in AHDL from AGL for a nominal £1,000. Angel House was shown as an asset in the accounts of AHDL to 30 April 2011 (which were signed by Ms. Davey on 19 April 2012) with a value of £8.5 million. The result was that the accounts showed that the Company had negative net assets. The account contained a note to the effect that the directors had used the existing use valuation by Bishop Beamish "as they believe this to equate to market value as at 30 April 2011". In cross-examination, Ms. Davey accepted that the market value shown in the 2011 accounts had not included any "hope value". Ms. Davey initially said that the decision as to the value shown in the accounts had been taken by the Company's accountants. When pressed, however, she accepted that the value had actually come from her own "in-house" accountant, but she then denied having been involved in the decision as to what value to use in the accounts and said this had been a matter for her accountant. I regret I do not believe that Ms. Davey was being candid at this point. As an experienced businesswoman, she would have been keenly interested in the price she paid for AHDL and how it could be justified. In my judgment she must have been well aware of the connection between the value of Angel House shown on the balance sheet of the Company and the fact that she had acquired the shares in the Company for a nominal price.
52. Discussions over the repayment of the facility continued between Ms. Davey and Dunbar, and in July 2011 Ms. Davey sought a further extension until the end of June 2012 on the basis that the planning process was unlikely to be completed until early 2012. In response, Dunbar offered to renew the facility in the sum of £16.04 million until 30 June 2012 on the basis that Ms. Davey should provide the £1.6 million personal guarantee previously promised which would be released if the loan was repaid, planning permission obtained, or if further security was provided by way of a second charge over a property in Newcastle owned by another company in the Angel group. Sporadic correspondence then ensued over the summer concerning the documentation to reflect the terms of the loan and supporting security.
53. Nothing had been finalised by 6 October 2011, and on that date AHDL's relationship manager at Dunbar emailed AHDL to notify it that if Ms. Davey's personal guarantee was not signed by the close of play that day, matters would be taken out of his hands and the loan would be called in. This prompted Ms. Davey to agree to execute the promised personal guarantee on the basis that it would be held to her order by Dunbar's solicitor pending execution of a side letter from Dunbar confirming that if and as long as all interest and other payments due under the facility were paid, and that no event of insolvency had occurred in relation to AHDL or any guarantor, no demand would be made by Dunbar under the personal guarantee. That side letter was duly given by Dunbar on 7 October 2011, and Ms. Davey's personal guarantee ("the Guarantee") was executed and dated 18 October 2011.
54. After the rejection of the planning application in late 2010, AHDL continued to investigate the possibility of a new planning application in respect of Angel House with the assistance of Ms. Wheldon and CgMS. Various problems were encountered including the approval by the Council of a "Marsh Wall East Masterplan" in early November 2011 and news that another Skylines planning application was to be submitted which would have light and space implications for any proposal to redevelop Angel House. There were a number of meetings with the Council planning officers, including in particular a pre-application meeting on 17 February 2012 which was followed by a long letter from the Council setting out its expectations of the parameters of any revised application. The proposal then floated with the Council was for a new mixed use building consisting of ground plus 42 floors with a podium, ground floor retail units, offices, a 120 bedroom hotel and a mix of private and affordable residential units. In that latter respect, the Council's letter indicated that at least 35% affordable housing should be included in the residential part of the development.
55. AHDL made an interest payment on the Dunbar facility on 20 March 2012, but thereafter made no further payment of either interest or capital. The facility duly expired on 30 June 2012 and was not extended. This led to a meeting between Mr. French, the general manager of AHDL, and Mr. Stenson of Dunbar on 5 July 2012 to consider the status of the facility and for Dunbar to receive an update on the progress of the formulation of the planning application. The latter was provided after the meeting, but when, by 30 July 2012, no proposal had been made by AHDL to Dunbar in relation to the facility, Mr. Stenson emailed Mr. French to indicate that a proposal was required and that if one was not received, then it would be assumed that the Company was going to repay the loan.
56. On 2 August 2012 Mr. French emailed Mr. Stenson apologising for the delay and stating that the Company was confident that planning permission would be granted at the Council's November 2012 planning committee meeting. He requested another extension of the facility until 30 April 2013 to give the Company time to go through the planning process and market and sell Angel House. Mr. French's email continued,

"Therefore I suggest something like the following:

a) A straight 50/50 joint venture from this point. Assuming that our interests are aligned equally then we would request that:

i) The additional security taken i.e. the Corporate Guarantee from the Group, the second charge and the Personal Guarantee be dropped.

ii) Either we share the costs of the final submission or we be allowed to deduct from rental income.

iii) Further Income shortfall be allowed to roll up (or pre agreed increase of the facility).

b) We agree a profit share of 15% which reduces to 10% if we repay by the end of December 2012 and to 5% by the end of January 2013."

57. On 24 August 2012 Dunbar sent a letter to AHDL indicating that its present intention was to negotiate terms for the refinancing of the facility on an on-demand basis, but reserving its rights in the meantime. On 31 August 2012, Mr. Stenson reported to Dunbar's Risk Mitigation and Restructuring Committee ("RMRC") and recommended an extension to the facility to enable the planning application to be determined. His report referred to the Bishop Beamish valuation, but added, "From speaking to a couple of agents they feel that a more indicative value is in the following range £10-14 million as is and £20-24 million with planning." Mr. Stenson suggested that,

"The critical action is to exit this exposure as soon as possible to ensure we get a full recovery. This requires us supporting the borrower through the final stages of the planning process.

Given the location there is a chance of competitive interest in the property leading to a more optimistic sale value, however while it is important to participate in this upside our core focus is on a redemption.

To facilitate our exit and have exposure to any upside I am proposing the following facility renewal structural…."

58. The memo then set out a proposal which involved all outstanding interest to be paid, for a share of costs, and for a profit share between AHDL and Dunbar on the disposal of the property. The memo noted that on this proposal, Dunbar would break even if Angel House was sold for a gross figure of £17.6 million.
59. A third planning application in respect of Angel House was submitted by CgMS on behalf of AHDL on 31 August 2012. This scheme involved a proposal to demolish the existing building and to erect a 47 storey building with 249 residential units (164 private and 85 affordable, with separate entrances), a 147 bedroom hotel and other facilities. On 29 September 2012 the Council's planning department validated the application and set a target decision date of 19 January 2013.
60. A decision by Dunbar's RMRC on the extension of AHDL's facility was deferred in September 2012 and further financial information requested from AHDL, together with a statement of assets from Ms. Davey. Mr. Stenson chased Mr. French and his colleague, Mr. Kurash, for the information in a telephone call on 26 September 2012, and when the information requested was not forthcoming, a meeting took place between them at Dunbar's offices on 11 October 2012 at which the information was promised and a report given to Dunbar on the status of the planning application. Dunbar was also told that Lloyds Bank had appointed administrators to AGL the previous day, that Ms. Davey was unable to service the interest on the AHDL loan, and that no payments to Dunbar could be made by AHDL out of the rents received from Angel House until there had been a reconciliation between AHDL and AGL.
61. The meeting on 11 October 2012 was Mr. French's last substantive involvement with AHDL's affairs, because shortly thereafter he was dismissed by Ms. Davey. In addition, Mr. Kurash collapsed whilst at Ascot racecourse on 20 October 2012. He was subsequently unable to return to work and effectively ceased his active involvement with the Company and Ms. Davey's affairs after that date.
62. The administration of AGL naturally caused some concern among the project team who were working on the planning application for AHDL. None of the project team had been paid since March 2012, and as a consequence they were collectively owed in excess of £250,000. In particular, by 23 October 2012 McBains Cooper refused to carry out any more work unless they were paid in full, and they were considering whether to commence proceedings to recover their fees.
63. A meeting took place between Ms. Wheldon, Ms. Davey and Dunbar on 24 October 2012. The purpose of the meeting was to discuss both the planning application in relation to Angel House and Ms. Davey's personal position. About a week after the meeting, on 30 October 2012, Ms. Davey swore a statement of her assets, disclosing that she had unencumbered assets of about US$14 million. The statement was subsequently provided to Dunbar.
64. In an internal Dunbar restructuring memo dated 24 October 2012, a number of options for dealing with Angel House were considered. One of these was for Dunbar to appoint an agent to manage the planning process and devise a workable development scheme for the property. The note acknowledged that it might be difficult to achieve this goal until after planning permission had been granted. Two possible managing agents were discussed – APAM and Lambert Smith Hampton. It would appear that both companies were asked to quote a fee for the job.
65. At this time, Dunbar also obtained a number of appraisals and valuations of Angel House. On 29 October 2012, Blenheim Bishop sent an appraisal to Mr. Stenson which indicated that the gross development value of Angel House would be about £156 million, and that after taking development costs of £130 million into account, the net value would be about £26 million. The appraisal also noted that due to the size and cost of the project, the number of parties who would be capable of acquiring and developing the land would be limited. Blenheim Bishop valued the land with planning permission at £12.3 million.
66. Shortly thereafter, 2 November 2012, Dunbar sought a RICS Compliant ("red book") valuation from Savills of the market value of Angel House, on both an existing use basis and with planning permission.
67. A further meeting took place between Ms. Davey and Dunbar on 8 November 2012. By this stage, Ms. Davey had the assistance of Mr. Joe Daniel of Greenside Real Estate Solutions LLP ("Mr. Daniel" and "Greenside"). After the meeting, Mr. Daniel sent an email to Dunbar, acknowledging the fact that Dunbar had received no payment of interest on its loan from AHDL since March 2012, and had not been provided with any analysis of what had become of the rents paid in respect of Angel House. The email promised that information and looked ahead to a discussion to arrive at a "workable way forward" involving obtaining planning permission and then selling Angel House. Some unverified management figures were subsequently provided by Greenside to Dunbar on 20 November 2012, together with a report of progress in relation to the planning application. That email acknowledged the need for further funding for the existing consultants and the new studies, and accepted that progress had been slower than all would like.
68. On 11 November 2012, Dunbar instructed DLA Piper (UK) LLP ("DLA") to act for it as solicitors in relation to the possible appointment of administrators to AHDL.
69. On 22 November 2012, Mr. Stenson produced a memo for Dunbar's Property Provisioning Panel which referred to the Blenheim Bishop 2010 valuation of £15.375 million and gave the estimated realisable value of Dunbar's security (i.e. the charge over Angel House and Ms. Davey's personal guarantee) as £19.8 million net of costs. The memo stated that Dunbar's exit strategy was to obtain planning permission and to dispose of the property with the benefit of that permission. The memo indicated that Ms. Davey's preference was to bring in a third party to take Dunbar out, but that Dunbar's preferred exit was by way of a disposal of the property and share of the uplift. The memo gave a "with planning permission" value for Angel House of £20 million "so as to allow an expedited exit"; and recorded that Ms. Davey thought that the value of the property was £24 million with planning. The memo also commented,

"A sale as is would leave a shortfall and hence we are seeking to work with the borrower through planning. However if planning is refused the as is value and personal guarantee should be sufficient."

70. On that basis, the memo concluded that no provision was required in relation to the AHDL debt.
71. On the same day, 22 November 2012, Mr. Stenson telephoned Mr. Money at PKF to notify him of the potential administration of AHDL and to ask him to provide a fee quote for the administration. Mr. Money's evidence was that he did not recall being told any of the information in the Property Provisioning Panel memo by Mr. Stenson on 22 November 2012, but that he believed that Mr. Stenson told him that Angel House was worth about £8 million without planning permission and in the region of £11 million with planning permission. Mr. Stenson's evidence was that he would have given Mr. Money a range of values to base a fee quote upon, but that he could not recall what values he had given and he could not recall conveying any of the information in the provisioning memo to Mr. Money. In his evidence to me, Mr. Stenson volunteered that he thought that the value ascribed to the property for the purposes of provisioning was a very different exercise from that associated with normal market valuation: he described provisioning as an "accountancy" exercise in which "strong assumptions" could be made (e.g. in relation to an improvement in the market) that would not be reflected in a market valuation.
72. The next day, 23 November 2012, Mr. Gilmartin queried with Mr. Stenson whether Ms. Davey had at very least accepted that Dunbar should get a share of any up-side if it was to continue to support AHDL. That prompted Mr. Stenson to seek an urgent meeting with Ms. Davey, which took place at Dunbar's offices that Friday evening. At that meeting, which was also attended by Mr. Daniel, Ms. Davey denied that Mr. French had been operating on her instructions when he had suggested a profit share to Dunbar. The following Monday morning, Mr. Daniel emailed Mr. Stenson to deal with a number of points arising out of the meeting. In particular he stated that the proposals made by Mr. French had come as a "complete shock" to him and Ms. Davey and he expressed surprise that Mr. Stenson had not sought to check such a proposal with Ms. Davey personally.
73. The email made a suggestion for a standstill agreement until the end of January 2013 to enable negotiations to take place with the planning team as regards payment of their outstanding fees, and for the planning process to be taken forward. The email continued,

"You will also recall on 8th November that we indicated there were no longer additional monies to be injected corporately or personally into this venture. Julia is fully committed to the Project and with her connections is still the best option to deliver the "outline Planning Permission". I would also add that, whilst in principle one could justify a percentage of the uplift in value once planning is achieved on the site value when sold, the corollary should be that the establishment of the original capital loaned and normal interest in relation to the debt is capped. Julia is in the process of looking back at the interest paid since inception of the loan and other costs so we can have a more meaningful discussion and also with proper information agree a sensible way forward while planning is delivered. As part of the arrangement, Julia also intends to pursue during the planning period the opportunity for a sale subject to planning whereby the bank's exit can be established.

Notwithstanding the difficulties all of us are respectively faced with and grappling with, we are still of the opinion that Julia together with Malcolm [Lea] will deliver the best commercial outturn for all parties."

74. Mr. Stenson immediately reported on this email to Mr. Gilmartin in unfavourable terms,

"It basically says that Julia had no knowledge of the profit share negotiations taking place and is unwilling to stand behind the proposal in any way.

They are proposing a standstill agreement till the end of January with no share of uplift, no mandating of rent, no contribution at all towards the two missed interest payments and no further security.

I hope to have James Money's proposal this afternoon which will help inform us of the route to be taken and we can discuss today."

75. That afternoon, 26 November 2012, Mr. Money and Mr. Stenson discussed the possibility of administrators being appointed to AHDL by Dunbar. Mr. Money recorded the substance of the discussions in an email the next day,

"Having discussed it further with you yesterday, I agree that appointment of administrators would be appropriate to maximise your recoveries if the borrower will not cooperate fully.

My understanding is that the core strategy will be to secure the asset and ensure that the planning process is not interrupted. Administration should support both these goals. The administrators will appoint a property manager to oversee the rent collection and service charge management in place of the current management. Ideally suitable agents should be chosen before appointment so that they can step in immediately, especially if appointment will be close to the next quarter day.

You may already have a view on the agent who has been managing the planning process. Ideally one would stick with the incumbent, but if the process has been run by management, or you are aware of other factors which would disqualify the current agent, then there are others who can act.

I understand that you would aim to sell the property with planning permission rather than fund the development. Confirmation of planning consent is anticipated in January 2013. If planning permission is not forthcoming, then we would assess the options available at that point. However, if consent is given, then preparations for marketing can commence forthwith. I am sure that you will have suitable agents in mind who could act. We can recommend some as well….

….

Given the nature of our involvement, with the majority of operational activity assigned to agents, I would hope to keep our management costs low. We will have to perform our normal initial statutory duties, which as you know are more extensive than in the case of an LPA appointment. I have included these statutory costs in my 'month 1' figure below. Thereafter I anticipate a steady monthly run rate until the month of completion, when there will be additional work. I have also included an additional £2k in months 6 and 12 (assuming the administration lasts that long) to allow for statutory reports. The final month will also include an additional £2k to cover the closure/exit from administration. I have assumed that there will be no funds available for unsecured creditors, so no liquidation."

76. On 30 November 2012, Mr. Stenson prepared a memo for the RMRC, which set out the situation in considerable detail. I find that Mr. Stenson's summary of the facts accurately and fairly represented the position which had been reached.
77. After setting out the background, Mr. Stenson identified a number of "key issues" for Dunbar in relation to the facility,

"1. Control and proper management of the planning application.

2. No payments to cover interest on the loan since March this year.

3. The absence of any analysis as to the gross rental receipts per month received since then and how such funds have been applied.

4. No agreement on a profit share arrangement in return for further support.

5. No agreement on mandating of rent.

6. No additional cash or collateral."

78. As regards the 2012 planning application, the memo stated that the "immediate focus is of course to continue to ensure the planning process is on track" and indicated that Dunbar was talking to the planning consultants to try to ensure that the existing team was retained. The memo commented that,

"If planning is not forthcoming we need to consider our involvement in this facility. The underlying security is a relatively attractive asset but its 'as is' value is considerably less than the facility balance at approx. £16.5m.

The proposal to redevelop the Angel House site is the best way to realise the maximum value from the site."

79. So far as rentals were concerned, the memo highlighted that AHDL had not mandated the rent (i.e. directed payment of rents to Dunbar) and was still in control of day-to-day property management. The memo stated that AHDL had not been able to reconcile the rents received, and recorded a view that if a professional property manager was installed, the net rental income of Angel House could be increased in the short term.
80. The memo also relayed the history of discussions concerning a profit share for Dunbar and noted that on the basis that Dunbar would agree to share the costs (out of mandated rent) a sale of approximately £17.6 million would be required for Dunbar to break even.
81. At Dunbar's RMRC meeting on 30 November 2012 a decision was taken to defer until 7 December 2012 the decision as to whether to appoint an administrator, to bring proceedings for summary judgment against Ms. Davey on her personal Guarantee, and/or to appoint a property manager to oversee rental collections.
82. On 10 December 2012 Ms. Davey sent an email to Dunbar attaching a draft letter which had been prepared for her by Mr. Lea of Greenside, which indicated that Ms. Davey understood that the anticipated valuation of Angel House (both existing use and with the benefit of planning permission) would be lower than AHDL's debt to Dunbar. The draft expressed the opinion that the then outstanding 2012 planning application did not represent the best redevelopment solution because the level of affordable housing (35%) detrimentally affected the estimated development value. It also indicated a belief that other comparable planning applications and consents had achieved a reduction in that level of affordable housing, and outlined a proposal to renegotiate the level of affordable housing with the Council, including a proposal to provide off-site affordable housing as part of a "Section 106" planning agreement. The email concluded with a proposal from Ms. Davey to Dunbar,

"4. Based upon the above my proposal is that we enter into a standstill agreement in respect of the existing loan facility on the following principal terms:

a. A period of 6 months in order to negotiate and obtain a planning consent incorporating acceptable conditions including a Section 106 agreement.

b. Interest on the loan is suspended for this period. I would ask you to recognise that that Dunbar has already received some £5m in interest payments and that the standstill agreement is proposed in order to achieve a result that is of financial benefit to both of us.

c. That all rental receipts from Angel House are held in the existing account and used for to fund the payments to consultants. Currently the project team consultants are owed approximately £200,000 with further costs expected in order to achieve an acceptable planning consent.

5. Notwithstanding the above proposal I am in early negotiations with potential investors with a view to paying Dunbar to cancel the loan and security over the property. Clearly any such offer will be subject to further negotiations at that time but I wish to advise you that this is my preference."

83. On 10 December 2012, Savills provided Dunbar with a draft red book valuation report on Angel House ("the Savills Report"). That valuation report concluded that the market value of the property on the basis of the existing leases and use and with no development potential was £6 million; and that if planning permission was obtained in accordance with the existing application, the value would be £8 million. That higher value was based upon a gross development value of £147 million, a sale price of £846 psf for the private residential units, and an assumption that a developer would look for a profit on cost of 22.5% to reflect the risks attaching to a tower scheme.
84. The report also contained a sensitivity analysis varying the sale price psf of the completed private residential flats by ±10% and the developer's profit on cost between 17.5% and 27.5%. At the extremes, this showed that the value of the property with planning permission might be worth between (negative) £1.5 million and £18.4 million. In this regard, Savills stated,

"We comment that the above sensitivity analysis shows the sensitivity of the site value in relation to the inputs, with the private sales rate and profit on cost required being two of the principal variables from a purchaser's point of view. Should the property be marketed with the benefit of the planning permission for the Proposed Scheme then there is a possibility that our opinion of value of £8.0 million could be improved on. In a competitive bidding situation, interested parties could sharpen their assumptions, reducing their profit on cost required and increasing the target sales values. For example, if the profit on cost is reduced to 20% and the private sales valued increased to £887 per sq ft (£9,547 per sq m) then the site value increases to £13.1 million.

Furthermore, we comment that the site value is suppressed by the fact that this is a scheme which is fully compliant with planning policy and provides 35% affordable housing. A prospective purchaser may take the view that the existing planning permission could be improved on and the level of affordable housing provision reduced. Again, this could result in a purchaser being prepared to offer more than the value shown by a residual appraisal.

Based on the above, we consider that it is reasonable to assume that a purchaser may be prepared to pay more than £8.0 million, and up to £10.0 million and therefore we informally report a value range of £8.0 million to £10.0 million, although only feel comfortable in reporting a value of £8.0 million formally."

85. On 11 December 2012 Mr. Money emailed Mr. Stenson with some of the points that had come out of a discussion with DLA concerning whether administration or a receivership would be the most appropriate procedure to be adopted in the case. Among those was the question,

"Would you benefit from having an administrator, with his associated powers, as part of your strategy in pursuing the director/shareholder?"

86. Ms. Davey and Mr. Stenson communicated over the next few days. Ms. Davey indicated that she was trying to raise money to repay the Dunbar loan and to find an asset to pledge to Dunbar as security for her Guarantee. However, nothing materialised, and on 18 December 2012 Dunbar formally demanded repayment of the loan and DLA drafted proceedings for enforcement of the Guarantee. Correspondence concerning that draft was copied to Mr. Money.

AHDL goes into administration

87. Dunbar made a final demand for repayment on 18 December 2012 and re-served it on AHDL on 21 December 2012. When AHDL failed to meet this demand, Dunbar appointed Mr. Money and Mr. Stewart-Koster as joint administrators on 27 December 2012.
88. On 27 December 2012, Mr. Sandall (the manager at PKF) called Ms. Davey to advise her of the appointment of the Administrators. Ms. Davey stated that she could not speak to Mr. Sandall but promised to call back. She did not do so. Mr. Sandall then called and emailed Mr. Lea requesting the bank account details of the Company, which he said were urgently required because the rents for Angel House were due at the end of December 2012 and the Administrators needed to secure the rental income for the benefit of the administration. Mr. Lea replied by email, advising that the requests had been passed to Ms. Davey.
89. It appears that rather than ensuring that the Administrators were given the bank account details for AHDL immediately, Ms. Davey instead procured that a payment of £20,000 was made by CHAPS transfer from the Company's accounts to herself. She later explained this on the basis that the funds belonged to Angelic Interiors Limited ("AIL") but had been paid into AHDL's bank account because AIL's account had been frozen. The Administrators were not given the details of AHDL's bank accounts until 16.35 hrs on Friday 4 January 2013.
90. On 2 January 2013 Mr. Sandall prepared a "Strategy Notes" document for the administration of AHDL. This document referred to the extant planning permission and recorded,

"It is anticipated that obtaining planning permission for the Site will provide a significant increase in its value and would provide sufficient realisation to pay Dunbar's current lending.

The Site is currently partially tenanted and so we will be receiving monthly rental income.

This is proposed to be a 'light-touch' administration and we do not anticipate getting involved with the planning application to any great degree. We propose engaging agents to manage the tenancies."

91. In addition, in the section describing the purposes of the administration, the document stated,

"The purpose of the administration is to realise the secured assets – though we should also achieve the objective of achieving a better result than liquidation provided the planning permission is granted."

92. Mr. Money signed that document on 3 January 2013.
93. On 3 January 2013, Mr. Sandall spoke to Mr. Stenson. The note of that call states that Mr. Stenson advised that he had spoken to Ms. Davey and that,

"… she will no [sic] cooperate with us. He said that she had been reluctant to give us the bank details because there had been some funds deposited that did not strictly belong to [the Company] and she thought we would take them all."

94. In his witness statement, Mr. Money referred to this file note and suggested that this was evidence of unwillingness on the part of Ms. Davey to cooperate with the Administrators. However, I do not think that the note supports a conclusion that Ms. Davey was, at that stage, being generally uncooperative with the Administrators, and I reject Mr. Money's interpretation of it. The background to the note is that Ms. Davey had not kept her promise to call Mr. Sandall back on 27 December 2012, and she had been unwilling to see the details of AHDL's bank accounts given to the Administrators before she could arrange for the removal of some funds from the accounts. But I think that Mr. Sandall was recording a view expressed by Mr. Stenson to him that Ms. Davey would "now" cooperate with the Administrators. That is consistent with the fact that about half an hour after his call to Mr. Sandall on 3 January 2013, Mr. Stenson emailed Mr. Connolly to report on his communications with various parties including Ms. Davey and APAM. As regards Ms. Davey, Mr. Stenson commented,

"The upshot is that Julia wants to cooperate on the planning, I have told her that this could only be considered if she was in essence acting as an unpaid consultant to our project manager.

She is cooperating on the bank account and there is a further meeting tomorrow between her accounts people and PKF to get the full understanding of the banking and the rent.

PKF are actually quite positive about her staying involved and in a funny way appear happy with Greenside (Joe & Malcolm) on the planning and the property management. They give a case against changing from them on the planning relating to the cost and any possible animosity. I don't accept this and still feel it is more appropriate to appoint our own manager for purely transparency and control aspects…."

95. Moreover, early the next morning Mr. Stenson emailed Ms. Davey to follow up on their conversation,

"Provided the Administrator is agreeable to you continuing to assist in the planning process Dunbar Assets have no issue. I think all our interests are aligned in that a grant of planning is beneficial to the overall attractiveness of Angel House.

Any input would need to be coordinated with the Administrator and any Asset Manager that they appoint but otherwise I don't see why a productive and amenable relationship can't be maintained."

96. The next day, Friday 4 January 2013, Mr. Sandall spoke to Ms. Davey by telephone for about half an hour. The call was cordial and various matters were discussed, including in particular Ms. Davey's view that the extant 2012 planning application was uneconomic with affordable housing at 35%. Ms. Davey suggested that the planning application would need reviewing in light of this, and asked for some assurance that the Administrators would pay the arrears of fees due to the planning team of some £265,000. Mr. Sandall made clear that he could not give any such assurance but indicated that a discussion over fees would take place with the planning team. Ms. Davey also indicated that she might have some overseas investors who would be interested in Angel House.
97. Mr. Sandall's note of the conclusion of the call stated,

"I concluded by explaining that the main objective of the administration was to ensure that the planning consent was obtained and thereby achieve a sale at a price that would settle Dunbar's loan which is approx. £17m. The £17m figure is the baseline from which we want to work and anything above that would be to her benefit.

We would prefer to work with her on this rather than against her in order to achieve this objective. Our role will be to collect the rents and oversee the planning matters and ensure that we achieve our objective of settling Dunbar's claim as quickly and cost-effectively as possible.

She agreed that that would be the best strategy."

98. Mr. Sandall reported this call to Mr. Stenson later that day, who indicated that he was due to meet APAM and was proposing that they should "handle the project and tenancy management". Mr. Stenson then copied Mr. Sandall into the email details of Mr. Powell at APAM, saying that Dunbar were "just ironing out the last technical terms with APAM as property/asset manager over the existing building and the planning process". Shortly thereafter Mr. Stenson also emailed Ms. Davey to notify her that APAM were to be appointed as property/asset manager by the Administrators.

The appointment of APAM

99. In the second part of his email to Mr. Connolly of 3 January 2013, Mr. Stenson reported,

"Over the last 3 years [APAM have] stepped in (on behalf of Banks and Special Services) as asset managers and successfully sold a number of significant London properties that are very similar to Angel House i.e. properties that require a duel strategy of income stabilisation (due to poor management) in parallel to the implementation of the planning / development strategy that result in maximising the exit value."

100. He then indicated that APAM had proposed a fee structure comprising a property management fee, an asset management fee, a net operating income incentive fee, and a "value enhancement incentive fee". In relation to the latter fee, the email stated,

"Subject to agreeing a current open market value of the site. They propose the following incentive fee structure:

OMV + £1 m - 10% (of excess)

OMV + £1-4m -20% (of excess)

OMV + £4m + -30% (of excess)"

101. Mr. Connolly's response was,

"Not sure I understand the incentive fee on rental but I don't have an issue with an incentive fee.

I do have an issue with upside. No problem once after our debt. I would prefer to pay them a planning fee and any incentive is after our debt."

102. Mr. Stenson met Mr. Powell of APAM the next day to discuss various matters including the fee proposal. This resulted in a revised proposal being sent by APAM to Dunbar by email on 7 January 2013. As regards the "value enhancement incentive fee", Mr. Powell's suggestion was as follows,

"Exit Management Fee / Value Enhancement Incentive Fee

As discussed, I set out below 2 options for the proposed Exit Management Fee / Incentive fee structure for your consideration:

Option 1 - Exit Management Fee

- A 2% Exit Management Fee (to include Investment Agent sales fees). To be paid on exit.

Option 2 - Exit Management and Value Enhancement Incentive Fee

- A 2 % Exit Management Fee (to include Investment Agent sales fees) up to £16.7m (the current debt level)

- Then above the Current Debt Level (£16.7m) APAM will receive a Value Enhancement Incentive Fee of 17.5% of the excess to be paid on exit."

103. The next day, 8 January 2013, Mr. Money and Mr. Sandall met Mr. Powell. Mr. Money's evidence was that neither he, nor any of his colleagues at PKF, had worked with APAM before, and so the meeting was intended to be an initial "get to know you" meeting. Mr. Money's evidence in cross-examination was that at this stage he had not seen any of Dunbar's proposed terms of engagement of APAM, and he only envisaged that APAM would be the property and asset managers for Angel House rather than acting as selling agents. He therefore did not discuss APAM's views on the value of Angel House at the meeting. The meeting lasted for about an hour, and Mr. Money's evidence was that at the end of the meeting he was satisfied that APAM understood what was required and had the necessary skill, expertise and resources to manage Angel House.
104. Thereafter the parties proceeded on the basis that APAM was to be engaged by the Administrators. APAM commenced work, and its initial focus appears to have been to review the state of the tenancies and rental income from Angel House, to understand the status of the planning application and to report to Dunbar and the Administrators. Among other things, APAM reported to Mr. Money that the rental income from Angel House was only about £500,000 per annum.
105. APAM's fee structure also continued to be negotiated between APAM and Dunbar. At some relatively early stage in the course of those continued discussions, Mr. Money must have appreciated that there was a possibility that APAM might wish to have a wider role than simply being property and asset managers, because on 14 January 2013 he responded to an approach from CBRE offering to provide him with assistance in maximising realisations on the sale of Angel House by stating that, "The Angel House appointment came with the lender's agents already attached". Further, on 17 January 2013 Mr. Money was sent a copy of APAM's draft revised fee proposal which followed a similar structure to the earlier proposal – i.e. it contained a suggestion for an Exit Management/Value Enhancement Incentive Fee payable by reference to the sale price of Angel House as well as an Asset Management Fee and a Property Management Fee.
106. On 23 January 2013 Mr. Stenson compiled a memo for the RMRC at Dunbar which reported that "for the most part" Ms. Davey had been cooperative and that both the Administrators and APAM thought that for the time being she was "an asset". The memo went on to set out information and views as to the state of the rentals of Angel House, and the status and further work needed for the planning process (including the need for "£150k+" to pay for the further work of the planning team and a reminder that over £200,000 was due in past fees to the planning team).
107. As to the value of Angel House, Mr. Stenson's memo summarised the Savills Report which showed that Angel House was worth £6 million in its then current state but could be worth £9.3 million if refurbished and fully let. The "with planning" value was given a range of between £8 million and £18.4 million depending on the assumptions made as to sales values per square foot and profits on development costs, but all reflecting what was described as the "punitive" requirement for 35% affordable housing. Mr. Stenson's memo acknowledged that these "Red Book" values were lower than those that he had previously indicated within Dunbar of approximately £12 million "as is" and £20 million with planning. He indicated, however, that the Savills Report had stated that a prospective purchaser might take the view that the level of affordable housing provision could be reduced with the result that a higher offer might be obtained.
108. Mr. Stenson's memo also sought approval for APAM's fee structure including the Exit Management/Value Enhancement Incentive Fee options that had been suggested by APAM. The RMRC approved the fees proposal at the meeting on 23 January 2013. Mr. Stenson's manuscript note of the approval stated that the approval of the Exit Management Fee was "subject to fixed fee basis and details as to what this includes". The RMRC did not approve the Value Enhancement Incentive Fee at the same time: there was a manuscript note beside the proposal for a Value Enhancement Incentive Fee of 17.5% indicating that this was to be discussed.
109. After a telephone call between Mr. Stenson and Mr. Powell following the RMRC meeting, Mr. Powell sent a draft appointment letter to Dunbar. Mr. Stenson indicated that Dunbar was content that the letter reflected the discussed terms, and the draft letter was then forwarded to Mr. Money for his review. Mr. Money signed the final version of APAM's letter of appointment without amendment the next day, 24 January 2013.
110. As executed, APAM's letter of appointment was expressed to take effect for 12 months from 8 January 2013. APAM's duties were specified as the day-to-day property management of Angel House, the asset management of Angel House to maximise its rental income, the management of the planning application (including a detailed review of the scheme), the positioning of the property for sale and the management of the marketing and sales process. In the letter APAM undertook to carry out its duties with due skill and care having regard to the principles of good estate management and the RICS codes of conduct.
111. APAM's agreed fee structure was (i) a property management fee of 6% of the gross rent (which rent was estimated at £500,000 per annum); (ii) an asset management fee of £4,000 per month for six months, subject to review thereafter; (iii) a net operating income incentive fee; and (iv) a 2% exit management fee to be paid on exit. The letter also stated that it was envisaged that the Administrators and Dunbar would consider agreeing an alternative fee structure under which APAM would be paid an exit management fee on the sale of Angel House of 2% up to AHDL's current debt level of £16.7 million and a further "value enhancement incentive fee" of 17.5% of the excess obtained over £16.7 million. The letter made it clear on a number of occasions that the fees of any third party selling agents would be payable out of APAM's fees.
112. Finally, the letter contained an exclusivity clause under which the Administrators agreed not to seek, solicit or enter into negotiations with any third party for the sale of Angel House, except where APAM was involved.

Relations between Ms. Davey, Dunbar and the Administrators from the end of January 2013

113. As I have indicated, for about the first month of the administration there had been relatively little contact between Ms. Davey and the Administrators. However, matters took a different turn at the end of January 2013.
114. At the start of the administration, Ms. Davey had been required to provide various information and documents to the Administrators, including a statement of affairs and a completed questionnaire concerning AHDL. These did not materialise, and so on 22 January 2013 the Administrators repeated the request and set a deadline of 31 January 2013 for compliance. On 31 January 2013 Ms. Davey signed and sent to the Administrators her statement of affairs for AHDL. This included Angel House at a book value, and an "estimated to realise" value, of £8.5 million.
115. On the same day, Mr. Sandall and Ms. Davey spoke by telephone and arranged for their first face-to-face meeting to take place together with Mr. Money at PKF's offices the next day. However, a couple of hours before the scheduled meeting on 1 February 2013 Ms. Davey emailed Mr. Sandall to cancel, saying that she had an earlier meeting that was overrunning and that a "better option" would be for them to meet in the following week. Ms. Davey then called Mr. Sandall to suggest that she would in fact not be available the following week, and they agreed a date of 12 February 2013 for a face-to-face meeting.
116. Mr. Sandall was clearly irritated by being put off by Ms. Davey, and this prompted him to send an email to Ms. Davey (a draft of which had been amended by Mr. Money) expressing disappointment and asking for the provision of further information including details of Ms. Davey's claim to be a creditor of AHDL in the sum of about £400,000. Mr. Sandall also stated that on a number of occasions he had asked for information or assistance from staff members at Angel House and had been informed that Ms. Davey had told them not to comply until they had been authorised to do so by her. His email warned Ms. Davey of the consequences of non-cooperation with the Administrators.
117. That email prompted a rapid response from Ms. Davey, who indicated that she was at Angel House and would be prepared to "hold on" if Mr. Sandall could make the time to go over to see her. Mr. Sandall then went to Angel House and first met Mr. Daniel, who indicated that Ms. Davey would see him. When Mr. Sandall was taken to meet Ms. Davey some minutes later, however, she indicated that she was in fact leaving, and a terse exchange ensued which was continued by Mr. Sandall and Mr. Daniel after Ms. Davey had left. I am not in a position to resolve the dispute over precisely what was said, but it was clearly not an amicable encounter and it led to a forthright exchange of emails between Mr. Daniel on the one hand and Mr. Money and Mr. Sandall on the other. A number of allegations and insinuations were made by Mr. Daniel against Mr. Sandall and it is very clear that any prospect of a harmonious working relationship between Mr. Daniel and Mr. Sandall thereafter was remote.
118. Until that time, although Dunbar had made preparations for pursuing Ms. Davey's Guarantee, it had held off from making any demand for payment. However, on 8 February 2013, Dunbar drafted and signed a formal letter to Ms. Davey demanding payment of £1.6 million. Dunbar also made arrangements with Mr. Money that it should be able to serve the demand on Ms. Davey in person if she attended the meeting with the Administrators on 12 February 2013. Mr. Money sent a draft agenda to Ms. Davey and sought to verify that she was indeed intending to attend on 12 February 2013, but in response, about two hours before the meeting was due to start, Mr. Daniel emailed to say that Ms. Davey would not be coming and that he would be attending the meeting alone.
119. At the meeting, Mr. Daniel explained that Ms. Davey had some family problems concerning her daughter and had remained in Israel. In her evidence to me, Ms. Davey first indicated that she did not go to the meetings with the Administrators because she felt that their attitude towards her was aggressive; she then told me that she could not remember why she had not gone to the meeting on 12 February 2013.
120. After the meeting with Mr. Daniel, Mr. Money wrote on 18 February 2013 seeking to reschedule the meeting with Ms. Davey for 24-28 February 2013 when he had been told she would be visiting the UK. He also sought an explanation from her of a number of payments made to and from the accounts of AHDL (including a substantial number of payments made both to and from Ms. Davey, and the payment that had been made to Ms. Davey after the commencement of the administration).
121. In spite of the indication that Ms. Davey would be available during the week of 24-28 February, nothing more was heard until Ms. Davey called Mr. Sandall on 27 February 2013 to apologise for not being available. She indicated that she was hoping to come to the UK the following week and expressed an interest in being involved in the planning process and saying that she wanted to ensure that what was being proposed was viable because she was keen to purchase Angel House.

The Administrators' proposals to creditors and funding issues in the administration

122. During the early part of the administration, APAM had been investigating the position of the existing planning application and the position of the planning team as regards the payment of fees. Contact had also been established early in the administration between APAM, the Administrators and the existing team of consultants headed by McBains Cooper. It was generally understood between those involved that the outstanding fees were in the region of £250,000 and that a further £150,000 or more would be required to take the application through to the planning committee stage. The initial indications from the Administrators and APAM were that, subject to resolving the issue over fees and funding, they were minded to continue with the existing planning application. A meeting was then arranged between the Administrators and the Council on 19 February 2013 to provide information and reassurance to the planning authority as to the Administrators' plans.
123. In the week before the meeting, APAM were in negotiations with the planning team to reach agreement about payment of future fees and a proportion of the historic arrears. On 18 February 2013 Mr. Sandall wrote to McBains Cooper confirming the Administrators' intention to retain the existing design and planning team so as to have the best chance of obtaining planning consent. Mr. Sandall also told McBains Cooper that the Administrators would pay any fees which had been incurred at their request since their appointment as administration expenses, and that they had asked Dunbar to agree to fund the payment of a proportion of the historic fees. The meeting with the Council then took place as planned, attended by representatives of McBains Cooper, and the Administrators confirmed their intention to progress the extant planning application with the assistance of APAM and the existing planning team.
124. The Administrators circulated their proposals for the conduct of the administration to creditors on 21 February 2013. Although the proposals erroneously stated (at para 2.7) that a revised planning application had not been submitted as at the date of administration, the stated strategy for the administration suggested the contrary – or at least that the Administrators were intending to progress a planning application with the assistance of the existing team and APAM,

"3.1 Having considered the options available to them, the joint administrators have determined that the best result will be achieved by continuing to trade the Company and re-engaging the design team in order to progress the revised planning application.

3.2 It is anticipated that obtaining planning permission for the redevelopment will enhance the value of the site.

3.3 The joint administrators have engaged the services of Alliance Property Asset Management Limited ('APAM') to assist in the management of the Angel House and the serviced office lettings. APAM are also assisting the administrators with the planning application.

…

3.6 Occupancy levels are currently at around 50% of available units and APAM are working with local and online agents to increase take-up. Steps have been taken to place residents on new licences and proper invoicing and collection procedures have been instigated.

3.7 APAM are assisting the joint administrators and have engaged with the design and planning team and with London Borough of Tower Hamlets Planning Department with a view to preparing a planning application for submission later in the year.

3.8 Initial meetings with the Planning Department have been encouraging and APAM and the design team are adopting a cooperative approach to other developers in the area to ensure that our respective applications are in harmony with each other."

125. On 26 February 2013, Mr. Sandall emailed Mr. Stenson to set out a number of issues that had been raised at a meeting a few days earlier and which required Dunbar's attention. These included (i) the payment of historic and future fees to the planning team, and (ii) the funding of trading costs for AHDL out of monies received from rentals and licence fees. Dunbar had security over such receipts by way of what purported to be a fixed charge, but in practice APAM was collecting the income on behalf of the Administrators and using it to pay trading costs.
126. On 6 March 2013 a planning application by the owner of the neighbouring Skylines site was refused by the Council.
127. On 12 March 2013 McBains Cooper put a proposal to APAM and the Administrators to the effect that 40% of the outstanding fees should be paid in two tranches, and that the remaining 60% should be deferred until a positive decision was received on the planning application. That proposal was discussed between Mr. Powell and Mr. Money, and Mr. Powell agreed to go back to McBains Cooper to see if there was any latitude in their position.
128. On 14 March 2013 Mr. Sandall provided a brief report of the progress of the administration to Dunbar. That report stated, (in part),

"Julie Davey and Pre-Appointment Transactions

We are still to interview Ms Davey and she continues to avoid meeting with us in person. She continues to be advised by Greenside Solutions and at her request we have sent Joe Daniel (of Greenside) a letter asking a number of questions relating to transactions conducted in the period leading up to administration….

….

Planning Application

We spoke recently on this and the main obstacle at present is an agreement as to how much of the pre-appointment unpaid fees will be paid by way of incentive for the team to remain with the project.

You and I discussed this yesterday and I put to you the pros and cons of retaining the current team or tendering for a new team. I understand that you later had a conversation with William Powell. I understand that William is going to go back to Mark Leeson to see if there is any latitude in Mark's position….

APAM Management Fees and Costs

It was intended that APAM's management fees for the operations side of this assignment would be met from the rent/licence income. Due to the high level of remedial and repair works required from the outset, their fees have been deferred. Current management fees unpaid are £20.56k.

APAM Planning Fees and Costs

Having reviewed the terms of engagement with APAM relating to the planning application, we are conscious that the scrapping of the current planning application and restarting of the process may be considered outside of the scope of the original engagement. While I am confident that this will not present a problem, I would raise it as a point to be borne in mind.

Administrators costs

The original fee quote for the administration was £42k comprising £22k admin and £20k admin [sic]. That fee quote was given on the understanding that this was going to be somewhat of a light-touch administration with APAM conducting much of the day-to-day work in relation to both operations and planning. Sadly, this assignment has not been as straight forward as anticipated and our current WIP stands at £63k.

James and I would appreciate the opportunity to discuss future fees and the basis upon which they will be met."

129. Following further conversations, on 21 March 2013 McBains Cooper reverted to the Administrators and APAM, accepting a proposal that 50% of their unpaid fees would be written off and the remaining 50% would be payable in instalments prior to submission of the final planning details. McBains Cooper chased APAM and the Administrators for a response from Dunbar a week later.

Dunbar declines to fund the existing planning application

130. Receipt of the chaser from McBains Cooper on 28 March 2013 prompted Mr. Stenson to inform Mr. Sandall that his initial paper to Dunbar's RMRC had been returned with a request for more analysis addressing the question of, "Is this the right planning for the scheme?" Mr. Stenson indicated that he hoped to get a decision on 5 April 2013.
131. In fact, the decision from Dunbar's RMRC was delayed for several more weeks. On 18 April 2013 Mr. Stenson sent a lengthy memorandum to Dunbar's RMRC. That memorandum was, in my view, a careful and accurate summary of the position that had been reached. Mr. Stenson set out in some detail the difficulties that had been encountered by the Administrators and APAM in relation to the fabric, the property management and the occupational tenancies of Angel House. The position as regards the planning application, the fees owed to the planning team and the potential value of the property were also analysed in considerable detail.
132. The memorandum included the following points as regards the planning application,

"At this stage our asset manager has had a number of meetings with the Local Authority including all the planning case officers on 19th February. These meetings have been positively received and have been reported to me as being very open and encouraging.

There is an underlying tone that they appear to be more confident to have the Receiver [sic] on the applicant side than the previous party (as a consequence of insolvency events with the borrower's group companies). However there are a lot of externalities at play due to the councillor elections in July. Also the Greater London Authority can still be a wild card that needs to be managed.

The current planning application is appropriate to the site and establishes the potential of the site. Unlike the first planning in 2009 it is economically driven. The 2009 application was design led and was a statement building. The new design is considerably more efficient and market friendly. The residential net to gross of the current design is 89% which is very efficient for such a property.

The key determinates as to the attractiveness of the site with the proposed planning are the view a perspective purchaser might take on further negotiations with the Local Authority on reducing the affordable content and whether the hotel should be 3 star or 4 star….

….

The other alternative is that we mothball the permission and progress to market on a conditional basis. APAM do not recommend this as (and I agree) as this puts us into the same category as all the other available sites in the area. We have a benefit of a commenced application.

Based on APAM's analysis, it is anticipated that we could make the July Planning Committee (based on the current outline application and design team). To complete a detailed programme, we will need further input of the architect, planning consultant and a PR/Community Engagement consultants…."

133. As regards the fees of the professional team, Mr. Stenson summarised that the amounts of historic fees owed were £267,000, and that McBains Cooper had agreed to write off 50% of their fees and to be paid the remainder in instalments. He also estimated the future costs required to take the project to completion of the design and planning work as £120,000 plus VAT.
134. The valuation section of the memorandum referred to the sale process of the neighbouring property (Meridian Gate) without a planning application, and summarised the Savills Report.
135. Mr. Stenson concluded by setting out four strategies for Angel House: (i) do nothing and sell 'as is' realising about £6 million; (ii) hold the building for at least 12 months, make £1.2 to £1.5 million improvements and sell without planning for about £9.2 million; (iii) endeavour to secure planning and sell the property for between £8 and £18 million depending on the view of the market as to developer's profit and the gross development value of the finished residential component; and (iv) sell conditional on obtaining planning permission.
136. Mr. Stenson recommended option (iii) in the following terms, noting that this was also the opinion of the Administrators and APAM,

"Endeavour to secure planning and sell

In this option we will be proceeding with the planning application as commenced in 2012 with a view to achieving a permission around August 2013. Upon grant it needs to be ascertained if further negotiations should be entered into with the Local Authority regarding the Affordable content or whether a potential purchaser will price their bid on the basis that they are the best placed party to achieve a reduction in this allocation. This option would see us expending in the region of £250,000 to £275,000 of design/planning fees. The realisable value with this strategy would be in the region of £8m to £18m depending on the view the market takes on developers profit and gross development value of the finished residential. This is a wide variance but has the potential for most upside if planning achieved so this leads us to believe that this is the option we should proceed with. This is also the opinion of APAM and [the Administrators]. If planning is not forthcoming for a redevelopment then we will need to consider the options again."

137. On 19 April 2013 Mr. Stenson reported to Mr. Money that notwithstanding his own recommendation, others within Dunbar were questioning whether this was the correct strategy,

"My paper was sent back to me again for further clarification.

There is real concern as to whether this is the right thing to be doing, i.e. is this the most appropriate planning? I keep arguing that it is a very good planning especially as it establishes the developability of the site and gets us ahead of the rest of the competition.

The uncertainty is not being helped by the position regarding [a tenancy that had been granted in 2012 to a company known as] Docklands Estate and there are views being expressed that if we can't get VP well then are we are wasting our time with planning in any case. I am again arguing that this is only one potential outcome and we need to protect the upside of the asset.

The other thing that is being requested prior to a decision is the full reconciliation of rent and expenses which I can now set out to them.

I don't think that Mark [Leeson of McBains Cooper] is getting that all avenues need to be fully investigated, if anything his approach will turn committee against his continued involvement. This is a big decision for Dunbar and they are not entering into it without full deliberation."

138. Mr. Money then discussed the matter with Mr. Leeson and reported to Mr. Stenson that McBains Cooper had a concern that in the absence of progress, the Council might take a decision to refuse the planning application in its current state. McBains Cooper had also stated that they had to protect their reputation with the Council. That discussion was followed a week later by a letter from McBains Cooper to the Administrators indicating that in the absence of any agreement on fees, they intended to notify the Council that they were withdrawing their support for the proposal and would assert copyright over the design drawings.
139. Shortly thereafter, on 29 April 2013, the Council wrote reminding the planning team that they had not provided the information that had been promised at the meeting on 19 February 2013. The Council requested that if the information could not be provided the application should be withdrawn, and warned that if no response was received by 10 May 2013 the application would be formally disposed of.
140. On 1 May 2013 Mr. Stenson reported to Mr. Money that the RMRC had decided to defer a decision for a further two or three weeks whilst it investigated the feasibility of the planning scheme. He suggested that a letter should be sent to the Council asking for more time to permit Dunbar as the "funding institution" properly to consider the application. Such a letter was duly written to the Council by the Administrators on 3 May 2013.
141. A leading sceptic within Dunbar as regards the value of the existing development scheme was Mr. Tom Hamilton ("Mr. Hamilton"). He was Mr. Stenson's equivalent in Dublin, and, before joining Dunbar, he had had a background in the property industry. On 2 May 2013 Mr. Hamilton sent a memo to Mr. Stenson containing what he described as "an initial pass at the kind of residual appraisal I believe a potential purchaser will run for [for Angel House] following the grant of an outline [planning] permission." Mr. Hamilton suggested that on the basis of his appraisals, a site value of £10.2 million was the highest that could realistically be achieved for Angel House and concluded,

"I understand the standing building has a value of circa £6 million now or up to £9 million if you spend £1.5 million without need for planning. So I am struggling to see a major uplift out of the planning process given the additional cost and planning wait time involved.

As an aside I would caution that if you are going to follow through with the current planning application this will involve a huge time commitment if you want to achieve the right result and, in my view, this is not one you trust to a project manager/design team to control as they ultimately don't have any skin in the game and the planners/local authority will react much better to having the organ grinder in front of them in meetings."

(emphasis in original)

142. Mr. Stenson sought the assistance of APAM in responding to Mr. Hamilton's argument on the valuations and the time commitment that would be involved. That led to a report from APAM to Dunbar which was copied to the Administrators. In its final form dated 17 May 2013, APAM's report expressed the view that Dunbar's residual appraisal was generally in line with what had previously been reported by Savills and itself, and set out a sensitivity analysis for developer's profit on costs between 22.5% and 17.5% resulting in values for Angel House between £8.2 million and £12.6 million. APAM then noted that due to the problems in negotiating an acceptable fee arrangement with the planning team, planning consent probably could not be obtained before late Autumn 2013. Crucially, the memo of 17 May 2013 continued,

"APAM considers it is no longer appropriate to pursue immediate submission of the planning application for the following reasons:-

The last 3 months has seen the emergence of a significant amount of private equity targeted at opportunistic London/South East real estate transactions.

APAM is aware of 2 sites close to the subject property that have recently sold both unconditionally and without planning consent (albeit both in better locations).

Since January, the adjoining Skylines site has been refused planning consent and the refusal was upheld on appeal. There is the possibility of a Judicial Review and any application for Angel House would possibly be delayed/deferred pending further activity of the Skylines site.

Whilst it would be advantageous from a sale perspective to have a planning consent in place, if only to establish the principles of massing and uses, the McBains Cooper design is still compromised in respect of both the absence of car parking and the inclusion of an unprofitable hotel element. Any purchaser is likely to look to amend the consent thereby limiting its intrinsic value.

APAM recommends further consideration should be given to the potential for an immediate sale of the asset on an unconditional basis and would be pleased to report in detail thereon if required. It should however be noted that on the residual valuation basis a site value would be c. £9M - £10M (subject to more detailed analysis) which would crystallise a significant recovery shortfall.

A detailed marketing exercise prior to proceeding with a planning application would be inexpensive and does not commit the Bank to a sale. In the event that the results are below expectations, an alternative strategy of continued assets stabilisation/improvement and progression of a planning application could be invoked in the knowledge that the current window of opportunity, in terms of investment appetite, has been fully explored."

143. Faced with APAM's change of advice, over the course of the next few weeks, Mr. Stenson formulated a number of revised drafts of his memorandum for the RMRC. He sent copies of his drafts to Mr. Hamilton and discussed them with him and Mr. Powell (among others). Mr. Stenson's drafts raised a number of new ideas as alternatives or in addition to proceeding with the existing planning application. These included revising and resubmitting the planning application on the basis of replacing the hotel with more residential accommodation, and reassessing whether car parking could be provided.
144. On 3 June 2013, Mr. Sandall reported developments to Mr. Money by email,

"Will Powell at APAM called this morning to ask if we had had any response from Dunbar with regards to their Committee decision on the proposed planning application. Will was conscious that we had indicated to [the Council] that we would revert at the end of this month with our intentions re the outstanding application and the fact that [the Council] will effectively shut down for June/July.

I told Will that Paul Stenson had not been in touch and had been very quiet. Will said that he had had a meeting with Paul and Ross Connelly 2 week ago to discuss the options for the property (Will had already had this conversation with me prior to meeting Dunbar).

He told Dunbar that there were 3 options available:

1. Put the property to the market with a full marketing plan and seek a buyer in the more buoyant market.

2. Undertake a more focussed marketing campaign while continuing with the current planning application.

3. Do not go to market yet and continue with either the current planning application or a revised application adjusted to make the building more attractive to developers.

Paul did speak to Will shortly after that meeting to request some details on neighbouring developments and Will got the impression that Dunbar is likely to take a long-term strategy and go for amended planning rather than options 1 or 2."

145. Notwithstanding the advice from APAM, Mr. Stenson's draft memos up to and including the draft of 12 June 2013 continued to recommend that Dunbar should fund the Administrators to proceed with the existing planning application. However, by 1 July 2013 Mr. Stenson emailed Mr. Hamilton to say that he was proposing to change tack. He indicated that he intended to recommend letting the existing planning application lapse and for there to be an investigation of the feasibility of a revised development scheme and planning application on the basis of removing the hotel, increasing the private residential component and including car parking.
146. In its final form, drafted on about 3 July 2013, Mr. Stenson's memo no longer recommended continuing with the existing planning application. The memo included a detailed analysis of the various planning issues, including the recent sale of part of a neighbouring property and outlined four options, namely (i) sell "as is" using a market pack to showcase - cost £20,000 and estimated outcome £7 million to £12 million; (ii) fully refurbish and then sell - cost £1.5 million and estimated outcome £9.5 million to £12 million (with a "very outside chance" of up to £15 million); (iii) continue with outline planning - cost £300,000 and a matrix of potential values depending on build costs and residential sale prices of between £0 and £14.35 million; and (iv) prepare new planning - cost £500,000 and a matrix of potential values between £1.6 million and £21.98 million.
147. Under the heading "Proposed Strategy" Mr. Stenson's memo stated,

"When this property entered Administration it was proposed by the Asset Managers that the best route to follow was to proceed with the initiated planning application. It is believed that for various reasons this was the right decision at that time.

In the meantime there have been a number of developments that make the previously proposed decision worth reappraising. With this in mind in conjunction with the Administrators we have had a number of meetings with APAM and also discussed the matter with a number of market participants and agents.

The commonly held view is that there has been an upswing in demand for this type of asset and this is witnessed by an increase in activity in the market. This has been predominantly led by the deployment of equity and debt by new market entrants that have decided that the London development market (especially the residential sector) is an agreeable sector to allocate resources.

Since January we have also seen the planning refusal of the neighbouring scheme 'Skylines', this may have unintended consequences for our scheme given that they were moving in parallel. The refusal will have had an effect on the timeline in which a committee decision will be made, as they are watching the site to see what the promoters will do. This means that a decision on the current planning would be the end of 2013.

Starting a new planning application would only add on 2 or 3 months to the timeline of the existing application, in addition we would be able to benefit from 'recycling' the planning fees (approx. £40,000) already paid to the council with the current application. I have attached a program showing the anticipated timelines showing the estimated costs (including the £40,000 planning fee already expended on the existing scheme).

If we were to pull the current application or let it lapse we would then inform the incumbent design team that we will not be paying any of the historic fees as these were owing from the company now in Administration. We would probably cherry pick a couple of the existing consultants, most probably the planning consultant and some of the more specialist consultants, however, we would probably end our association with the architects as we feel that this relationship would become untenable following the refusal to pay their historic costs.

Alternatively, we may be able to come to a satisfactory agreement on fees going forward if we made a contribution to historic costs."

148. Under the heading "Potential 'soft' marketing exercise" the memo also stated,

"The only other thing that may be worth considering is soft marketing the site in the next 6 weeks to a select community of developers to see if anyone would price in the eventual planning and offer a surprise unconditional bid due to the uptick in the market for sites like this, APAM considers the market would amongst other things now appraise the scheme without the hotel element, replacing this with residential and this would be reflected in a bid 'as is' in the region of £9 to £10m, however there may be a surprise bid in excess of £10 in their opinion. The downside of this approach is the timeline that it will take to interact with interested parties however this could be run in parallel with starting up the planning application again."

149. The recommendation in the memo was approved at the RMRC on 10 July 2013. The result was reported in an email to Mr. Money by Mr. Sandall, who had spoken to Mr. Stenson,

"Paul Stenson called.

He now has approval from committee to move forward. Headlines are:

Soft market now to test the appetite for the building as is.

Begin a new application (detailed not outline) replacing hotel space with a further 60 residential units.

Only retain some of the original design team - definitely drop McBains Cooper as Paul believes trust is irreparably damaged.

Paul will prepare a full review and arrange a meeting with us and APAM."

The Administrators, APAM and Dunbar agree a revised course of action

150. On 16 July 2013 Dunbar, the Administrators and APAM met to agree a course of action. The agreed action points were recorded in an email from APAM to the Administrators and Dunbar of 23 July 2013. The topics discussed included the identity of the parties to be involved in the planning team and APAM's perception that there might be special purchasers for Angel House. These were the Albany Group which was in the process of purchasing an adjacent property at Meridian Gate (Phase 1) and had an opportunity to purchase Phase 2 which backed on to Angel House, and Lycatel, who rented a significant proportion of the building. The process by which Angel House might be marketed was also set out,

"Soft Marketing

APAM to finalise and agree a target potential purchasers list to approach by the first week of September. Meetings will be arranged with all potential purchasers in September, whereby APAM will talk through the opportunity and present the marketing pack. APAM will insist upon NDA's being signed by all parties prior to the presentation of the marketing pack.

It is perceived that a period of 4-6 weeks will be required to allow sufficient time for potential purchasers to carry out the required due diligence. A deadline for final bids is therefore likely to be w/c October. This will be moved forward if APAM believes bidders can work to a shorter timeframe.

Marketing Pack

APAM to compile a marketing pack to be approved prior to the soft marketing campaign. The marketing pack is to include details of the current tenancy information, building running costs together with NOI projections. It was agreed that the VP issues of the Docklands Estates lease will not be stated in the marketing pack but will be presented as a 'housekeeping' issue later in the process. It is hoped that the marketing pack can include sketches produced by the architects who are pitching for the full detailed application.

It was agreed that details on an end scheme will be left deliberately vague to allow a potential purchaser to put together its own scheme ideas and hopefully reach as high a site value as possible, particularly following Berkeley's announcement last week of its intention to develop an 80 storey residential tower at South Quay Plaza."

151. On 8 August 2013 the Council wrote to the Administrators to the effect that because the requested documentation had not been received by the end of June, no further action would be taken on the case and the application would be treated as "finally disposed of" under the relevant Town and Country Planning legislation.
152. Towards the end of August 2013 APAM and Dunbar discussed the appointment of CgMS as project managers for the revised planning application for Angel House and APAM contacted three firms of architects to invite them to express an interest in working on the revised scheme. In addition, APAM prepared a draft marketing pack to be used in "face-to-face meetings with targeted potential buyers" in the 'soft marketing' of Angel House and compiled a list of 35 such potential purchasers.
153. APAM began the soft marketing process at the beginning of September 2013 and continued it for several weeks. It attracted a number of expressions of interest, including some from parties who had not been included in the list of 35 potential buyers.

Proceedings in relation to Ms. Davey's Guarantee

154. Whilst the administration had been proceeding, Dunbar had also pursued its claim against Ms. Davey on her Guarantee. Dunbar had applied for summary judgment when it had issued the proceedings, and Ms. Davey had filed a Defence denying liability on 27 June 2013. That Defence alleged that the administration of AGL was unlawful and not a trigger for her liability under the Guarantee, and that Dunbar ought to have pursued the administrators of AGL before pursuing her.
155. In addition, Ms. Davey's Defence made complaints about the conduct of the administration of AHDL as follows,

"12. The main asset of AHDL was Angel House itself.

13. The Administrators of AHDL produced a report and proposals dated 21st February 2013, a copy of which is attached to this Defence. In the Administrators' strategy plan, it was an express term that they would pursue development, and then sell Angel House at substantial profit, fully discharging the debt to the Claimant, amongst other things.

14. The basis upon which funds were advanced by the Claimant was on the basis that Angel House, which is the sole asset of AHDL, was to be developed, and then to be sold at substantial profit.

15. The Administrators had a statutory duty to pursue such a strategy under paragraph 3, of Schedule B1 of the Insolvency Act 1986. In the discharge of such duties, the Administrator had to adopt a 3-tier objective:

i) Rescue AHDL as a going concern;

ii) To obtain a better result for the Company's Creditors than would have been achieved if AHDL was wound-up;

iii) Failing those two above, the Administrators ought to have 'realised' Angel House in order to make a secured distribution to one or more of the preferred creditors.

16. In breach of those statutory requirements, the Administrators have been dilatory in the discharge of their duties, to the detriment of the Defendant who is also a Creditor of AHDL. Such conduct amounts to a dereliction of duty. The Defendant challenged the Claimant to confirm what steps the Administrator had taken to discharge their duties to develop Angel House and sell it, so as to pay in full the debt outstanding to the Claimant, but the Claimant has not responded, and neither has the Administrator provided any revised situation report to other Creditors confirming their progress."

156. On 24 July 2013 Dunbar obtained summary judgment against Ms. Davey under her Guarantee in the sum of £1.6 million plus interest and costs. That order was forwarded to Ms. Davey's solicitors on 8 August 2013. In response, Ms. Davey's solicitors put forward proposals for settlement of the amount due, indicating that she would have to realise non-cash assets to pay the judgment debt, and seeking deferral of enforcement for 12 months to enable her "to liquidate assets in an orderly and efficient manner". In return, Dunbar's solicitors sought provision of a sworn statement of affairs for Ms. Davey and the identification of the assets which she intended to sell to pay the debt.
157. Ms. Davey then telephoned Mr. Stenson on 20 August 2013 and identified a property in California as the potential source of the necessary funds. Mr. Stenson's note of the call also recorded that,

"I asked her why she hadn't had her interview with the Administrators she said she had had issues with BDO. I explained the position with the planning, i.e. that the hotel is no longer market appropriate and this needs to be amended, also, most of the historic team are not deemed to be aligned due to … their outstanding fees."

158. This call was followed up by a letter from Ms. Davey's solicitors on 21 August 2013 confirming that the house in California was the potential source of funds to meet her judgment debt, indicating that she was flying to the USA to put it on the market urgently, and that she was willing to provide a statement of affairs, but only in an outline form.
159. This prompted Dunbar to institute proceedings against Ms. Davey in California to register the judgment that it had obtained against her and to obtain a writ of attachment or protective order against her assets in California including the house which she owned at 7310 Vista Del Mar Avenue, La Jolla 92037. Those steps (which were commenced without notice) prompted a complaint from Ms. Davey's solicitors and a reiteration by letter of 11 September 2013 that Dunbar's actions had been unnecessary and that Ms. Davey was willing to co-operate and provide Dunbar with details of her attempts to sell the property. The letter ended,

"… our client remains committed to assisting your client with the planning issues and disposal arrangements for Angel House in relation to … which she is aware of considerable interest by prospective purchasers. It is clearly in the interests of both parties to pursue this.

Our client would still like to discuss the position with you at the earliest opportunity. Please let us know when a telephone conference would be possible."

160. Dunbar's solicitors responded on 13 September 2013 rejecting the criticisms, asserting that Dunbar had been entitled to proceed to protect its interests as a judgment creditor and providing copies of various charging orders and third party debt orders which it had obtained, together with an order for Ms. Davey to attend court for questioning as to her assets on 28 November 2013. Dunbar also sought to take proceedings to enforce its judgment in Israel and Switzerland.
161. Dunbar's letter of 13 September 2013 indicated that Dunbar remained open to settlement negotiations with Ms. Davey but only on the basis that Ms. Davey was present in person at any meeting and provided a sworn statement of assets and liabilities. On 25 September 2013, Mr. Clarke provided Dunbar with a statement of Ms. Davey's assets and liabilities in preparation for a meeting that had been arranged between Mr. Clarke, Mr. Stenson and Mr. Connolly later that day. It was anticipated that Ms. Davey would join the meeting by telephone.
162. The meeting on 25 September 2013 consisted largely of a discussion about Ms. Davey's assets and the means by which she might satisfy her judgment debt to Dunbar. Ms. Davey asserted that she had no cash but was trying to sell her Californian property. In addition, during the opening presentation on behalf of Ms. Davey, Mr. Clarke indicated that Ms. Davey was "bursting" to help Dunbar with planning in relation to Angel House, and he suggested that Dunbar should not underestimate the value of Ms. Davey's contacts at the Council.
163. Mr. Clarke followed up after the meeting on 1 October 2013 with an update and querying an increase in the legal fees incurred by Dunbar in the US (that Ms. Davey would be asked to bear). The email also reiterated Ms. Davey's offer of assistance in relation to Angel House and suggested that if marketing or development was being considered, Ms. Davey "should be approached and given the chance to be involved."

APAM commences formal marketing of Angel House

164. The initial "soft marketing" of Angel House was completed by APAM by about the start of October 2013. It suggested that there was a strong interest in the property from a number of parties. APAM reported this interest to Dunbar on 4 October 2013. A few days later, on 7 October 2013, Mr. Stenson took steps to contact DLA who had acted for Dunbar on the review of Angel House for the purposes of security. Mr. Stenson indicated that Dunbar was preparing for the disposal of Angel House and "attempting to perform some high-level vendor due diligence".
165. An asset management schedule prepared internally by Dunbar on 9 October 2013 also reported the expressions of interest "from some serious market players at £12 - £14 million" and indicated that a decision was required by Dunbar whether to pursue the marketing further or pursue a revised planning application. To assist in that decision, on 10 October 2013 APAM sent to Dunbar a draft sales process/timeline showing that all interested parties could be advised of a formal sales process in the latter part of October or the first week in November (depending on school half-term holidays and ensuring that this was "convenient and timely for all key bidders"), that a deadline for best bids could be set shortly thereafter, with a sales pack to be issued by solicitors on 22 November 2013, leading to an exchange of contracts before Christmas 2013 and completion by 10 January 2014. APAM also produced a schedule of the parties with whom they had liaised, indicating that they had approached 20 possible purchasers, of whom 10 were described as interested. APAM subsequently forwarded that timeline and schedule to the Administrators on 15 October 2013.
166. The decision was then made that APAM would be instructed by the Administrators to conduct a more formal sales process for Angel House. It is unclear precisely how that decision was made, and there is no document recording it. Mr. Money's written evidence was that after he received the report from APAM on 15 October 2013 showing the strong level of interest in the property, he decided to instruct APAM to market Angel House. He said he could not recall precisely when the instruction was given, but believed that he would have discussed it with Dunbar, and that he was confident that APAM understood Angel House and the market for it, and were incentivised to maximise its value.
167. In cross-examination, however, Mr. Money's evidence was that the move from soft marketing to a more detailed marketing process was rather fluid,

"Q. Mr Money, can you explain why there is not a single document on the Joint Administrator's file setting out the reasons why you considered it appropriate to enter into this bidding process in November 2013, having regard to the fact that there had only been soft marketing?

A. Well, I think by November it had gone from soft marketing into a more detailed marketing exercise.

Q. How so? How had it? Tell his Lordship how it had gone from soft marketing to a more detailed marketing.

A. Well, I would say that we had had the initial feedback from APAM, probably towards the end of September, possibly into early October, which I believe suggested that there was quite considerable interest out there. It certainly suggested that there were a number of people, I believe, who might be interested in making bids, and there would have been various discussions about: okay, well, do you think this is serious? And we then agreed to move ahead. And the fact that APAM did move ahead, if not minuted on the files, I am not sure if there are emails in there confirming, "Well, keep looking, keep pushing", but I suppose you would say that it sort of morphed, if that is the right expression, from the soft marketing into the more detailed marketing, going out to -- I mean, we had the discussions about moving out, looking at the more detailed lists that they had pulled together …"

168. The decision to move to a more detailed marketing and sales process certainly seems to have been taken in principle by 17 October 2013, because on that day Mr. Money sent an email to Mr. Connaughton of Capital & Oriental, one of the parties who had not been on APAM's original list but which had got to hear about the opportunity to acquire Angel House. The email followed a meeting between Mr. Money and Mr. Connaughton on 15 October 2013 and Mr. Money was responding to a question from Mr. Connaughton to explain who would have the ultimate decision on which offer to accept in a sales process and the criteria that would be applied. Mr. Money stated,

"Although the 'rules of engagement' have yet to be agreed, you are right in thinking that the decision will be based both on the ultimate price and on the ability to deliver. When we set a date for offers, it will probably be after confirming with serious bidders that the timing is realistic. The bottom line is that price will be the key factor. After the initial offers are in, we will be ensuring that we have evaluated the different bases used by interested parties, and there may be further opportunities for the highest bidders to clarify their offers.

While it is likely that APAM will manage the process, the decision will rest with BDO and Dunbar. Dunbar will have more influence if the level of bids is below their indebtedness. BDO will make the decision, albeit in close consultation with Dunbar, if the Dunbar indebtedness is likely to be fully repaid."

169. Mr. Connaughton's response was to provide Mr. Money with what he described as "proof of funding" from Mr. Robert Whitton, who was described as the Chairman and executive director of Affinity Corporation Properties plc ("Affinity"). That letter was oddly post-dated 3 November 2013 and indicated that Capital & Oriental would have access to the necessary funds to complete the purchase of Angel House, but did not mention any price.

Ms. Davey expresses an interest in buying Angel House

170. On 18 October 2013, Mr. Clarke approached the Administrators on behalf of Ms. Davey, introducing himself and seeking a face-to-face meeting. That meeting took place on 23 October 2013. Mr. Clarke offered Ms. Davey's full co-operation to the Administrators in providing the information that they had been seeking since February 2013 regarding some of the transactions and payments from AHDL's accounts. Mr. Clarke also mentioned that Ms. Davey had a relationship with Mr. Vincent Tchenguiz and stated that "a bid [for Angel House]" would be forthcoming. Mr. Money emailed Mr. Stenson and Mr. Connolly after the meeting to report that, "There has clearly been a change of approach" by Ms. Davey. He also noted that he had asked Mr. Clarke to "put any bid through APAM", and Mr. Connolly emailed Mr. Stenson to observe that any such bid would, "have to tie in with the other bidders timetable, which it should if Julia reverts within the month."
171. A further meeting took place between Mr. Clarke and Mr. Money on 29 October 2013 and was followed by a telephone conversation between Mr. Clarke and Mr. Powell of APAM on 30 October 2013 and an email (copied to Ms. Davey) on 31 October 2013 in which Mr. Clarke notified Mr. Powell that Ms. Davey was intending to bid for Angel House and that she had "a substantial backing partner".
172. In his email of 31 October 2013, Mr. Clarke sought clarification on a number of points, which Mr. Powell referred to the Administrators for guidance. On 1 November 2013 Mr. Sandall sent an email to Mr. Powell (copied to Mr. Money) suggesting various answers to be given to Mr. Clarke's questions. The questions and suggested answers (in italics) included the following,

"2. I noted your comments about proof of finance and ability to proceed quickly being relevant factors, however clearly price must be, I assume, be a most important issue in any such case.

I am surprised by this question from Mr Clarke who is, or was, an insolvency practitioner. Administrators always like to see proof of funds - it is all too easy for potential purchasers to make an attractive offer and then find that they cannot raise the required funds. This leads to delay and additional administration costs - and in a lot of cases - a reduction in the purchaser's offer. Additionally, going back to the market after an aborted sale will incur additional cost and usually results in lower offers. So proof of funding is important in the context of it adds credibility to the purchaser's offer and gives the administrators comfort that the purchaser can complete the deal quickly and with a minimum of additional cost.

3. Will this be a sealed bid tender process with all bids being opened together and a decision being made then?

I cannot answer this - how were you intending to run the process? I suspect that whatever process we use, if the result is not a win for Ms Davey, we will be subjected to scrutiny.

4.Will there be an opportunity to negotiate in the event, for example, of a bid being sufficiently high but needing some clarification as to, for example, funding?

See my response to 2 above. The administrators are under a duty to realise the company's assets at the best price achievable. Achievable includes factors such as time and cost to complete the sale which rests upon the purchaser having the ability to complete quickly. If an offer was received that was significantly in excess of all others but unclear as to funding then the joint administrators would consider whether a sale was achievable in a sensible timeframe or whether the offer was unrealistic. Such consideration may involve further recourse to the bidder and if the administrators were not satisfied that a sale was achievable then they would look to the next bidder."

173. Mr. Powell then responded to Mr. Clarke on 5 November 2013 as follows,

"Thank you for your below email. I set out below a response to your questions:

1. You mentioned a "target deadline" of 12 noon on 15th November 2013. Is this the absolute deadline for bids? Please confirm the precise position in order that my client should not be prejudiced.

We have informed all interested parties that the target date for written bids is currently 12 noon on 15 November. We will be writing to all interested parties to confirm this shortly. If the time and date is changed whatsoever we will write to all parties explaining why and confirming the new date and time.

2. I noted your comments about proof of finance and ability to proceed quickly being relevant factors, however clearly price must be, I assume, be a most important issue in any such case.

Agreed - subject to proof of funding as it adds credibility to the purchaser's offer and gives the administrators comfort that the purchaser can complete the deal quickly and with a minimum of additional cost.

3. Will this be a sealed bid tender process with all bids being opened together and a decision being made then?

As I expect you know bids will be received (in most cases) by email. We will then submit all bids, supporting information, and our analysis of the bids received to the Joint Administrators for their consideration.

4. Will there be an opportunity to negotiate in the event, for example, of a bid being sufficiently high but needing some clarification as to, for example, funding.

The administrators are under a duty to realise the company's assets at the best price achievable. Achievable includes factors such as time and cost to complete the sale which rests upon the purchaser having the ability to complete quickly. As is nearly always the case, offers may require clarification but there will be no opportunity to negotiate the price."

174. Mr. Clarke responded to APAM asking them to note Ms. Davey as an interested bidder for Angel House and forwarded the email exchange to Ms. Davey within the hour. APAM also copied the exchange to the Administrators, prompting Mr. Money to note in reply in relation to question 4 that the Administrators might go back to the 2 or 3 front runners and ask them for "best and final" bids.

The sales process for Angel House

175. After the decision to move to a more formal sales process had been taken in mid-October, APAM proceeded to contact the parties who had expressed an interest in bidding with a view to informing them of the process and timescale which was intended. APAM also produced an enlarged list of 45 potential bidders for the property and notified them of the intention to sell Angel House. Various of those parties made arrangements with APAM to inspect the property over the following weeks.
176. APAM also gathered together information to be included in an electronic data room for prospective purchasers and sent a schedule of such information to Dunbar and the Administrators on 25 October 2013. At about the same time Dunbar also instructed DLA to produce a report on title for Angel House to be provided to the Administrators for inclusion in the data room. DLA duly provided its report on title to the Administrators on 4 November 2013 and the data room for Angel House opened and interested parties were notified and given access shortly thereafter.
177. On Monday 11 November 2013, and having checked its draft wording with Mr. Money, who made a couple of suggested amendments, APAM sent an email to its "A" list of 16 interested parties (which included Ms. Davey and Capital & Oriental) inviting offers for Angel House by no later than noon on Friday 15 November 2013. The email stated,

"Your offer should contain the following:-

1. The purchasing entity

2. Outline of the proposed transaction

3. Purchase price

4. Unequivocal proof of funds

5. Board of Investment committee approval process

6. Timing for Exchange/Completion

Please note that the Joint Administrators will not be obliged to accept the highest offer. A 10% non-refundable deposit will be payable at exchange of contracts. Please also note that this is a sale by an insolvent company in circumstances where it is usual that no representations and warranties can be given by or on behalf of the Company or the Administrators.

Please feel free to call if anything needs further clarification."

178. The sending of the email of 11 November 2013 also led to a number of other parties expressing interest in making an offer for Angel House, and APAM made arrangements for these parties to have immediate access to the data room.
179. On 7 November 2013, Mr. Stenson reported a security value of Angel House for Dunbar's internal provisioning purposes of £14.5 million (before costs) on the basis of a sale in Q1 2014 and explained his assumptions as follows,

"The sales value of £14,500,000 is on the basis of interest that has been forthcoming in the initial exercise undertaken by APAM. This process will culminate in bids being received on the 15th November 2013. There has already been a written (fully funded) offer of approximately £13.5m from a party who has gone back to improve on this.

There are at least 12 parties currently looking at the property with serious due diligence being undertaken. We are expecting strong interest being translated into offers around the level of the forecasted disposal amount.

For provisioning we have allowed a full recovery under personal guarantee of £1.6m this is thought achievable as we have legal freezing orders on the guarantor's assets in four legal jurisdictions and we have a recent sworn net worth statement showing net worth of approximately £10m."

Ms. Davey makes a proposal for a funded rescue of AHDL

180. On Wednesday 13 November 2013, Rosenblatt, solicitors instructed by Ms. Davey, wrote to the Administrators expressing concern on behalf of Ms. Davey that a sale of Angel House would give rise to a corporation tax liability on the capital gain to be made by AHDL. The letter continued,

"In the circumstances we are instructed to make the following proposal on behalf of our client:

1. Our client will procure payment to the Company of £17 million in order to discharge the debt of Dunbar Bank (which is understood to be the approximate sum due to the Bank).

2. Our client will procure payment to the Company of up to £1 million in order pay the Joint Administrators' costs (estimated to be circa £130,000), the unsecured creditors' claims in full plus interest on the creditors' claims (including any statutory interest).

3. Following payment to the creditors, the Joint Administrators will resign from office and the Company will exit from administration.

Our client has been given verbal confirmation from a third party that funds will be made available to her in order to procure the above payments to the Company. We anticipate being able to provide written confirmation of the funding by 12 noon on 15 November 2013.

Our client considers that acceptance of this offer by the Joint Administrators would achieve the statutory purpose of the administration by rescuing the Company as a going concern.

In the circumstances, please confirm by 4.00pm on Thursday, 14 November 2013, whether this offer is acceptable and, if so, that the Joint Administrators would suspend the sale process for 60 days to enable our client's proposal to be effected."

181. The next day, Mr. Sandall wrote a memo to Mr. Money giving his initial thoughts on the proposal from Ms. Davey. He expressed the view that the Administrators should not accept the proposal before receiving proof of funding, and relayed a concern expressed by Mr. Stenson that a suspension of the sale process might undermine the fairness of the sale process and risk deterring potential buyers. Mr. Sandall also considered whether Ms. Davey's proposal was a genuine offer or a tactic to delay the sale process so as to deter other buyers and put a bid by Ms. Davey for Angel House into a better position. Mr. Sandall recommended pushing the date for acceptance of Ms. Davey's proposal back until after the deadline for bids for Angel House and concluded that,

"If we are minded to accept, then we would want some sort of 'deposit' or other form of comfort that Davey's intentions are true. How we would structure this I have not yet considered."

182. After discussing the matter with Mr. Money, Mr. Sandall telephoned and replied by email to Mr. Anthony Field at Rosenblatt, saying that the Administrators were unable to comment until they had reviewed Ms. Davey's confirmation of funding.
183. On Friday 15 November 2013, Mr. Stephen Wicks, the CEO of Inland Homes plc, a company quoted on the London Stock Exchange, wrote to the Administrators to confirm his company's financial support for the transaction referred to in the Rosenblatt letter. He stated that Inland Homes would be providing about £18 million to enable the debt to Dunbar to be discharged and to cover the Administrators' costs and the claims of the unsecured creditors in full.
184. Shortly thereafter Ms. Davey called Mr. Connolly seeking to discuss the redemption figures for the AHDL loan. Mr. Connolly's note of that call records that Ms. Davey had underestimated the redemption figure for Dunbar, which was closer to £18 million than £17 million. At about the same time, Mr. Sandall also spoke to Mr. Field at Rosenblatt and gave figures for the amount of the Dunbar loan, interest and costs. Mr. Sandall indicated that the Administrators would be seeing what offers came in for Angel House via the sale process, and in a subsequent email Mr. Sandall reported to Mr. Money that he had told Mr. Field,

"As is standard, if we found Davey's offer was acceptable then we would want a 10% non-refundable deposit on acceptance. He wanted to know that if we accepted her offer she would get exclusivity. I said that if she paid the 10% NRD then I could not see why not."

185. Mr. Field responded by email shortly thereafter,

"Further to our conversation, please could you send me a copy of Dunbar's redemption statement as soon as possible so that I can take instructions on the additional funding requirements.

You mentioned that it is BDO's usual practice to request at 10% non-refundable deposit on administration sales. Whilst I acknowledge how that would operate in relation to an asset sale, my client's offer is different. The effect of my client's offer being accepted would be for funds to be provided to the Company to enable the Joint Administrators to discharge the Company's debts and the administration expenses. A payment of 10% by my client in these circumstances would effectively be on account of the Bank's debt and therefore, in the event that she withdrew from the process, my client would have a subrogated claim in relation to the value of her cash injection. Perhaps a more appropriate solution could be for an amount to be paid into an escrow account upon the Joint Administrators' agreement to proceed with her proposal and we can these discuss the finer detail as to how the creditors can be paid and the Company exit administration.

Thank you for your confirmation that the Joint Administrators will not be considering the other offers straight away and that my client's position will not be prejudiced pending these ongoing discussions regarding her proposal."

186. By noon on 15 November 2013, APAM had received four bids (subject to contract) for Angel House: (i) Albany Homes (£15 million funded by a loan facility and subject to planning permission being received for the McBains Cooper scheme); (ii) Guildmore Limited (£15.5 million funded from cash reserves); (iii) LBS Properties (£16.15 million funded from cash reserves); and (iv) Jirehouse Capital on behalf of Regius Wharf (£17 million with funding arranged by Voltaire Financial LLP). Mr. Powell emailed Mr. Sandall and Mr. Money on that date to let them know about the offers received.
187. The highest offer on behalf of Regius Wharf stated that it superseded any previous offer made by Capital & Oriental. It also stated that Regius Wharf was a special purpose vehicle established for the purpose of the bid and that the primary funding for the project had been arranged by Voltaire Financial LLP which was described as "a niche Real Estate Brokerage House". The funding letter from Voltaire was addressed to Regius Wharf and stated,

"We understand that you have undertaken substantial due diligence on this project with a number of leading consultants and have reviewed your detailed financial appraisal.

Based on our appraisal of the due diligence provided, we confirm that we are in a position to fully fund the project in accordance with the payment terms outlined in the Offer Letter. Any funding commitment is strictly conditional on our undertaking financial and legal due diligence to our satisfaction on the substantial work you have already undertaken and presented to us. Once you have secured the deal and your bid is accepted, subject to contract, we are in a position to conclude our funding arrangements with you to facilitate exchange within the timetable set out in the Offer Letter."

188. Mr. Powell told the Administrators that he had concerns about Regius Wharf's offer and the nature of their funding, which he recommended clarifying with them. The concerns were not alleviated when, later that day and in response to Mr. Powell's inquiries, Jirehouse Capital sent a "revised offer letter" to APAM which was on behalf of Capital & Oriental "should we decide that they can bid", but did not address the position of Voltaire.
189. In contrast, Mr. Powell noted that LBS Properties' second highest offer was from the purchaser of the adjacent site at Meridian Gate, and he expressed his opinion that,

"Their offer letter is the most comprehensive; they are cash buyers; have undertaken significant [due diligence]; and are offering to exchange contracts in 3 working days!"

190. On 18 November 2013, Ms. Davey, Mr. Money, Mr. Clarke, Mr. Slatter (of Olympian Homes), Mr. Katz (an insolvency practitioner) and Rosenblatt attended a meeting. The meeting discussed Ms Davey's proposal to provide the funds to pay off Dunbar and the other creditors and costs (including the costs of the Administrators and APAM) and thereby to rescue AHDL as a going concern and avoid the sale of Angel House. The Administrators agreed that if Ms. Davey could provide the money to achieve this result, this would represent the best outcome, but indicated that there would need to be some certainty that Ms. Davey could fulfil her side of any such deal. The Administrators reiterated their requirement for a 10% non-refundable deposit on exchange of an agreement. Rosenblatt repeated their suggestion that this should be by way of an escrow payment. The Administrators responded that they had had a number of offers for Angel House from purchasers who indicated that they could move quickly to an exchange and pay a non-refundable deposit. They resisted requests for a 14-day suspension of the sales process to enable Ms. Davey to conduct due diligence, indicating that if Ms. Davey told them what information she needed as regards other creditors and costs, they would provide that information speedily.
191. The Administrators also responded to criticisms from Ms. Davey about the involvement of APAM and its fees, the lapse of the planning application, and the timing of the decision to invite offers for Angel House. The Administrators defended the decision to involve APAM and pointed out that the administration had no free money and that they were dependent upon Dunbar to fund continued trading. They indicated that the planning application had been allowed to lapse because its only potential funder, Dunbar, was unwilling to provide the further funding necessary to take it to a stage where it would result in an increase in value of the building. And they stated that a decision had been taken to "test the water" in relation to the sale of Angel House because of an increase in interest in the market and because of Dunbar's attitude on continued funding.
192. After the meeting, Rosenblatt emailed Mr. Money with Ms. Davey's requests for information concerning the involvement and costs of APAM and the Administrators' own fees and costs. Rosenblatt repeated the request that the Administrators should not accept any offer for Angel House for 14 days. Pinsent Masons LLP responded on behalf of the Administrators on 19 November 2013 rejecting that request but indicated that the requested information was being assembled. The letter made the point that Ms. Davey had had the opportunity to put AHDL in funds to pay off the Dunbar debt since before the commencement of the administration in December 2012, and had been aware of the sales process for Angel House for about a month.
193. Whilst welcoming the "constructive discussions" between the parties and setting out their understanding of Ms. Davey's stated intentions to fund a repayment of AHDL's debts and the costs of the administration, Pinsent Masons' letter continued,

"Whilst such an outcome is clearly desirable, our clients consider that they can only reasonably bring a halt to the sales process and risk losing the existing offers at the point in time when your client enters into a legally binding contract on her proposal. In order for your client's proposal to be acceptable to our clients and to Dunbar, we anticipate that it will need to include the making [of] a 10% non-refundable payment to Dunbar and provide proof of funding. In the interim, our clients consider that they ought properly to continue with the sales process and seek to exchange on one of the existing offers. While our clients anticipate that your client's response will be that such interested parties will still be willing to buy in two weeks' time, our clients' view is that the reality is that they may not be; and, of course, neither may your client."

The final round of bids for Angel House and Ms. Davey's rescue proposal for AHDL

194. The bidders from the first round of bidding for Angel House were contacted by APAM and invited to improve their bids by 5pm on 20 November 2013. They did so, with the result that the revised bids received were (i) Albany Homes (a reduced bid of £12.5 million); (ii) LBS Properties (£16.95 million); and (iii) Guildmore Limited (£17.05 million). Regius Wharf provided neither a revised bid nor proof of funding.
195. On 21 November 2013, the Administrators provided the information requested by Ms. Davey to Rosenblatt.
196. On the same day, APAM also reported to the Administrators on the marketing process and recommended that the Administrators should commence exclusive discussions with LBS in spite of the fact that Guildmore's offer was £100,000 higher, because (APAM considered) LBS were a special purchaser (having completed on the neighbouring property) and had proof of funds, a proven track record and the ability to exchange and complete quickly. APAM recommended a timetable involving exchange of contracts on 29 November 2013 and completion on 13 December 2013.
197. Mr. Money then instructed APAM to see if LBS would increase its offer to match the offer of £17.05 million from Guildmore. On being contacted by APAM, LBS agreed to do so. Mr. Money then emailed Mr. Stenson to recommend that LBS's increased offer should be accepted,

"I spoke to [Mr. Powell] earlier this afternoon and asked him to go back to LBS to see if they would go up to £17,050,000. I did not want Ms Davey to be able to complain that we had not accepted the highest offer. Will did so and succeeded. Accordingly, my recommendation to you is that we accept the LBS offer at £17,050,000. Do you need committee approval? If so, I attach a draft HoT for you to present to the committee. I look forward to receiving your formal confirmation."

198. In the mid-morning of 22 November 2013, Mr. Clarke emailed Dunbar and Mr. Money stating that a further offer from Ms. Davey was in the course of preparation, referring to other recent sales in the locality of Angel House and complaining about "the complete lack of marketing" and what was described as the untimely rush for a sale. The email indicated that the proposals would involve one option under which Dunbar's debt would be acquired, together with a further £2 million payable within three months of outline planning permission being obtained. The email stated that, "Funding is ready, just waiting some paperwork."
199. Mr. Clarke's email prompted Mr. Money to email Mr. Stenson commenting that,

"For the avoidance of any doubt, I am fully satisfied with the level of marketing undertaken, and APAM have already considered nearby transactions as part of their on-going advice.

Clearly the proposals from Julia Davey are attractive, not just for Dunbar, but for all stakeholders. However, they must also be credible such that we do not end up losing what APAM believe is a good deal."

200. The same day, 22 November 2013, Dunbar's RMRC met to consider a lengthy report that Mr. Stenson had prepared a couple of days earlier setting out the state of play regarding bids for Angel House and Ms. Davey's proposal for a funded rescue. As regards the offers for Angel House, Mr. Stenson's memo commented,

"The highest offer of £17m has not had its funding proven and has a stretched exchange and closing. In addition, they have changed their name and proposed funder in the process which doesn't lend a lot of confidence to performance in the opinion of APAM.

The second offer of £16.75m is from a high net worth family office (the Crawfords) and they have carried out extensive due diligence with 97 visits to the dataroom and 2 detailed site visits. They are represented legally by Brechers solicitors and are completely cash funded. They have a good track record and performed on the site adjacent to the subject property. Of the bids received this is the party which the Administrators' consultant APAM recommend and I further endorse that support at this time."

201. As regards Ms. Davey's funded rescue proposal bid, Mr. Stenson observed,

"Following submission of the proposal Ms Davey and her advisors (but not the funder) met with the Administrators, on the 18 November, where they proceeded to question aspects of the Administration process. They have requested at least 2 weeks to carry out further due diligence,

The Administrators in conjunction with Pinsent Masons are currently considering the implications and options that arise from this proposal but the high-level update is that the Administrators intend to inform Ms Davey that they will continue with the sales process unless they are placed in funds.

In due course the Administrators will report on their review of the proposal but if the Administrators are satisfied that the proposal is properly funded and credible then it would be an appropriate culmination of the process."

202. Mr. Stenson's recommendation was,

"We propose to continue with the marketing process notwithstanding Ms Davey's approach but we feel we should work to LBS' timescales (should exchange next week). If other offers materialize we will of course consider.

We recommend the acceptance of the LBS bid for £16.75m on the condition that the corporate bid cannot be credibly substantiated by the time of presentation of this RAM …"

203. The RMRC then resolved,

"Accept LBS bid for £17.05 million on condition that the corporate bid cannot be credibly substantiated by exchange."

News of the RMRC's decision was communicated to Mr. Money by Mr. Stenson later that afternoon.

204. Later that day, Rosenblatt wrote to Pinsent Masons complaining of a lack of a formal redemption statement from Dunbar and stating that Ms. Davey was keen to progress her proposal. The letter stated that Rosenblatt was instructed that Ms. Davey would procure funding of up to £20 million to refinance AHDL and referred to Mr. Clarke's earlier letter. Rosenblatt continued,

"Our instructions are that our client has received verbal confirmation from her funder that the additional amounts (over and above the amount set out in our letter of 13 November) required to effect this proposal will be made available to her and that proof of funding will be sent to us by no later than Tuesday (26 November). We confirm that a 10% payment can be made to the Company when the Joint Administrators decide to proceed with our client's proposal and contractual arrangements are entered into.

….

We invite the Joint Administrators to seriously consider our client's interest in the Company and her proposal, which, if accepted, would be the best outcome for all stakeholders.

In your letter, you indicate that the Joint Administrators do not anticipate exchanging contracts on one of the offers received until at least the middle of next week, in the circumstances, whilst our client is not asking at this juncture for the sale process to be put on hold, we do request the Joint Administrators' undertaking not to enter into any binding contract for the sale of the Property prior to 5.00pm on 29 November 2013, which will hold the ring and, we hope, provide sufficient time for our respective clients (and Dunbar) to agree terms and the mechanics of achieving the rescue of the Company as a going concern. We cannot see what good reason your clients can have for rushing the sale of the Property: that the market is buoyant is evidenced by the fact that with the Joint Administrators' inadequate marketing your clients have in the space of only one month or so been able to obtain a number of serious offers, albeit offers which are insufficient to pay off the debt due to the bank, let alone anything for unsecured creditors. Meanwhile your clients have not given our client a statement of the amount required from her if the sale is to be rendered unnecessary."

205. The response from Pinsent Masons was as follows,

"Our clients' position has not changed and they continue to work towards a sale in accordance with the process conducted by them and APAM. Exchange of contracts may take place next week and possibly as early as Wednesday 27 November though the end of the week is more realistic. We are instructed that our clients will not provide the undertaking requested.

We note that your offer is dependent upon your client procuring funding. Our clients' position remains as set out in our letter of 19 November 2013 … Given that your client has not been in a position to provide funding to the Company to redeem the Dunbar charge up until now, proof of funding of her offer is essential. We would suggest that if your client makes any material progress in obtaining that funding written details are provided to our clients.

Your client should be satisfied that our clients have taken, and continue to take, your client's offer very seriously and that they have regard to their obligations as administrators and the interests of creditors. However, in short, our clients will not, as matters currently stand, halt the sale process until your client contracts to deliver on her offer, with deposit and proof of funding."

206. At just after 20.30 hrs on 22 November 2013, Rosenblatt emailed Pinsent Masons enclosing a copy of a letter to the Administrators from Mr. Eastwood which confirmed Blackcube's financial support for Ms. Davey's proposal to the tune of £20 million.
207. Over the weekend, on Saturday 23 November 2013, Mr. Clarke contacted Mr. Money to ensure that he had seen Rosenblatt's letter, and on Sunday 24 November 2013, Mr. Money responded, reiterating that the Administrators were taking Ms. Davey's proposal seriously, but asking for an explanation as to why her funders had changed. Mr. Clarke replied on the 25 November 2013 stating that Ms. Davey had three available funders and asserting that selecting the funder had been delayed because of the delay in her getting information about the amount required to discharge the administration.

Late offers for Angel House

208. Two late offers/indications of interest in relation to Angel House were received by the Administrators on 22 November 2013. Mr. Slatter, who had previously attended the meeting with the Administrators on 18 November together with Ms. Davey, sent an offer on behalf of Olympian Homes of £19.12 million for Angel House. The email indicated that the offer was made in conjunction with London & Regional Properties Limited ("L&R"), and that it was made "without any involvement of Ms. Julia Davey who we understand is acting with other parties". It was explained to me at the hearing that L&R is a company headed by the Livingstone brothers who are generally regarded as serious participants in the UK property industry. The receipt of the bid prompted Mr. Money to circulate it immediately to Mr. Stenson and APAM. Mr. Stenson forwarded the email to Mr. Connolly under cover of an email saying, "I hope you are sitting down ...".
209. In a further email to Mr. Stenson and Mr. Powell, Mr. Money immediately noted that the offer from Olympian Homes exceeded the offer by LBS and that it would enable Dunbar to be repaid in full and provide some payment to shareholders. He indicated that at this level he would be, "happy to upset LBS … but only if we can be sure that we will do better." Mr. Money asked APAM to contact Mr. Richard Livingstone of L&R to verify that the offer was a genuine one, and in the meantime replied to Mr. Slatter to reiterate that given the stage of the process that had been reached, proof of funding would be "absolutely fundamental". This prompted an email from Mr. Livingstone to the Administrators confirming that L&R would be funding the project and promising a formal letter at the beginning of the following week. The promised letter confirming that L&R was prepared to provide up to £20 million to finance the purchase of Angel House was duly provided to APAM on Monday, 25 November 2013.
210. On 24 and 25 November, Mr. Money also had an email exchange with Mr Powell. Mr. Powell advised Mr. Money,

"Richard [Livingstone] is clearly serious. The question is whether he is at north of £19m? Or it is just a strategy to secure the contract before they delay / chip! I'm also worried about Toby and any ongoing discussions with the borrower. Finally, if we now delay LBS, will they be there in a week's time?"

In response, Mr. Money commented,

"We now have the Olympian offer at £19.12m and JD's proposal to take the company out of administration. Both are so materially better than the LBS offer that a) I would like them to succeed, and b) it would be wrong for me simply to take the LBS offer as the easy option when there is a prospect of getting the bank out in full plus either a proportion of or all of the unsecured creditors.

I attach a copy of the letter from JD's latest funder. Have you come across Blackcube?"

211. The second indication of interest received on 22 November 2013 was from a Mr. Chris Willans of Vale Retail, stating that he was acting for Capital & Oriental. He sent an email to APAM attaching an email from Mr. Connaughton which in turn included the text of an email from a solicitor (Mr. Richard Fidler of Thrings) stating that he had been shown bank statements indicating that Affinity had in excess of £17.5 million in its account and was negotiating a joint venture with Capital & Oriental to make a bid to acquire Angel House.
212. During the morning of Monday 25 November 2013, a formal offer letter was sent to APAM by Jirehouse Capital, the same solicitors who had previously acted for Regius Wharf, stating that they now acted for Capital & Oriental, and that Capital & Oriental, with funding from Affinity, was making a formal offer of £17.5 million to buy Angel House. That offer was accompanied by a letter from Mr. Fidler of Thrings to the effect that he had seen a bank statement confirming that Affinity had the necessary funds in place to fund the acquisition of Angel House at that price.
213. At the end of the afternoon on Monday 25 November 2013, Pinsent Masons wrote to Rosenblatt attaching proposed non-binding heads of terms for Ms. Davey's refinancing of AHDL (the "Heads of Terms"). The draft required Ms. Davey to enter into a binding agreement by 2 December 2013 agreeing to make payments to the Company to enable it to make an immediate repayment of £2 million to Dunbar, to repay the full balance owing to Dunbar by 16 December 2013, to meet the administration expenses in full, and to satisfy the Administrators that the Company could meet its unsecured liabilities in full so that they could then seek to terminate the administration. The Heads of Terms also required Ms. Davey to provide proof of funding to the Administrators.
214. The covering letter indicated that the Administrators did not envisage that contracts would be exchanged on Angel House before 4.30 pm on 2 December 2013, and in any event undertook that the Administrators would give Ms. Davey 24 hours' notice of any exchange of contracts on Angel House. The letter also continued to stress the importance to the Administrators of proof of funding being provided by Ms. Davey and questioned the financial standing of Blackcube,

"You will see from the Heads of Terms that our client wishes to speak to or meet your client's funder as a matter of urgency. Our client also requires proof of funding on exchange: by this we mean a contractually binding commitment to fund from an entity which can demonstrate its ability to deliver. We should add that a company search of your client's proposed funder, Blackcube Group Limited, reveals that it was incorporated on 8 November 2013 and therefore has filed no audited accounts. Our client does not consider that a trading period of less than three weeks constitutes an exceptional track record in real estate investment or that a letter from such an entity amounts to proof of funding of a £20m refinancing … In these circumstances, you will understand our clients" concern to address the issue of funding urgently and properly."

The final stages of the sales process and funded rescue proposal

215. On 26 November 2013 Mr. Livingstone of L&R met Olympian Homes to review the numbers underlying its offer. Mr. Sandall subsequently reported in an email to Mr. Money that he had been contacted by Mr. Livingstone and had been told that having looked at the numbers, Mr. Livingstone thought that Olympian Homes' plan was "madness", and that L&R's position was that the best offer that they could come up with would be between £12-15 million.
216. Mr. Money summarised the position that had been reached in an email that evening to Mr. Sandall, APAM and Mr. Stenson (among others),

"I'm afraid that it's been one of those days when it's been impossible to pick up the phone. There have been various developments. Apologies if you are already aware of some or all of these.

First, Olympian's funder has pulled out. Having gone through the figures he concluded that Olympian were overpaying. In his view £12m - 15m was more realistic.

I am due to speak to Eastwood of Blackcube at 9 tomorrow morning to discuss his position as funder. I will let you know the result of that meeting as soon as possible thereafter.

We are supposed to be meeting JD, Rosenblatts et al tomorrow to discuss the mechanics of the proposed refinancing. Time not yet fixed.

LBS remain on hold. I want to wait until we have spoken with Rosenblatts about the proposal before formally issuing a contract to LBS. I understand that they believe that there is a contract race, and are happy to participate. This is not the case right now, but their continued enthusiasm is encouraging. However, we need to be careful, and must not stretch their patience too far.

I was phoned by Oriental and Capital [sic]. They were concerned at the radio silence. I explained that no contracts had been issued due to recent circumstances which had to be addressed first. I was asked what I thought about the time to exchange. They were worried that they had been too prudent, and that 3 or 5 days might have been better given that the funds for the deposit were available. As this was not a negotiation and I did not want to suggest in any way that the offer was acceptable, I merely stated the obvious that 3 or 5 days would generally be better than 15. Although there is a longer completion timeframe, at 17.5m I assume that the extra 450k would exceed accruing interest. Is that correct, or are there other costs to take into account?

After speaking with the funder and with Rosenblatts tomorrow we will be better able to consider the likelihood of JD's proposal succeeding and therefore when to bring LBS into the process. We can also take a view on whether to bring Oriental into the process.

Let me know of any immediate thoughts you may have. I will arrange a conference call for later tomorrow."

217. Mr. Stenson's response later that evening was as follows,

"Thank you for the update. In my opinion the earlier the meeting, with [Ms. Davey] and her advisors, the better but that is obviously your decision as Administrator.

I hope the other offeror, Guildmore, are also in the loop in some way.

I take it then that by virtue of Olympian retracting their position that London + Regional are also completely removed from the picture."

218. As planned, the next morning, 27 November 2013, Mr. Money spoke to Mr. Eastwood of Blackcube. Mr. Eastwood indicated that he had been approached by Ms. Davey and had relied upon what she had told him in deciding to back her. Mr. Eastwood told Mr. Money that he had not had an opportunity to do any due diligence and that he would not be able to look at any documents until the end of the week when he returned to Ireland.
219. Mr. Money subsequently emailed Mr. Eastwood to stress that apart from the need to show the actual availability of the necessary cash, the main concern was that Mr. Eastwood should be able quickly to satisfy himself that he wanted to fund Ms. Davey's proposal. To that end the Administrators offered to provide information to assist Mr. Eastwood's due diligence. Mr. Money backed that up with an email to Mr. Clarke which stressed the need for Blackcube (as potential lender to AHDL) to instruct lawyers to draft the contractual documentation and stated,

"Given the looming deadline, you really do need to get Blackcube working on this right now. Their solicitors will need to receive instructions asap. I'm sure that you and Julia are working on this already, but the ball is very much in your court right now."

(emphasis in original)

The same point was made in a more formal letter by Pinsent Masons to Rosenblatt later that afternoon.

220. Early the same morning, 27 November 2013, Mr. Willans of Vale Retail sent an email to APAM stating,

"Good morning William, I've missed you a couple of times on the phone, I spoke to my clients a few times yesterday. They have the funds sitting on deposit, having drawn them down from the fund. You have solicitors' confirmation of funds, but if you/BDO wish to meet my clients and Affinity we will happily do so.

We are keen to exchange fast now and commit this money, my clients, quite reasonably I think, wish to know where we stand, could you call me please."

221. Mr. Money emailed Mr. Connaughton later that day, stating,

"Further to our call yesterday, I confirm that for now the matter halting a progress on the property sale is still on-going. However, I anticipate being able to return to a property sale process soon. In the meanwhile, a) can APAM contact Affinity to discuss their funding, and b) can you confirm what we discussed yesterday, namely that a 3 to 5 day exchange is realistic?"

222. On 28 November 2013, Mr. Clarke emailed Mr. Money to confirm his understanding of the mechanics of Ms. Davey's proposal. The email sought a statement from Dunbar of the amount needed for redemption of their charge, together with a statement of the Administrators' costs. Those details were provided by Mr. Sandall later that afternoon: the estimated costs of the administration were £1,106,364.24, and Mr. Sandall forwarded a letter from Dunbar dated 18 November 2013 confirming that the redemption figure was £17,973,072.93 with a rate of interest accruing daily of £2,133.91.
223. Behind the scenes, and unknown to the Administrators or Dunbar, Mr. Eastwood had been negotiating terms with Ms. Davey for a joint venture pursuant to which he was to make finance available to AHDL. An agreement was signed between them on 28 November 2013 under which Blackcube would lend AHDL £20 million and Ms. Davey agreed to transfer 50% of her equity in AHDL to Blackcube on exchange of contracts. Ms. Davey also agreed to pay £10,000 towards the preparatory work for the refinancing, and an arrangement fee of 1.5% and interest of 9% on the amount of the refinancing, such amounts to be "rolled up throughout the development".
224. It would appear that at some point Mr. Eastwood commenced some basic inquiries into the viability of Ms. Davey's proposals for AHDL and Angel House, because on Sunday 1 December 2013 they exchanged a series of emails dealing with a number of issues. These included questions about obtaining a valuation of Angel House, Ms. Davey's experience and ability to deliver a development scheme, and the likelihood of obtaining the necessary planning permission.
225. Also on 1 December 2013, Mr. Connaughton left the country for Hong Kong, and on arrival there emailed Mr. Money to inquire what was happening with the bid from Capital & Oriental. He indicated that although Affinity had been trying to speak to APAM, that conversation had not taken place and that Affinity were unclear what more was required of them. The emails passing between Mr. Powell of APAM and Mr. Whitton of Affinity showed that they had each attempted to contact the other but were playing "phone tennis". Mr. Connaughton also indicated that his lawyers were "experienced" and "keen to move quickly", and therefore asked for a draft contract to be sent.
226. On 1 December 2013, final draft heads of terms were agreed between the Administrators and LBS for the acquisition of Angel House for £17,050,000 by Cubitt Property Holdings Limited ("Cubitt"), a wholly owned subsidiary of ED Group Holding Limited, for which LBS was acting as advisor. Consistent with the earlier offer by LBS, the timetable offered was exchange three days after receipt of a draft contract, with completion 10 working days thereafter.
227. By the end of the afternoon on Monday 2 December 2013, Mr. Eastwood emailed Ms. Davey to tell her that it was doubtful that he would finish his (due diligence) work that afternoon, and asked Ms. Davey what her "delay mechanisms" were. At about the same time, Mr. Money also emailed Mr. Clarke to ask for an indication from Mr. Eastwood where he was in the process. Mr. Clarke responded that Ms. Davey was "pressing" and asked for 48 hours "grace". Mr. Money replied,

"I am not going to extend the deadline. I remain nervous, indeed increasingly so, that I will lose the goodwill of the purchasers who have been put on hold.

The opportunity still remains for Julia to secure the business, but right now delay is a risk. It is two weeks since we met, and I don't yet have a loan document. You will appreciate that that is not encouraging.

Do please keep pressing Mr. Eastwood."

228. Later that afternoon on 2 December 2013, APAM gave Mr. Money an update on their Marketing Report. This recommendation summarised the position that had been reached with the various interested parties. As regards Guildmore and Capital & Oriental, Mr. Powell stated,

"1. Guildmore's offer holds but the 14 February 2014 completion is fixed by a Guildmore refinance/restructure they are currently undertaking.

2. Having spoken with [Capital & Oriental] a number of times and requested further detail and clarity of their funding agreement with Affinity and an understanding of why they have changed funding partner 3 times during the bidding process. With limited information forthcoming, APAM requested permission to speak directly with Affinity and, after receiving consent, contacted them directly. After significant chasing APAM spoke with Robert Whitton ("RW") who confirmed that Affinity was in the process of raising a bond; however this transaction would be funded through current available funds. When asked for further details of this funding RW stated he could not provide details. It was left that RW would write an email by 5pm today (not yet received) setting out as much detail on funding as possible and details of transactions Affinity has completed in the last 12 to 24 months as track record. RW confirmed that he had not worked with [Capital & Oriental] before, would need to put in place the structure and all documentation, and so doubted they would be able to exchange in less than 15 days and complete in less than 2 months (as per their present offer)."

229. APAM's recommendation was as follows,

"APAM recommends the Administrators instruct APAM to commence exclusive discussions with [Cubitt/LBS] with a view to instructing solicitors on the basis of the attached Heads of Terms with exchange of contracts within 3 working days of receipt of the draft sales contract.

The main reasons APAM recommends progressing with [Cubitt/LBS] rather than [Capital & Oriental] or Guildmore (despite [Capital & Oriental]'s offer being £450,000 higher) are:

• [Cubitt]/LBS is a special purchaser having purchased the adjacent property for £12m in October

• The extensive due diligence completed by [Cubitt]/LBS - including local searches and rights of light

• Proof of funds (family office)

• Timescale for exchange (3 working days) and completion (10 working days)

• Track record

As has been discussed at length APAM has significant concerns over [Capital & Oriental]'s ability to exchange and complete this transaction for the following reasons:

• [Capital & Oriental] has changed funding partners 3 times during the bidding process

• [Capital & Oriental]'s apparent lack of track record both in terms of the bidding process and evidence of actual transactions they have completed elsewhere

• Concerns over Affinity's source of funding, timescales and relationship with [Capital & Oriental] (see above)

APAM further recommends it is instructed to engage with Guildmore explaining that, whilst detailed terms are being negotiated with the preferred party ([Cubitt]/LBS), they should remain in the process in the event that the preferred party fails to exchange within the agreed timescale."

230. After receiving this recommendation from APAM, Mr. Money emailed Dunbar informing them of his intention to issue a sales contract to Cubitt, and asking whether Dunbar had any objections. Mr. Stenson responded indicating that Dunbar had no objections. Mr Money then emailed APAM asking them to confirm to Cubitt that a contract would be issued shortly, but also asking APAM to inform Cubitt that Ms. Davey could not be excluded from the process but no longer had the benefit of a 24- hour grace period.
231. The contract for the sale of Angel House was emailed by Pinsent Masons to Cubitt's solicitors on 3 December 2013. That morning Mr. Money spoke to Ms. Davey and Mr. Clarke and notified them that this had occurred, saying that realistically they had 2-3 days to trump the sale of Angel House.
232. Thereafter, Mr. Eastwood emailed Mr. Money to apologise for the lack of a draft contract for the loan to AHDL, but indicating that he had been working on the due diligence and that once the loan documentation was acceptable to Ms. Davey, he would instruct his solicitor, Mr. Ross Davidson ("Mr. Davidson"), to transfer what he described as "the deposit monies". After consulting Pinsent Masons, Mr. Money responded to Mr. Eastwood to the effect that he really needed to see the draft loan agreement, but that an initial payment of £2 million would "almost certainly" allow him to postpone the sale of Angel House. Mr. Money ended the email by stressing that the discussion of the mechanics and documentation for the refinancing "does need to happen very urgently now".
233. On 4 December 2013, Blackcube circulated a draft agreement for a secured loan to AHDL of £20 million. The document did not bear Mr. Davidson's firm's name and Pinsent Masons' immediate reaction was that it did not reflect the Heads of Terms. In mid-afternoon, Mr. Eastwood emailed Mr. Clarke and the Administrators to promise a revised loan agreement. He also stated that he had transferred £2 million to his solicitor and that when his solicitor received the money he would be issuing a heads of terms relating to what he described as "the £2m deposit".
234. Pinsent Masons followed up by calling Mr. Davidson. Contrary to what Mr. Eastwood had said, Mr. Davidson told Pinsent Masons that he had not been instructed by Blackcube and that after an initial approach had not been followed up, he had assumed that Blackcube was not proceeding. This led to a further late-night email to Mr. Money in which Mr. Eastwood suggested that there had been a "miscommunication", and stated that Mr. Davidson was instructed and that he would be in contact.
235. In light of the lack of progress and mixed messages from Mr. Eastwood and Mr. Davidson, Mr. Money emailed Mr. Clarke the following morning, 5 December 2013, expressing dissatisfaction with the situation as regards Ms. Davey's proposal and asking for clarification of exactly what was going on, "as I will very soon be in a position to exchange on the property". Pinsent Masons also followed up again with Mr. Davidson, who told them that he had not been the author of the first draft loan agreement, that he had no real knowledge of the proposed transaction and that he was neither in funds nor expecting to receive funds from Mr. Eastwood. Pinsent Masons thereupon sent an email to Rosenblatt reporting on what Mr. Davidson had said and observing that this state of affairs raised very serious concerns about Blackcube's interest and ability to deliver the proposed refinancing.
236. Later that morning, Mr. Money emailed Mr. Eastwood reiterating that the steps needed in order to put Ms. Davey's funded rescue proposal into effect were, (i) payment of £2 million by 6 December 2013; (ii) repayment of the balance of Dunbar's debt by 23 December 2013; (iii) payment of all administration expenses; and (iv) satisfying the Administrators that the Company was solvent such that the administration could be discharged.
237. In response, Mr. Eastwood asked whether, if the initial funds were transferred, Blackcube would be given security by AHDL. He also asked whether, if the £2 million was transferred, the timeframe to completion could be extended. Mr. Money responded that, subject to Dunbar agreeing, a second charge could be granted to Blackcube, and that if the monies were received on acceptable terms, then he would consider extending the timetable for completion of the refinancing. Mr. Money stated that at the very least he would require a solicitor's undertaking from Mr. Davidson that the initial £2 million had been transferred to Pinsent Masons to be held to Mr. Davidson's order pending finalisation of the terms relating to that money. Mr. Eastwood replied that "£2m to Pinsents held to our solicitor's order will be fine by tomorrow". Mr. Money responded, stating "we need to start now, not tomorrow", but that a solicitor's undertaking from Mr. Davidson to Pinsent Masons confirming that funds had been sent would suffice.
238. In the later afternoon of 6 December 2013, Mr. Eastwood sent a further email to Mr. Money asking whether a bank letter stating that the funds were in place would be good enough. Mr. Money responded that no, the money needed to be transferred to Pinsent Masons' account, and asked why Mr. Davidson could not transfer it. Shortly thereafter, Mr. Eastwood responded, confessing that Mr. Davidson was not in fact acting for Blackcube, but had "simply been providing internal council [sic]". Mr. Eastwood also revealed that he had not transferred funds to Blackcube's English solicitors so that no undertaking could be given by them. In a further email, Mr. Eastwood stated that money would not be available until Monday 9 December 2013, and asked whether that would be too late. Mr. Money replied simply stating that he would not be exchanging contracts for sale of Angel House on that day (6 December 2013).
239. At the same time that Mr. Money was pursuing Ms. Davey's refinancing proposal with Mr. Clarke and Mr. Eastwood, he was also being chased by Mr. Connaughton of Capital & Oriental for clarification of what was happening. Mr. Connaughton expressed some frustration at having been led to believe by APAM that he was a top bidder but that the deal was now being given to a third party. Mr. Money replied by email, apologising that potential purchasers of Angel House had not been kept fully in the loop and explaining that the Administrators had been seeking to work on the refinancing proposal from Ms. Davey, which "would have priority over a sale of the property" and that APAM had been instructed not to tell the unsuccessful bidders. Mr. Money indicated that although it was still possible that the refinancing route might succeed, the previous evening the Administrators had decided to proceed with a sale of the property, and that he was now notifying Mr. Connaughton that Capital & Oriental's bid had not been successful. Mr. Money said that the key deciders in the choice of the preferred bidder were the combination of funding and ability to exchange and complete rapidly.
240. Over the weekend, Mr. Money responded to some further requests for information from Mr. Eastwood. However, mid-morning on Monday 9 December 2013, Mr. Eastwood emailed Mr. Money stating that the majority of Blackcube's funds were held in an "offshore structure" and that funds could be in the UK in 24 to 48 hours. The email added that providing evidence that there was a further £18 million to complete the transaction had proven difficult in the timeframe. Mr. Money's response was as follows,

"The timeframe for the receipt of the deposit monies keeps moving out. Further, at this stage the receipt is not, from my point of view, any more than a glimpse of the potential monies.

Your lawyers did not make contact over the weekend in order to familiarise themselves with the transaction, and the nature of the email which I received from you suggested that due diligence has not, to any meaningful extent, been undertaken. Realistically we are no further forward than we were this time last week, or even the week before.

It seems clear that there is little prospect of the deposit monies being released to me before Wednesday or Thursday at the earliest, and there is no guarantee that you will proceed at all. I expect to exchange on the property this afternoon, and will only not do so if I have received the £2m non-refundable deposit before I exchange."

241. Mr. Eastwood replied, confirming that funds could not be in Pinsent Masons' account before 11 December 2013. He subsequently provided a copy of a letter from a Swiss company, BSI SA, headed with a reference to AHDL, and concerning the ability of a Mr. Mehmet Dalman and his Concept Business Group of companies to provide a £2 million deposit for the purchase of "the above-mentioned property". Mr. Clarke also sent an email to Mr. Money complaining of the tight timescales and pleading for more time, and Rosenblatt emailed Pinsent Masons asserting that the sale was being rushed without proper marketing, that it was at an undervalue, and threatening an application for injunctive relief.
242. Just before noon on 9 December 2013, Mr. Money emailed Mr. Stenson updating him on the position regarding both the sale to Cubitt and the funding from Mr. Eastwood, and asking whether there were any matters preventing the Administrators from exchanging with Cubitt that afternoon. Mr. Stenson replied that he was not aware of any such matters.
243. Pinsent Masons then responded to Rosenblatt's letter, stating that the Administrators had provided Blackcube and Mr. Eastwood with ample opportunity to progress their interest, but that the Administrators had received no satisfactory evidence of Blackcube's ability to fund either the £2m initial payment or full £20m refinancing. Pinsent Masons observed that the letter provided by Mr. Eastwood from BSI SA referred to an individual unknown to Mr. Money, to a purchase of Angel House rather than a refinancing, and contained no reference to the non-refundable deposit. The letter also highlighted the lack of progress towards implementing the Heads of Terms and the inconsistent messages from Mr. Eastwood as to the status of the proposal, the instruction of lawyers and the transfer of monies. Pinsent Masons concluded that Blackcube and Mr. Eastwood had not persuaded the Administrators that they were capable of delivering on their proposal and that in the circumstances, the Administrators considered that they had no alternative but to continue with the sale process and to exchange contracts.

The sale of Angel House

244. After the correspondence with Mr. Eastwood and Rosenblatt, the Administrators gave instructions for contracts to be exchanged with Cubitt for the sale of Angel House. This took place at approximately 18.30 hrs on 9 December 2013.
245. After exchange, APAM sent an invoice for their services to the Administrators. That fee was £393,500 (excluding VAT) of which £61,250 represented the Value Enhancement Incentive Fee calculated at 17.5% on the excess of £17,050,000 over £16,700,000.
246. The sale of Angel House to Cubitt for £17.05 million was duly completed on 19 December 2013. Following completion, APAM were paid their fees on 20 December 2013 and Dunbar were repaid £15,978,011.86 from the proceeds of the sale on 2 January 2014.

The proceedings

247. On 31 January 2014, Dunbar issued a claim in the Queen's Bench Division against Ms. Davey seeking to recover the costs of enforcement of the Guarantee. A Defence was served on 7 March 2014, following which Dunbar applied for summary judgment on 14 July 2014.
248. On 12 June 2014, AHDL moved from administration to voluntary liquidation and Mr. Money and a Ms. Rayment of BDO became the liquidators. On 24 June 2014, Ms. Davey applied to have Mr. Money and Ms. Rayment removed as liquidators. Mr. Money and Ms. Rayment then resigned as joint liquidators on 29 August 2014 and were replaced by Mr. Hosking of Quantuma LLP.
249. During 2014, Ms. Davey made a series of payments to Dunbar in relation to her liability under the judgment on her personal guarantee. The final payment was made on 18 July 2014 bringing the total amount paid to £1,742,468.12, which Dunbar accepted as discharging the judgment debt. On the same day as making her final payment, Ms. Davey issued her proceedings against the Administrators under paragraph 75 of Schedule B1.
250. On 7 November 2014, and having taken an assignment of rights of action from the liquidator, Ms. Davey was given permission to amend her Defence in the enforcement costs proceedings to add a Counterclaim against Dunbar. On 12 November 2014 the Administrators served their defence in the proceedings against them. Further pleadings followed in both claims, and after Dunbar's claim was transferred from the Queen's Bench Division to the Companies Court, on 9 February 2015 Mr. Registrar Jones ordered the two matters to be heard together and gave directions for trial.

D. THE ISSUES

251. The Issues identified by Ms. Davey for decision and which formed the structure for the submissions by the parties are as follows:

In relation to the claim against the Administrators

(1) Did the Administrators act in breach of duty from the outset in their approach to the administration?

(2) Did the Administrators act in breach of duty in relation to the appointment of APAM?

(3) Did the Administrators act in breach of duty by failing to obtain a proper price for Angel House?

(4) Did the Administrators act in breach of duty by failing to explore and pursue a funded rescue?

(5) Did the Administrators act in breach of duty by failing to exercise their own independent judgment in the conduct of the administration?

(6) Was any such breach of duty by the Administrators a breach of fiduciary duty?

(7) Was any breach of duty by the Administrators the cause of loss for which AHDL should be compensated?

In relation to the counterclaim against Dunbar

(8) Is Dunbar liable for any breaches of duty on the part of the Administrators by reason of its interference in the conduct of the administration?

(9) Is Dunbar liable in damages for procuring breaches of duty by the Administrators?

(10) Is Dunbar liable in damages for conspiring with APAM to injure AHDL and/or Ms. Davey by unlawful means?

(11) Has Dunbar acted in bad faith towards Ms. Davey or so as to prejudice Ms. Davey in such a way as to cause the Guarantee to be discharged?

(12) If the Guarantee is not discharged under Issue (11), for what sum is Ms. Davey liable?

E. THE CLAIMS AGAINST THE ADMINISTRATORS

Issue 1: Did the Administrators act in breach of duty from the outset in their approach to the administration?

The statutory context

252. Paragraph 3 of Schedule B1 to the Insolvency Act 1986 provides for a hierarchy of objectives of an administration,

"(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.

(2) Subject to sub-paragraph (4), the administrator of a company must perform his functions in the interests of the company's creditors as a whole.

(3) The administrator must perform his functions with the objective specified in sub-paragraph (1)(a) 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.

(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."

253. The structure of this provision makes it clear that an administrator who is pursuing the objective under paragraph 3(1)(c) ("Objective 3") is focussing on achieving a return to the secured creditor (albeit whilst not unnecessarily harming the interests of the creditors as a whole); an administrator who is pursuing the objective under paragraph 3(1)(b) ("Objective 2") is focussing on achieving a better return to unsecured creditors as well as repaying the secured creditor; and an administrator pursuing the objective under paragraph 3(1)(a) ("Objective 1") is focussing on achieving a result in which all creditors are paid in full and the company is restored to financial health for the benefit of its shareholders.
254. Understood in this way, there is a significant difference between the role of the office-holder in an administration on the one hand and in a receivership or administrative receivership on the other. A receiver or administrative receiver owes his primary duties to his appointor and is generally free to determine when and how to realise assets to repay the secured debt without consideration for the interests of the unsecured creditors or the company itself. In contrast, in deciding how to run the administration, an administrator is required to have regard to the interests of all of the company's creditors, and he can only limit his ambition to seeking to realise assets to repay the secured creditor if he thinks that it is not reasonably practicable to achieve anything else. Even then, he must not unnecessarily harm the interests of the creditors as a whole.

Standard of review

255. Given the range of interests to be addressed under paragraph 3 of Schedule B1, the use of the expression that the administrator "thinks" rather than, for example, "reasonably believes" is a clear indication that Parliament intended a degree of latitude to be given to an administrator in deciding upon the objective to be pursued, and that he is not lightly to be second-guessed by the court with the benefit of hindsight. In Lightman & Moss, The Law of Administrators and Receivers of Companies (6^th ed.) at paragraph 12-022 it is suggested, by reference to case-law and the legislative debate upon this provision, that the appropriate standard of review by the court should be one of good faith and rationality. This would mean, for example, that an administrator's decision not to pursue the first objective will only be open to challenge if it was made in bad faith or was clearly perverse in the sense that no reasonable administrator could have thought that it was not reasonably practicable to rescue the company as a going concern. I agree with that approach. Though obviously important for creditors and shareholders, the assessment of the practicality of following one or other objective (e.g. whether a company which is insolvent or on the brink of insolvency can be rescued) will most likely require the exercise of a substantial amount of commercial judgment, often under significant time pressures. I see no good reason to adopt any more interventionist standard of review of an administrator's opinion in this regard than is applied more generally by the courts to the question of whether to interfere with specific business decisions taken by administrators: see e.g. Re Edennote Ltd [1996] BCC 718.
256. That said, I would also endorse the point made in paragraph 12-023 of Lightman & Moss that the more deferential standard of review of the decision of the administrator as to which objective to pursue does not also extend to the methods adopted by the administrator to pursue his chosen course. In particular, the administrator can only follow Objective 3 if he does not unnecessarily harm the interests of the creditors of the company as a whole. That statutory requirement in paragraph 3(4)(b) is not couched in terms of what the administrator thinks, but appears to invite a more objective standard of review. That is relevant for my consideration of Issue 3.

Ms. Davey's case

257. The gist of Ms. Davey's case under Issue 1 is that from the outset the Administrators wrongly assumed that this was simply an "Objective 3" case, and wrongly disregarded Objectives 1 and 2.
258. As regards Objective 2, Ms. Davey contends that the Administrators were engaged by Dunbar for what was envisaged to be a "light touch" administration, that they committed themselves at the outset to a very low fee structure, and that they failed to obtain adequate or reliable evidence as to the value of Angel House upon which to base their assessment of whether it would be reasonably practicable to make a return to unsecured creditors. She contends that they therefore wrongly boxed themselves into an assumption that the only objective to be served by the administration was to sell Angel House simply to make a distribution to Dunbar as the secured creditor in accordance with paragraph 3(1)(c) of Schedule B1 (i.e. Objective 3). This Issue, as I understand it, is one that goes to the purpose of the Administrators from the start of the administration. This is a wider point than the separate question of whether the Administrators breached a duty of care by failing to obtain a proper price for Angel House, thereby depriving unsecured creditors of the possibility of some return from the administration. That is Issue 3.
259. As regards Objective 1, Ms. Davey asserts that by reason of personal hostility towards her and/or a desire to assist Dunbar to pursue a guarantee claim against her, from the outset the Administrators failed to consider, and failed to consult with her as the director and shareholder of AHDL, as to how they might achieve the objective of rescuing AHDL as a going concern in accordance with paragraph 3(1)(a) of Schedule B1. Again, I understand this to raise a wider point than the particular question of whether, at a much later stage in the administration in November 2013, the Administrators failed appropriately to pursue the possibility that Ms. Davey could have provided a funded rescue for AHDL which would not have required the sale of Angel House. That is Issue 4.

Objective 2

"Light touch" administration and fees

260. It is certainly true that several documents refer to the initial intention of Dunbar, and the acceptance by the Administrators, that the administration of AHDL should be a "light touch" administration. However, when considered in context, I am satisfied that this referred, as Mr. Money explained in his oral evidence, to an administration in which he would not be heavily involved in the day-to-day running of the business of the company, but would rely upon employing agents to manage the operational aspects of the continuation of that business.
261. So, for example, in Mr. Money's pre-administration discussions with Dunbar as recorded in his email of 26 November 2012, Mr. Money's emphasis was on the majority of operational activity (such as the collection of rentals and service charges from Angel House) being managed by agents, with his own management costs being kept low. Likewise the observations in the Strategy Notes document of 2 January 2013 and under the heading "Administrators costs" in the report of 14 March 2013.
262. As to the arrangements on fees, it would obviously be unreal for an administrator not to have any discussion of the likely level of his fees with a secured lender who is considering appointing him as administrator. Such discussions do not, however, carry any necessary implication - as suggested by Mr. Davies - that the administrator can or will tailor the selection of the purpose of the administration depending on how much he is paid. The point was addressed by Mr. Money in cross-examination,

"Q. The statute, Mr Money, doesn't contemplate even the possibility of agreeing fees for the entire administration prior to appointment, does it?

A. Well, there you are. I mean it is perfectly reasonable, it is perfectly normal to discuss fees with a lender.

Q. My question is a simple one. It was predicated on the basis that it was an objective 3 case.

A. It is predicated on the basis that -- you are not thinking -- no administrator, no insolvency practitioner, when discussing fees with a lender before the start of an administration, is looking at it in terms of: is it objective 1, 2, 3? You are looking at it in terms of what you think you are likely to have to do during the course of an administration."

And later,

"A. I think my view of a light touch approach is an administration where you are not heavily involved in the day-to-day running of the business over which you have been appointed as administrator. I don't think it applies -- it's not relevant to your approach to your statutory or legal obligations or anything else. It is simply a reflection of what you are doing on a day-to-day basis."

263. In this regard, the suggestion was put to Mr. Money that he had agreed a cap on his fees for the administration in the sum of £42,000 with Mr. Stenson on 18 December 2012. Mr. Money was unable to recall that when giving evidence, but it would seem from the contemporaneous documents that although he had originally given an estimate of £61,000, he was persuaded to reduce that estimate to £42,000 to match a rival quotation from Rollings Oliver. Mr. Money recorded that lower amount as his estimate of fees in a handwritten comment on the Administrators' internal strategy document on 3 January 2013 and it is also the figure referred to as a "fee quote" by Mr. Sandall in his progress report of 14 March 2013.
264. Mr. Money's oral evidence on the point was that even if he had agreed such a cap it would not have prevented him from doing the appropriate amount of work,

"Q. But you had agreed a cap, had you not, with Dunbar? Hadn't you?

A. Well, I think as I have already said, I'm not sure that I'm certain that I had agreed a cap or that at the time of doing this work -- certainly, even if a cap had been agreed with Dunbar at that amount, then once you are in you are in, and it is as simple as that, you do the work you need to do."

265. That evidence is consistent with Mr. Sandall's progress report of 14 March 2013 that stated that due to the unexpected difficulties in the administration, the Administrators had recorded fees for work-in-progress (WIP) that exceeded the quoted figure of £42,000 and were seeking an opportunity to discuss future fees and how they were going to be met. There was no suggestion that the Administrators had simply stopped work or modified their approach to stay under the quoted fee.
266. Mr. Stenson's evidence showed a slightly different understanding, but one in which the Administrators would still be at liberty to carry out all necessary work in the administration. He said that he viewed the agreement as having set a cap of £42,000 for the "run-of-the-mill" steps required to be taken in the administration, but that he understood that anything extra would be paid for. He also pointed out - credibly - that it was obvious that Dunbar could not insist that the Administrators should work for nothing, and that it would not have been in Dunbar's own interests to insist on adherence to a cap and thereby alienate the Administrators if the matter had turned out to be more complex than envisaged,

"Q. You, of course, thought that you had capped his fees at [£42,000], subject only to there being some particular complexity at the end, didn't you?

A. It would have been looked upon merely like a phased approach to it. So phase 1 of it, which would be the general administration matters that would have been seen as run-of-the-mill, would have been capped. For anything else that would have been deemed above and beyond that, they would be entitled to -- you can't expect them to work for free. Also if we had reached a cap and there was severe complexities that were seen with the property, they would not have been aligned with us and would not have had the enthusiasm to continue on with the role, so there is an unknown quantity within that formulaic approach."

267. I also do not think that the remainder of the evidence as to what occurred during the administration supports a conclusion that Mr. Money was constrained in the exercise of his functions as administrator by his discussions or arrangements on fees with Dunbar. In particular, there is no evidence that Dunbar ever sought to use this matter to inhibit or restrain Mr. Money's conduct of the administration, or any evidence that Mr. Money understood that he was so constrained.
268. This conclusion is also consistent with how matters turned out when the issue of fees came to be discussed in January 2014 after Angel House had been sold. The Administrators claimed significantly more than £42,000 on the basis that the matters with which they had had to contend had taken the case outside the scope of the "light-touch" administration that had been envisaged. In a lengthy email to Mr. Stenson and Mr. Connolly, the Administrators referred in particular to the lack of proper information, systems and staff support at Angel House; the fact that it had taken several months of work before receipts from Angel House could even meet trading costs; the fact that (contrary to their understanding at the outset) the planning application was far from complete; and that substantial time had been spent dealing with the sales process and with Ms. Davey's funded rescue proposal. Although Dunbar challenged the Administrators' fees, it did not seek to enforce any 'cap' of £42,000. Dunbar's approach was to take issue with the Administrators' assessment of the matters that should be regarded as part and parcel or outside the scope of a normal administration, but it eventually agreed a significantly increased fee.

Valuations of Angel House

269. Ms. Davey alleges it was essential for the Administrators to obtain at least one independent valuation of Angel House, addressed to them, when assessing their strategy for the administration, and in particular when deciding whether it was feasible to pursue Objective 2 in the administration. The Administrators accept that they did not obtain such a formal valuation for themselves, but contend that this was not necessary and their decision not to do so was not irrational given the other evidence that they had at the time as to the value of Angel House.
270. As indicated above, Mr. Money's evidence was that he thought that he had been told by Mr. Stenson in November 2012, prior to the commencement of the administration, that the value of Angel House was in the region of £8 million without planning permission and £11 million with planning permission. I do not, however, think that this is a reliable recollection. It is not the subject of any contemporaneous note, and it is not consistent with other contemporaneous evidence of the view of the Administrators.
271. In particular, the Administrators' internal Strategy Notes prepared on 2 January 2013 and signed by Mr. Money on 3 January 2013 clearly record a belief that if planning permission was obtained, the value of Angel House would be sufficient to repay Dunbar. The Strategy Notes also record the possibility of achieving a better result for unsecured creditors than in a liquidation in that event. That suggests that the Administrators initially thought that the value of the property with planning was likely to equal or exceed the Dunbar debt which was then thought to be about £17 million. That conclusion is also consistent with the views expressed by Mr. Sandall to Ms. Davey on the telephone the next day, 4 January 2013, where he repeated that the main objective of the administration was to obtain planning permission and thereby to be able to sell Angel House for a price that would settle the Dunbar debt. Mr. Sandall's note records that he told Ms. Davey that,

"the £17m figure is the baseline from which we want to work and anything above that would be to her benefit."

272. What I suspect has occurred is that Mr. Money has confused his earlier impression as to the value of Angel House which is likely to have been obtained from earlier discussions with Mr. Stenson, with the information that he acquired after appointment in January 2013, when he saw a copy of the draft Savills Report. As indicated above, in that draft report, Savills expressed the view formally that Angel House was worth between £6 million (without planning) and £8 million (with planning on the basis of the existing application), but informally indicated that the value (with such planning) might be up to £10 million.
273. Although there is no documentary evidence of Mr. Money having been sent a copy of the Savills Report, his evidence was that he recalled a meeting at Dunbar's offices in the second week of January 2013 when he was given a copy of the draft report (without appendices). That account is to some extent supported by Mr. Stenson's evidence that he recalled sending Mr. Money a copy of the Savills Report in January 2013.
274. Mr. Money's evidence was that because the Savills Report was a "Red Book" valuation, there was no reason to think that if he had gone to another valuer, any very different advice would have been obtained,

"MR JUSTICE SNOWDEN: … 'Why didn't you consult an independent professional adviser?', is what you are being asked, very shortly.

A. Right. Okay. Because, in the first instance, we had a valuation from Savills, and I believe, notwithstanding the fact that that valuation had been prepared for Dunbar, that given what it was indicating in there, it was not unreasonable to use that as a pretty reasonable or a pretty sound basis for forming a view on the likely value of the property. There was no reason to think that if I had gone to another valuer there was any reason why the number should have been different.

If it had been -- and again, I can only look back and say, you know, "what if" it had been a valuation that was prepared that wasn't a Red Book valuation, that was, for example, just something based using, you know, a bit of Argus software to come up with some numbers without the due consideration that goes with that; would I, in circumstances such as that, have acted differently? Well, I don't know, because the circumstances weren't different. I had the Red Book valuation there."

275. The experts generally agreed these points. Mr. O'Connell thought that it was unnecessary for the Administrators to have obtained a duty of care letter or to have commissioned a new report addressed to them from Savills; and Mr. Shierson ultimately accepted that even without it being addressed to them, the Savills Report could legitimately have formed part of the Administrators' "collation of information" at the commencement of the administration.
276. Mr. Shierson also accepted that the figures in the Savills Report would themselves have justified the decision of the Administrators to seek planning permission, and would have gained some greater credence from the Statement of Affairs that Ms. Davey subsequently provided to the Administrators on 31 January 2013,

"Q. You say that in circumstances where the intention was to try and get the planning consent, they had to have a valuation before they started. Another valuation …. Is that really your view?

A. They needed to -- well, you can actually use a Savills report to say pursuing this planning application is justified.

Q. Yes.

A. So you wouldn't need a second valuation to support the pursuit of the planning application.

Q. No. So do you agree with me that there is nothing wrong with Mr Money's decision to proceed on the basis of the Savills valuation in January and February of 2013 in concluding (a) that it was likely … that there would be no surplus for the unsecured creditors, and (b) in seeking to pursue the planning permission?

A. I think if we look at the way that subsequent events unfolded, he received a director's statement of affairs with a figure of £8.5 million in that. It seems to add greater credence to the Savills valuation."

277. The additional material giving credence to the Savills Report included, but was not limited to, the Statement of Affairs that Ms. Davey provided to the Administrators on 31 January 2013. The Administrators also had the value ascribed to the property in AHDL's audited accounts to 30 April 2011 (which had been signed by Ms. Davey on 19 April 2012), and in the unaudited management accounts to 31 August 2012 (sent to Dunbar on 20 November 2012 and forwarded to the Administrators on 8 January 2013 by Mr. Stenson). As I have indicated in the chronology above, the 2011 audited accounts contained a note to the effect that the directors believed the existing use value of Angel House to be £8.5 million and that this equated to market value in April 2011; the same value was used as the basis for the value of fixed assets in the management accounts to 31 August 2012; and Ms. Davey signed the Statement of Affairs on 31 January 2013 with a statement of truth which also confirmed that the "estimated to realise" value of Angel House was £8.5 million.
278. Ms. Davey's evidence was that the figure shown in the 2011 audited accounts was what she genuinely believed Angel House to be worth at the end of 2011, but that during mid-2012 there was "a lot of excitement in the area" and "the value for anything there started to creep up". Ms. Davey said that she included the value of £8.5 million as the "estimated to realise" value for Angel House in the Statement of Affairs not because that was what she thought the building was worth, but because that was what she was advised to do by her accountant at the time.
279. Whatever the motivation behind that advice from Ms. Davey's accountant, or her own willingness to follow it, the Administrators were not aware of it. The experts agreed that the result was therefore a value ascribed to Angel House in the Statement of Affairs that the Administrators were entitled to take at face value.
280. This indeed appears to have been what occurred. I accept Mr. Money's evidence that he used the information in Ms. Davey's Statement of Affairs and in the Savills Report (though not explicitly identified as such) as the basis for his comments in the Administrators' Proposals to creditors which were circulated on 21 February 2013. Those proposals included the following paragraph,

"Assets subject to fixed charge

4.2 The director has ascribed a value of £8.5 million to the Angel House property. The joint administrators have not commissioned a formal valuation of the property but documents to hand indicate that £8.5 million would be at the upper-end of the current market value."

281. I also accept that the Administrators behaved entirely rationally in taking these matters into account in formulating their strategy in the early days of the administration. They were entitled to believe what Ms. Davey told them in the Statement of Affairs and although they might not have been able to bring an action in negligence upon the Savills Report because of the limitation of liability clause in it, being a "Red Book" valuation from a leading firm, it was reasonable to assume that the highest level of care had been taken in its production.
282. I therefore conclude that there is nothing in the evidence to support a conclusion that the Administrators acted irrationally in forming the view that it was unlikely to be reasonably practicable to make any return to unsecured creditors. I also note that even if the Administrators had concluded that pursuit of Objective 2 was feasible, I cannot see that they would have gone about the administration at the outset in any different way. The Administrators decided to manage the property and collect the income from it efficiently, whilst attempting to obtain planning permission that would likely serve to increase its value. Those steps would have been the same under Objective 2 or Objective 3. At that stage, whether it was likely that a return to unsecured creditors could be achieved rather than merely a return to Dunbar on its secured debt would have been thought simply to depend upon the ultimate sale price that could be obtained.

Objective 1

283. Before considering the specific complaints in this regard, it is worth identifying clearly what Ms. Davey's case in relation to Objective 1 would have to amount to. The concept of rescuing a company as a going concern is not achieved by successfully realising all of its assets so that distributions of surplus monies can be made to shareholders after paying creditors in full. It connotes the retention of all or a material part of the business of the company together with the restoration of the solvency of the company so that the company can properly continue to trade as a going concern.
284. AHDL was essentially a one-asset company, whose business entirely depended upon owning and managing Angel House. The concept of rescuing AHDL as a going concern would necessarily preclude selling Angel House. As a practical matter there was, moreover, simply no question of achieving Objective 1 by improving trading performance to such an extent that AHDL could generate sufficient cash internally to pay off all its creditors (including Dunbar) or by persuading the creditors (including Dunbar) to agree to waive a substantial proportion of their debts so as to restore the company to solvency. The only way in which Objective 1 could have been achieved was by finding a person or persons willing to recapitalise or refinance AHDL with new money so as to enable the existing debt owed to Dunbar, administration expenses and the unsecured creditors to be paid without selling Angel House.
285. Ms. Davey's complaint in relation to Objective 1 appears to be that the Administrators did not seek to consult her at the outset of the administration of AHDL, but instead adopted an adversarial approach to her, including seeking to assist Dunbar to pursue her under her personal guarantee. Mr. Davies contends that the Administrators therefore did not treat Ms. Davey from the outset as their "best means" of achieving the rescue of AHDL as a going concern.

A duty to consult with Ms. Davey?

286. In his written Closing Submissions, Mr. Davies went so far as to contend,

"Fundamentally, the only way in which an administrator can assess the question whether he thinks that the company can be rescued as a going concern is to consult with the director/shareholders, explain that this is his top-ranked priority by statute - i.e. which he must achieve if he can - and invite their proposals or confirmation that such is not feasible."

I reject that submission, which I think puts matters far too high.

287. Of course, a newly appointed administrator will wish to familiarise himself rapidly with the affairs of the company to which he is appointed, and he must devise proposals to put to creditors. Seeking information and the views of the directors and shareholders as to the prospects for the company may well be a sensible step in most cases. However, there can be no "fundamental" rule requiring the administrator in every case to go through a process of consultation with the directors and shareholders, still less that he should seek their "confirmation" that rescue of the company as a going concern is not feasible. In many cases the administrator will have been appointed to bring independent judgment to the case precisely because the directors of the company, appointed by the shareholders, have presided over the decline of the company into insolvency. Such directors and shareholders may often have an entirely unrealistic and over-optimistic view of the company's business and prospects for rescue.
288. Nor does the case of In Petition of Blair Nimmo; Re Station Properties (In administration) [2013] CSOH 120, which was relied upon by Mr. Davies, support his submission. The case concerned an application by administrators for directions as to whether, and if so how, they should exit administration after three years on the basis that the purposes of the administration had been sufficiently achieved. The directors had made a proposal to secure sufficient new funding to allow the company to repay its creditors in full and exit administration as a going concern, but doubts still existed over the claim of one significant creditor. Lord Hodge indicated that before a company could be treated as having been rescued as a going concern, the administrators had to look into the foreseeable future, assess the prospects of the company trading successfully in the hands of the directors to whom it was to be returned, and decide whether it was probable that the company would be able to pay its debts as they fell due.
289. It was in that regard that Lord Hodge referred to a comment from Lightman & Moss concerning the importance of the directors' proposed business plan for future trading, and continued,

"I think that that quotation helpfully points up the need for an administrator to discuss with the directors of the company in administration their proposals for the company's business. I do not see how an administrator can make the required assessment without obtaining a clear understanding of the directors' business plan and cash flow forecasts and forming an independent view, in the light of the best evidence reasonably available, whether that plan and those forecasts are realistic."

290. The assessment by the administrator to which Lord Hodge was referring was entirely different from the instant case. If the issue is whether the company can continue trading as a going concern in the hands of its directors after the termination of the administration, then self-evidently it will be necessary for the administrator to consult the directors and be satisfied as to the viability of their business plan for that post-administration period. That is because the administrator will be returning the control of the company to their hands. But that is completely different from saying that it is essential for a newly appointed administrator to consult or seek confirmation from shareholders at the start of the administration.

Ms. Davey's own position

291. On the facts of the instant case, and before dealing with the detail of what the Administrators did or did not do to ascertain whether a rescue as a going concern was feasible, it is worth putting Ms. Davey's complaint into context by noting the candid account that she gave in cross-examination of her own efforts to achieve a funded rescue and her own game-plan at the start of the administration.
292. As indicated above, prior to the appointment of the Administrators, on 10 December 2012, Ms. Davey made a proposal for a standstill to Dunbar and outlined her view that the current planning proposal was not ideal and should be amended. She ended her letter,

"Notwithstanding the above proposal I am in early negotiations with potential investors with a view to paying Dunbar to cancel the loan and security over the property."

293. Ms. Davey was asked in cross-examination about this statement,

"Q. Who were the investors, plural, with whom you were in early negotiations?

A. One which I have already discussed, which was the Louis Vuitton [Group], William Moulin, and the second one was an Israeli Group that. I was talking to, to look at rescuing the whole of the Group and Angel House Developments as well.

Q. Did those efforts come to nothing?

A. I stopped talking to Louis Vuitton when we went into administration. I had gone with them with one building that was out of administration and a sort of a company that was in, and once we went into administration on Angel House Developments, it became too messy, and so the Israelis decided to pull out too.

Q. Yes. I would just like to understand why it was that you gave up when Angel House went into administration.

A. I did not give up. I just gave up that level – that process, because it was much more difficult then. It wasn't -- I gave up trying to find a Funded Rescuer at that point."

(my emphasis)

294. That evidence was consistent with Ms. Davey's earlier evidence,

"Q. Between 26 November [2012] and October the following year, did you pursue the possibility of a sale of the property?

A. Yes. I actually was trying to bring in a Funded Rescue, which was Louis Vuitton, up to the point of administration. Once administration happened, then no.

Q. Why?

A. Because I wasn't in control any more. It appeared at the time that we were going through the planning and so to wait for the planning and then to look at the situation after that --

…

Q. What were you expecting to happen during the period of administration, Ms Davey? Were you expecting it to be sold or to be handed back to you on a plate, or what?

A. I was expecting that we would -- the Administrators would get the planning, that it would be then either advertised fully to the market with the benefit of the planning, or -- and that I would then come along and take out the debt once the planning had been achieved. That is what I was expecting.

Q. So --

A. I wasn't expecting it to be handed to me on a plate, no.

Q. How did you think you were going to be able to take it back, in circumstances where you apparently had no money with which to pay off the bank?

A. No, I didn't have the money, that is true, but there were a lot of people around at the time who did have the money.

….

Q. What did you do about trying to pay off the debt and take it out of administration during the first ten months of 2013?

A. Nothing, my Lord. I was waiting for the planning to go through.

Q. Your position was you were prepared to sit back and let Dunbar pay for the planning, in the hope that you would then be able to take it back; is that right?

A. Yes, my Lord. Had I -- yes."

(my emphasis)

295. Given those answers, I simply cannot see how Ms. Davey can realistically now criticise the Administrators for failing to consult her at the start of the administration in relation to the prospects for achieving a rescue of AHDL as a going concern. It is quite clear that Ms. Davey was not herself in any position to mount a funded rescue and knew of no such prospects at the time. Her view as to whether there might be any prospect for a funded rescue in the future was pure speculation, and depended entirely upon there being sufficient rental income available to the Administrators to fund, or upon Dunbar being willing to fund, continuing trading operations of the Company and the progression of the planning application in the meantime.
296. The evidence also indicates that having lost control of AHDL, Ms. Davey was (to use her own words) "prepared to sit back". I consider that the events at the start of the administration show that Ms. Davey harboured a real reluctance to accept that she had lost control of her companies. As someone who was used to being in charge, I think Ms. Davey was determined to continue to work to her own agenda, priorities and timescales rather than to comply with the requirements of the Administrators. This gave rise to the justifiable perception on the part of the Administrators that Ms. Davey was, at best, lacking any real sense of urgency or commitment to assist them, and at worst that she was being positively obstructive in circumstances where there were unfulfilled requests for information and unanswered questions over her dealings with the Company's funds.
297. Ms. Davey was, for example, prepared to ignore the legitimate requests of the Administrators for assistance and information when it suited her: she delayed provision of the details concerning the bank accounts of AHDL until early January 2013 so as to give herself the opportunity to remove funds from those accounts. She was also slow to comply with the Administrators' requests for provision of a Statement of Affairs and a questionnaire concerning AHDL, only doing so at the very last minute having been refused further extensions of time.
298. Ms. Davey also gave instructions to members of staff at Angel House not to provide information and assistance to the Administrators until she had given her approval. In evidence, Ms. Davey explained to me that her reason for so doing was to enable her to check what the staff were being asked to provide. But in law, Ms. Davey was simply not entitled to interfere with the conduct of the administration in that way, and I consider her answer to be indicative of an unwillingness on her part to accept that she had lost control of the Company.
299. The problems of such a course were compounded by the events of 1 February 2013, when Ms. Davey chose to prioritise her own agenda, cancelled the pre-arranged meeting with Mr. Money at short notice, and did not leave sufficient time for a meaningful meeting with Mr. Sandall notwithstanding that he had gone to the trouble of travelling to Angel House to see her. From the perspective of the Administrators at the time, I consider that these events gave rise to entirely reasonable suspicions as to Ms. Davey's conduct and motives.
300. Those impressions were reinforced when Ms. Davey also decided, for reasons that she was unable to explain clearly to me, not to attend the meeting with the Administrators which was subsequently arranged for 12 February 2013, which she acknowledged in evidence was an important meeting. Moreover, after Mr. Money wrote to her again on 18 February 2013 to suggest a meeting during the week of 24-28 February 2013, it was not until 27 February 2013 that Ms. Davey telephoned Mr. Sandall to apologise, and to say that she would call to confirm a meeting for the following week when she was hoping to be in the UK. But she never did.
301. Ms. Davey's attitude that it was for her, and not the Administrators, to decide what her priorities should be and what she should do, was neatly summed up in the following exchanges during her cross-examination,

"Q. But you never did call, and you never did meet with them at that stage, did you?

A. No. No I didn't.

Q. Why not?

A. I think if you look at the first part, I was having some issues with my daughter with her schooling and stuff, and I actually took the view at the time that I needed to focus on her. I was juggling a lot of balls all at the same time, and it was really -- she took my priority.

Q. I understand that, but you complain that the Administrators are not discussing planning with you, and here are they saying they are happy to meet, you saying you will meet, and yet time after time you don't meet, and you cancel meetings.

A. I agree with you. This was in the early part of the year, and yes, I took the view very early on that as it was proceeding as planned, that it wasn't such an issue for me not to be so heavily involved. I think the same point, by this point I had received the first demand, I think, from Dunbar under the guarantee, and that had sort of soured my perception a little bit of why they were pulling on the guarantee so quickly. There was an awful lot going on. I'm sorry."

(my emphasis)

And later,

"Q. But why didn't you, at this stage, four months after you were first asked, engage with the Administrators and meet them and discuss all these things with them?

A. I was too busy, then, by that point, dealing with my guarantee matters and things. On reflection I should have met them. It would have probably helped enormously."

302. Against this background, Mr. Shierson and Mr. O'Connoll were of the joint expert opinion,

"We agree that Ms Davey can reasonably be characterised by the Administrators as an uncooperative director.

We agree that Ms Davey was inactive with regard to this administration and [Angel House] between February 2013 and September 2013 …"

I agree with those assessments.

Were the Administrators hostile to Ms. Davey?

303. Ms. Davey contends that from the outset the Administrators wrongly adopted an adversarial or hostile approach to her and sought to assist Dunbar to bring its guarantee claim against her.
304. I do not think that the evidence supports the proposition that the Administrators were either adverse or hostile to Ms. Davey at the start of the administration. I have set out in the factual narrative my summary of the initial contacts between Mr. Sandall and Ms. Davey, which were cordial. The internal notes and reports during January 2013 also show that notwithstanding Ms. Davey's initial failure to provide bank account details, the Administrators thought that there could be a productive relationship and that Ms. Davey was likely to be "an asset".
305. However, on 1 February 2013, after Ms. Davey had cancelled their meeting at short notice, Mr. Sandall drafted an email to Ms. Davey seeking to rearrange the meeting, request documents, to complain about Ms. Davey instructing her staff not to cooperate with the Administrators unless given her permission to do so, and to remind Ms. Davey of her statutory duties and the provisions of the Company Directors Disqualification Act 1986. Mr. Sandall sent the draft to Mr. Money under cover of an email which said,

"James, I'm feeling a little venomous ... please approve/moderate."

306. Mr. Davies' written closing suggested that this email followed the complaint being made by Mr. Daniel to Mr. Money concerning Mr. Sandall's conduct at Angel House and that it showed that Mr. Sandall had "taken against" Ms. Davey. It is quite clear on the chronology of events, however, that this email at 2.25 p.m. preceded rather than followed Mr. Sandall's visit to Angel House later that afternoon. The draft to Ms. Davey was firm in tone, and indeed Mr. Money added a number of more explicit instructions and warnings to Mr. Sandall's draft. Although the covering email to Mr. Money indicated that Mr. Sandall was feeling "a little venomous", I think Mr. Sandall was entitled to feel frustrated by the very late cancellation of the meeting and the lack of co-operation from Ms. Davey in relation to the provision of information and documents.
307. Mr. Davies also placed reliance upon the question raised by Mr. Money in his letter to Dunbar of 11 December 2012, ("Would you benefit from having an administrator, with his associated powers, as part of your strategy in pursuing the director/shareholder?") together with the subsequent actions of Mr. Money and Mr. Sandall in early February, making arrangements to facilitate Dunbar serving their claim under the Guarantee personally upon Ms. Davey.
308. The background to those actions was that Dunbar served the proceedings at Ms. Davey's residential address in Whitefriars on about 8 February 2013, but it was uncertain whether she might have received them, and Dunbar's solicitors, DLA, wished to effect personal service. Arrangements were made for this to occur on 12 February 2013 if Ms. Davey had attended the meeting with the Administrators at their premises. After Ms. Davey did not show, Mr. Sandall subsequently contacted DLA on 7 March 2013 to inform them that Ms. Davey was expected in London and offering to notify them if she appeared at Angel House. In fact, Ms. Davey was served personally on 9 March 2013 without the assistance of the Administrators: when this was reported to Mr. Sandall, his reaction was, "Good news".
309. When asked about this in cross-examination, Mr. Money was hesitant and did not seek positively to justify the Administrators' actions,

"If this was a bit over-enthusiastic in terms of supporting Dunbar, my own view is that working with Dunbar wasn't -- there wasn't a particular issue with working with Dunbar, they were going to serve her anyway, so I didn't have an issue with assisting with that, or at least providing the information that might be of assistance to them."

310. Mr. Davies also drew attention to some further assistance that Mr. Sandall gave to Dunbar in late April 2013. On 30 April 2013 Mr. Sandall sent an email to Dunbar setting out, "my sheet of miscellaneous details I have collected about Julia during my time on this case". The information provided included personal details relating to Ms. Davey, her assets and her family, some of which had been taken from the director's questionnaire which Ms. Davey had sent to the Administrators. Mr. Money was cross-examined about this,

"Q. Mr Money, I am just going to put it to you: you had absolutely no business providing to Dunbar personal details of the nature … It just was not something that was appropriate to do, was it?

A. The reality is that it probably was not appropriate to provide all of this information.

Q. Why wasn't it, Mr Money?

A. There are -- I suspect there are issues here about a certain amount of information that should have remained confidential, and didn't remain confidential as a result of this information being disclosed. I would also say that the majority of this information -- well, a large amount of this information was information that, you know, could be gleaned from the Internet and other sources, or probably should have been left to Dunbar to find.

Now, I was responsible for the case, there was a manager who was keen to be as helpful as he could to a lender, and he was more helpful, perhaps, than he should have been, and I was -- you know, I would love, with the benefit of hindsight, to say, you know, there was some stuff there that shouldn't have gone across.

Q. You were working together against Ms Davey. It is very simple, isn't it?

A. No. I don't think it is simple, my Lord. I don't think we saw ourselves as working together against Ms Davey. What we were doing was working together to maximise recoveries, and I think there is a difference there in terms of, I suppose, the focus, so --

MR JUSTICE SNOWDEN: How would the provision of this information to Dunbar have maximised the recoveries in the administration?

A. Only by -- how would it have -- I suppose only by potentially, from our point of view, if there was a -- as a result of this, if we were provided with information about where some of the transactions that we were interested in might have originated from, that might have meant that we were able to pursue some recoveries. I mean, it is difficult now, looking at this, to say how that would have benefitted the administration."

311. Although Mr. Money faintly attempted to justify the provision of this information to Dunbar by Mr. Sandall, I do not think that it could be justified. As Mr. Money eventually accepted, the provision of this personal information concerning Ms. Davey to Dunbar could not have benefited or furthered the purposes of the administration, and to the extent that it was information which had been obtained by reason of Ms. Davey's statutory obligations to assist the Administrators, it had not been given to the Administrators for purposes other than the proper conduct of the administration.
312. Taking these matters together, I accept Mr. Davies' submission that assisting Dunbar to serve the Guarantee proceedings upon Ms. Davey and providing Dunbar with personal information concerning Ms. Davey were actions which were not designed to further the purposes of the administration. To that extent, these actions were not part of the proper functions of the Administrators, and they should not have happened.
313. However, I do not accept that these actions had any effect upon the direction of the administration or that they indicated that the Administrators had set their minds against the prospects of achieving the objective of rescuing the Company as a going concern or the proper pursuit of the planning process. At the time the assistance was given to Dunbar, for the reasons that I have explained, Ms. Davey was (reasonably) not seen as a source of a funded rescue for AHDL. Moreover, although she had at the start of the administration voiced concern over the structure of the extant planning application and espoused a desire to be involved in the planning process so as to ensure that what was being proposed was viable (see e.g. the remarks made during the calls with Mr. Sandall on 4 January 2013 and 27 February 2013), the reality was that she had shown no inclination to follow that up in practice or to provide any tangible assistance to the Administrators.
314. I also do not accept that these matters can be extrapolated to support a conclusion that the Administrators were generally hostile to Ms. Davey throughout the administration. As I have explained, I do not think that the Administrators were initially motivated by any animosity towards Ms. Davey. Mr. Sandall's attitude towards Ms. Davey might well have soured as a consequence of the events of 1 February 2013 and the hostility and personal criticism directed at him by Mr. Daniel. His impression of Ms. Davey would also not have been improved by her lack of co-operation with and rather dismissive attitude towards the Administrators. This might explain why he subsequently gave his assistance to Dunbar in relation to the Guarantee proceedings against Ms. Davey. However, I do not think that there is any evidence to suggest that if this was Mr. Sandall's attitude, it persisted or infected any other aspects of his day-to-day conduct of the administration in the middle of 2013 when Ms. Davey was not on the scene.
315. Nor do I think that there is any evidence that these matters affected the attitude or decisions of the Administrators in relation to the marketing of Angel House or Ms. Davey's proposal for a funded rescue when she resurfaced later in the administration. I shall return to consider the specific steps taken by the Administrators in relation to those matters later in this judgment under Issues 3 and 4. Suffice to say for present purposes that the evidence does not indicate that Ms. Davey's position played any part in the Administrators' approach to the planning issues in mid-2013; and after Ms. Davey resurfaced in the Autumn of 2013, I believe that the Administrators genuinely acknowledged the desirability of her rescue proposal and went out of their way to facilitate Mr. Eastwood to make the necessary financial commitment and provide the necessary proof of funding.

The statement of proposals to creditors

316. Paragraph 49(1) of Schedule B1 provides that an administrator shall make a statement setting out proposals for achieving the purpose of administration, and paragraph 49(2)(b) of Schedule B1 provides that such statement must, if applicable, explain why the administrator thinks that the objective mentioned in paragraph 3(1)(a) or (b) of Schedule B1 cannot be achieved.
317. Paragraph 51(1) of Schedule B1 then provides that an administrator must seek a decision from the company's creditors as to whether to approve the proposals set out in the statement under paragraph 49(1). However, paragraph 52(1) provides that paragraph 51(1) shall not apply where the statement of proposals states that the administrator thinks,

"(a) that the company has sufficient property to enable each creditor of the company to be paid in full,

(b) that the company has insufficient property to enable a distribution to be made to unsecured creditors other than by virtue of section 176A(2)(a), or

(c) that neither of the objectives specified in paragraph 3(1)(a) and (b) can be achieved."

318. In the instant case, the Administrators' Statement of Proposals contained the following,

"No meeting of creditors to be held

1.4 Based on current information the administrators have concluded that there will not be sufficient funds becoming available in the administration to make a distribution to either preferential or non-preferential creditors. Therefore in accordance with Paragraph 52(1) of the Schedule, the administrators do not intend to summon a meeting of the Company's creditors.

….

The administrators' strategy

3.1 Having considered the options available to them, the joint administrators have determined that the best result will be achieved by continuing to trade the Company and re-engaging the design team in order to progress the revised planning application.

3.2 It is anticipated that obtaining planning permission for the redevelopment will enhance the value of the site.

3.3 The joint administrators have engaged the services of Alliance Property Asset Management Limited ('APAM') to assist in the management of the Angel House and the serviced office lettings. APAM are also assisting the administrators with the planning application.

….

Assets subject to fixed charge

4.2 The director has ascribed a value of £8.5 million to the Angel House property. The joint administrators have not commissioned a formal valuation of the property but documents to hand indicate that £8.5 million would be at the upper-end of the current market value.

Assets subject to floating charge

4.3 The director has stated that the Company has assets valued at £350,000 which are not subject to the fixed charge. The joint administrators are unsure as to what these assets comprise and are seeking clarification from the director.

Dunbar Assets Plc (formerly Dunbar Bank Plc)

4.4 On 4 September 2007 Dunbar was granted a legal charge over Angel House. The charge was registered at Companies House on 15 September 2007.

4.5 On the same day a floating charge was created over the Company's assets. The floating charge was registered on 15 September 2007.

4.6 On 18 December 2012 Dunbar issued a formal demand for payment of the loan and accrued interest totalling £16,637,078.31.

Preferential creditors

4.7 The director has scheduled preferential creditors of £15.8 million but this is an error. There are no known preferential claims.

Unsecured creditors

4.8 The statement of affairs lists unsecured creditors totalling £792,557. £401,574 of the unsecured total is claimed by the director in respect of payments made on behalf of the Company.

4.9 On current information it appears unlikely that there will be sufficient funds with which to make a distribution to unsecured, non-preferential creditors other than by way of the Prescribed Part (see below).

…

The administrators' proposals

7.1 In accordance with Paragraph 49 of the Schedule James Money and Jim Stewart-Koster the joint administrators of the Company, make to the creditors the following proposals for achieving the purposes of the administration.

7.2 The administrators propose:

(i) That the administrators do all such things and generally exercise all of the powers as administrators contained in Schedule 1 of the Insolvency Act 1986, as they at their discretion consider desirable or expedient in order to achieve the purposes of the administration, to protect and preserve the assets of the Company or maximise the realisation of those assets or for any purpose incidental to these proposals…."

319. Mr. Davies submitted that in breach of paragraph 49(2)(b), the Administrators' Statement of Proposals did not explain why the Administrators thought that the objective mentioned in paragraph 3(1)(a) or (b) of Schedule B1 could not be achieved.
320. I accept that the Statement of Proposals was defective. It would have been clear to creditors reading the document that the Administrators intended that AHDL should, with the assistance of APAM, continue to trade by managing Angel House and re-engaging the design team in order to progress a revised planning application with a view to obtaining planning permission so as to enhance the value of the site (paragraph 3). It would also have been clear from paragraphs 1.4 and 4.9 that the Administrators had formed the view that it was likely that there would be insufficient funds to make a distribution to unsecured creditors other than by way of the Prescribed Part, and that pursuant to paragraph 52(1)(b) of Schedule B1 this meant that they did not need to convene a meeting of creditors.
321. However, what was missing was an explicit explanation of why the Administrators thought that their proposed course of action would be unlikely to result in the rescue of the Company as a going concern or a better realisation for creditors than in a liquidation. A creditor might well have surmised that the Administrators were not aware of any prospect of a refinancing and that the Administrators thought that even with planning permission, the market value of Angel House was likely to be less than the amount of Dunbar's debt plus the expenses of the administration. But the Statement of Proposals did not say so. Moreover, paragraph 7.2 was singularly uninformative.
322. The requirements of paragraph 49(2)(b) are designed to fulfil the goal of reporting and transparency – primarily where unsecured creditors are not to be given the opportunity of having a meeting to approve the administrator's proposals because the administrator considers that there will be nothing in the administration for them. In the event of non-compliance, it would plainly be open to a creditor or creditors to require a meeting to be held pursuant to paragraph 52(2) if they could fulfil the requirements of that paragraph; or a creditor could apply to the court for an order that the administrator remedy a defective statement of proposals.
323. I do not, however, accept Mr. Davies' submission that failure to comply with the requirements of paragraph 49(2)(b) invalidates the actions of an administrator thereafter, or mandates the administrator to attempt to achieve the objective in paragraph 3(1)(a) or 3(1)(b), or prevents him from seeking to achieve the objective in paragraph 3(1)(c) if he can otherwise do so in accordance with paragraph 3(4). The wording of paragraph 3, which is clearly the substantive cornerstone of the administration regime and appears at the start of the section headed "Nature of Administration", does not contain any hint that it is subject to a pre-condition of compliance with paragraph 49(2)(b), which appears some way into the section headed "Process of Administration". Given the importance of the point, had Parliament meant to elevate the requirements of paragraph 49(2)(b) and to give that paragraph the status and substantive effect ascribed to it by Mr. Davies, it would surely have said so expressly in paragraph 3.
324. Accordingly, unsatisfactory though the Administrators' Statement of Proposals was, I do not accept that the failure to comply with paragraph 49(2)(b) invalidates the later conduct of the administration of AHDL.

Conclusion on Issue 1

325. I therefore reject Ms. Davey's claim that the Administrators acted in breach of duty or irrationally from the outset in failing to consult her or being hostile towards her, or otherwise failing properly to assess the prospects for achieving Objectives 1 and 2 in the administration.

Issue 2: Did the Administrators act in breach of duty in relation to the appointment of APAM?

326. Ms. Davey contends that the Administrators were in breach of duty in relation to their appointment of APAM. She contends that APAM were selected by Dunbar and hence were not independent of it and should not have been used by the Administrators. She also complains that APAM were not one of the recognised selling agents for development properties in the Docklands, but were inexperienced and manifestly unsuitable to give advice to the Administrators in relation to the sale of Angel House.
327. Ms. Davey's case was that the Administrators failed to exercise independent judgment, but simply accepted Dunbar's selection of APAM and their terms of engagement without due consideration. Specifically, the case was that the Administrators should not have appointed agents that were not independent of Dunbar; that the Administrators were bound (but failed) to conduct a selection process ("beauty parade") both for managing agents and selling agents; and that the terms agreed as to exclusivity and incentives were unjustified having regard to the interests of unsecured creditors. Mr. Davies contended that in these circumstances, the Administrators could not claim in their defence that they reasonably relied upon the advice of APAM.
328. Importantly, as regards APAM's terms of appointment, Ms. Davey's pleaded case was that the 17.5% Value Enhancement Incentive Fee in respect of any sale proceeds of Angel House in excess of the amount then thought to be owing to Dunbar (£16.7 million) was agreed between APAM and Dunbar to create the false impression that APAM was motivated to benefit the unsecured creditors and Ms. Davey as shareholder of AHDL, when in fact APAM had no intention of doing so. That appeared to be an allegation that in so far as it was agreed between Dunbar and APAM, the Value Enhancement Incentive Fee was a sham.
329. So far as the Administrators were concerned, however, Mr. Davies' complaint was different. He made a series of specific criticisms of the structure of the Value Enhancement Incentive Fee and submitted that, "In short, it was not necessary to agree such an encroachment on the funds payable to or for the benefit of the unsecured creditors." That appeared to be a complaint that, from the point of view of the Administrators, assuming the Value Enhancement Incentive Fee to be genuine, the amount of the potential benefit which it gave to APAM was excessive and should not have been agreed by the Administrators.

Independence and beauty parades

330. Mr. Davies submitted, by reference to a series of cases concerning trustees and cases concerning administrators in Australia, that administrators appointed under the Insolvency Act 1986 should not appoint agents to act for them who are not independent of the secured creditors.
331. In that regard, Mr. Davies referred, for example, to Shaw v Cates [1909] 1 Ch 389 at 404 - 405 in which a trustee was held liable for breach of trust in making a loan of trust monies on the strength of a mortgage over a house which turned out to be inadequate security. The trustee had simply relied upon the solicitors for the borrower to arrange for a survey and took no steps to see that the surveyor was properly instructed. The trustee was held liable to the beneficiaries for failing to act as a prudent man might in the management of his own business affairs.
332. Quite apart from the fact that it relates to the position of trustees rather than insolvency office-holders, and does not actually concern the process of appointment of an agent at all, Shaw v Cates was obviously an extreme case in which the relevant survey had actually been obtained by the solicitors acting for the counterparty to the transaction whose interests were manifestly not allied to those of the trustee or the beneficiaries. I do not think that it assists me as to the existence of any general rule of the type for which Mr. Davies contends in an insolvency context.
333. Mr. Davies supported his argument that there was a legal requirement for a competitive tendering process to be undertaken by reference to an extra-judicial lecture given by Lightman J in 1998 entitled "Office holders' charges – costs control and transparency" which is reproduced at (1998) Vol 14 IL&P 193. That article makes a number of suggestions, including that a tender process should be used when employing solicitors and counsel in insolvency cases. However, as its title suggests, the piece was really aimed at questions of control of excessive costs in insolvency proceedings and it did not analyse the broader question of how an administrator should select agents to manage or sell property.
334. Both these issues arose in one of the other cases to which Mr. Davies referred, namely Commonwealth Bank of Australia v Fernandez (2010) 81 ACSR 262. That was an Australian case in which a syndicate of banks had appointed receivers over the assets of a parent company and a number of its subsidiaries which carried on business as a softwood plantation developer. On the same day the directors of the companies appointed the defendant, who was a sole practitioner, as voluntary administrator (a role which I take to be similar to an administrator in the UK). The banks sought the removal of the voluntary administrator and his replacement with two insolvency practitioners from a large firm nominated by the banks.
335. Finkelstein J removed the defendant on the basis that he did not have the necessary resources for the job of acting as administrator of what was a large and complex group. He then turned to the question of appointing replacements. The judge acknowledged at the outset that the role of administrator gave rise to fiduciary duties and that it required an administrator to act impartially as between interested groups. He also acknowledged that in the case, questions of conflict between the banks and the unsecured creditors might well arise, since it was possible that the assets subject to the banks' security would not be adequate to satisfy the debt owing to the banks and that actions might therefore be taken by the receivers for the banks that might be contrary to the interests of the unsecured creditors and the shareholders of the companies.
336. After a review of Australian proposals for a rota system for the appointment of insolvency practitioners, the judge rejected the submission that he should hold a beauty parade before appointing replacements. Although it is clear that Finkelstein J thought that the concept of a competitive tendering process prior to the appointment of administrators had much to commend it, he decided not to hold such a process essentially on the practical bases (i) that this would take too long and (ii) that the court did not have the necessary resources or experience to conduct such an exercise.
337. The judge then considered whether it was permissible to appoint the banks' nominees as administrators notwithstanding that they had declared that they had earlier been engaged by the banks to produce a report about the group of borrowers (producing what the judge described as an "innocuous" report identifying issues to be investigated but not giving any substantive advice) and notwithstanding the potential conflict that might arise between the interests of the banks and the unsecured creditors in relation to the realisation of assets. Finkelstein J concluded that in all the circumstances he could appoint the banks' nominees, and he rejected a submission that, looking at matters objectively, they could not be relied upon to look after the interests of the unsecured creditors. He did, however, require the administrators to appoint solicitors to act for them who were independent of the banks, which he considered would strengthen the appearance of the administrators' independence.
338. It was in that latter regard about the appointment of solicitors that Finkelstein J made the observations upon which Mr. Davies particularly relied, namely,

"89. In Smarter Way (Aust) Pty Ltd v D'Aloi (as admin of) Smarter Way (Aust) Pty Ltd (2000) 35 ACSR 595 Byrne J spoke about the undesirability of an administrator engaging solicitors who act for a secured creditor (at [26]). He said that such a course was undesirable. I would go one step further than did Byrne J. Not only should an administrator not appoint solicitors retained by the secured creditor, they should not appoint solicitors who are on the secured creditor's panel of solicitors. I think that solicitors on a secured creditor's panel are just as likely to be perceived as loyal to the secured creditor as is the solicitor who happens to be retained by the secured creditor.

90. I readily appreciate that panel solicitors will see this approach as a challenge to their independence. No doubt panel solicitors will, if asked, say they will just as faithfully act against the interests of the client to whose panel they have been appointed as would any other solicitor. For my own part, I do not accept this to be so clearly the case. Just ask the managing partner of the firm that is about to bring proceedings against one of its large clients. Even if the action is allowed to go ahead (which in most instances would be problematic because permission would normally be required from the client) one would expect the liaison partner to speak to the client to smooth over any cracks in the relationship.

91. Anyway, I am not so much concerned with the actual independence of the firm but with the legitimate concerns of creditors. The creditors will quite properly want their administrator's lawyers to be truly independent of any party with whom the administrator has a legal dispute. Test the matter this way: Assume a poll is conducted and creditors are asked whether their administrator should appoint as his/her lawyer in an action against a bank (e.g. to challenge the validity of the bank's security) a firm that regularly acts for the bank. I would be surprised if even a small number would vote in favour of the proposal."

339. From that decision I take a number of points. The first is that Finkelstein J obviously did not think that there was any absolute requirement for a competitive selection process to be carried out prior to appointment of administrators. I agree, and for my part I think that the facts of Commonwealth Bank of Australia v Fernandez illustrate why there cannot be such a hard and fast rule in relation to the appointment of other agents of the company either. There may, in general terms, be good reasons for an administrator to consider holding such a selection process (including the issue of costs control and obtaining value for creditors to which both Lightman J and Finkelstein J referred). However, at the end of the day the facts of each case will vary widely and there may be practical reasons - including the limited scope of duties to be performed by the agent and the pressures of time in an administration - why a "beauty parade" is neither needed nor desirable.
340. The second point to be derived from Commonwealth Bank of Australia v Fernandez is that the judge did not think that there was any absolute bar upon the appointment of administrators who had had a prior business relationship with the secured creditors and had been nominated by them. Instead he plainly thought that the question of whether the insolvency practitioners could be relied upon to act impartially and in accordance with their duties required an assessment of all the circumstances. Further, although expressed in forthright terms, I do not think that Finkelstein J's views concerning the appointment of solicitors on the bank's panel can be taken to have been intended as prescribing some hard and fast legal rule as regards the appointment of agents by administrators. If, as the judge acknowledged, there is no prohibition on the appointment of administrators who have previously been engaged by the secured creditors, I fail to understand how he could have thought that such a rule could exist as regards the appointment of other professional agents. Rather, I think that the judge's comments were made in the particular factual context of the desirability of supporting the appearance of independence of the administrators whom he had decided to appoint.
341. Accordingly, I consider that there can be no hard and fast legal rule requiring a selection process to be held, or prohibiting the appointment by administrators of agents who have been recommended by the secured creditor(s). The essential question in all cases will be whether the agents to be appointed are competent and able to discharge their fiduciary duties to the company. That will obviously depend upon the precise nature of the duties in question and all the circumstances of the individual case.
342. These issues therefore need to be put into some factual context in the instant case. At the start of the administration, it was clear that there were a number of immediate priorities for the Administrators. After securing AHDL's bank accounts, the immediate tasks facing the Administrators were to find out about the Company's business of letting and managing Angel House, and to take steps to ensure the efficient collection of income from tenants. Thereafter, and if possible, it was obvious that the Administrators should seek to enhance that revenue stream by resolving any issues with tenants and granting suitable new tenancies on advantageous terms.
343. There is no dispute that APAM was initially selected by Dunbar and introduced to the Administrators primarily with these property and asset management tasks in mind. In that regard, the letter agreement of 24 January 2013 under which APAM was engaged by the Administrators contained the following relevant provisions outlining the activities which it was envisaged that APAM would perform,

"The purpose of this letter is to set out specifically what Alliance Property Asset Management Limited (APAM) will do once appointed as Asset and Property Manager.

The activities fall into 5 categories;

1. Information gathering and operational control

2. Property Management

3. Stabilise, and maximise the short term rental income of the property

4. Manage the current planning application and professional team

5. Strategy formulation and exit execution with a view to maximising sales proceeds to the Administrator and Dunbar.

Terms of Appointment

APAM's duties to the Appointor are set out below:

The management of the Property, including undertaking building management, collecting rent, carrying out appropriate works …

To undertaking day to day asset management of the Property, including reviewing any existing leases and occupier profiles with a view to maximising annual rental and enhancing the overall tenant profile, lettings of empty units.

Manage the current planning application process and professional team. Undertake a detailed review of the scheme.

Position the property for sale and the management of the marketing for sale of the Property (post planning) including preparation of appropriate sales packs, liaising with property investors, agents and managing the sales process.

The above duties will be carried out with due skill and care having regard to the principles of good estate management and professional codes of conduct and/or guidelines laid down from time to time by the Royal Institution of Chartered Surveyors ("RICS").

….APAM will appoint or seek the advice of agents, surveyors, engineers, building contractors, lawyers and any other professional advisors where the circumstances call for professional advice in relation to the above duties, subject to the prior approval (including fees) of the Appointor as to the identity and terms of appointment. Any sale agent's fees will be payable from APAM's agreed fees."

344. Mr. Money's evidence - which I accept - was that he was satisfied from the discussions at his relatively short meeting on 8 January 2013 that APAM had the necessary organisation and experience to act as property and asset managers. Ms. Davey was also well aware at the start of the administration that Angel House had been allowed to get into a very poor state and that there were numerous problems with leases, tenants and the fabric and facilities of the building which required immediate attention. Addressing those practical issues would not, as it seems to me, have raised any concerns as to the independence of APAM from Dunbar. I think it is also significant that Ms. Davey did not express any disquiet when the intended appointment of APAM as "property/asset manager" was reported to her by Mr. Stenson of Dunbar on 4 January 2013.
345. There was also no dispute between Mr. Shierson and Mr. O'Connoll that APAM were a suitable company with a good track record, and quite capable of being appointed as managing agents of Angel House notwithstanding that they had been recommended by Dunbar. As Mr. Shierson stated in his report,

"I do not believe that it was unreasonable for Dunbar to recommend APAM to the IP as asset manager. The IP would in all probability require an asset manager to be appointed and if he had concluded that Dunbar was unlikely to be paid in full, it would be reasonable to go along with their choice of asset manager."

346. Given the findings that I have made concerning the belief of the Administrators in January 2013 as to the likely value of Angel House, it seems to me that Mr. Shierson's observations are directly on point. In these circumstances I reject the pleaded case that the Administrators acted in breach of any duty in agreeing to appoint APAM as asset managers for Angel House.
347. There is also no real dispute between the parties concerning APAM's suitability for the task of overseeing and reporting to the Administrators in relation to the progress of the planning application. The core of Ms. Davey's case relates to the subsequent use of APAM in relation to marketing and the sales process for Angel House. She contends that it was critical that the Administrators should have held a beauty parade and insisted upon instructing one of the established selling agents with experience of selling commercial property in the Docklands. I shall consider that complaint in the context of the allegations of sale at an undervalue in Issue 3, but I shall deal here with the two specific issues raised by Mr. Davies concerning the particular terms upon which APAM had been engaged and which he contended were relevant to that issue.

The Exclusivity Clause

348. The letter agreement between the Administrators and APAM contained the following exclusivity clause,

"Neither party shall, for a period of 12 months from the date of commencement ("Exclusivity Period") directly or indirectly:

• enter into, re-start, solicit, initiate or otherwise participate with any Third Party, with the exception (for the avoidance of doubt) where APAM Ltd discuss the opportunity for sale with Third Parties;

• seek, encourage or respond to any approach that might lead to negotiations with any Third Party;

• enter into any letter of intent, agreement, arrangement or understanding (whether or not legally binding) pursuant to negotiating with any Third Party, with the exception (for the avoidance of doubt) where APAM Ltd discuss the opportunity for sale with Third Parties;

• supply or otherwise disclose any information about the Property to a party that wishes or may wish to enter into negotiations (unless the information is publicly available), with the exception (for the avoidance of doubt) where APAM Ltd discuss the opportunity for sale with Third Parties."

349. Mr Money's evidence was that at the time that the agreement with APAM was executed, he certainly envisaged that APAM would be providing asset management services in relation to Angel House and dealing with planning, but that the question of whether, and if so how, APAM was to be involved in acting as sole or joint selling agent for Angel House was for consideration in the future. Mr. Money said that he understood the terms of the agreement which had been negotiated between Dunbar and APAM allowed for APAM to seek the advice or assistance of another firm as sales agent, and that the fees of such a party would be paid from APAM's fees (see the clause beginning, "APAM will appoint or seek the advice of agents…" above).
350. Mr. Money also accepted that the exclusivity clause meant that the Administrators would have needed to obtain APAM's consent to a third party being engaged as selling agent. Mr. Money's explanation for agreeing to such a potential restriction at the outset of the administration was that he envisaged that as a practical matter, if the Administrators were subsequently to ask APAM to appoint another firm to act as selling agent, such consent would be forthcoming.
351. That essentially pragmatic approach was ultimately accepted by Mr. Shierson and Mr. O'Connell. At the end of his re-examination, Mr. Shierson clarified an earlier exchange in which he had been asked the following question in cross-examination by Mr. Fenwick QC for the Administrators,

"[Do you agree] that in the real world, when you are working with agents who want to work with you again, if you turn round to them and say, 'Come on APAM, you are not very experienced, we would like to have Savills on board this time', they are likely to agree, aren't they?"

352. Mr. Shierson clarified,

"A. My Lord, I think in terms of Mr Fenwick's question, which is, "Despite what is said in the contract, if the Administrator wanted to insist on having Savills on board, you would impose that on APAM, wouldn't you, and they would have to go along with it", I think the answer to that is, "Yes".

In terms of the nil cost option point, given that the cost of the joint agent was going to come out of APAM's fee in any event, that makes it a nil cost option, because having Savills as a joint agent doesn't increase the cost to the administration. They are already there within the APAM contract.

MR JUSTICE SNOWDEN: Right, so it would be a nil cost option to the Administrator and, in effect, you think he could put a bit of pressure on APAM to say yes because they would want to work with them again?

A. I believe that's correct. Yes."

353. In light of that evidence, I do not think that I can conclude that Mr. Money acted without due care or in breach of duty in signing the contract containing the exclusivity clause with APAM. His view that signing the agreement would not in practice prevent the engagement of another firm as selling agent for no extra cost if the circumstances merited it, was one that a competent insolvency practitioner in his position could reasonably have taken.
354. Moreover, as I shall consider below, it does not seem that the Administrators' decision to rely upon APAM for advice in relation to the marketing and sales process was one which was actually affected by the existence of the exclusivity clause in the agreement of 24 January 2013. Nor did APAM ever seek to enforce the clause. The Administrators decided to use APAM because they were pleased with the service they had received and thought that, having become familiar with the property and the market during the administration, APAM were suitable for the job.

The Value Enhancement Incentive Fee

355. The relevant provisions in the letter agreement of 24 January 2013 as regards fees were as follows,

"APAM's Property Management and Asset Management fees are set out below. All fees are subject to any applicable VAT.

….

Asset Management Fee

A fixed Asset Management Fee of £4,000 per month for the first six months (£24,000).

….

Exit Management Fee / Value Enhancement Incentive Fee

A 2% Exit Management Fee (to include investment Agent sales fees). To be paid on exit.

It is also agreed that a further Value Enhancement Incentive Fee will be reviewed and considered by the Administrator and Dunbar over the next 6 months based on the following structure:

A 2 % Exit Management Fee (to Include Investment Agent sales fees) up to £16.7m (the current debt level)

Then above the Current Debt Level (£16.7m) APAM will receive a Value Enhancement Incentive Fee of 17.5% of the excess to be paid on exit.…."

356. Ms. Davey's case was that the Administrators were at fault for not questioning the Value Enhancement Incentive Fee on the grounds, (i) that it was not a standard type of remuneration clause for a selling agent, but a type of arrangement that had been criticised by the OFT in June 2010; and (ii) that there was no reliable valuation advice for Angel House upon which the Administrators could assess whether the clause would actually operate as an appropriate incentive for APAM.
357. As to the first of those grounds, Mr. Money accepted that this was the first time he had agreed a clause which gave a selling agent a percentage on realisations in excess of the level of the debt secured upon a property. Moreover, none of the expert witnesses could point to another case in which a fee with a comparable structure had been agreed. However, Mr. Forgham did give evidence in general terms that incentive fees are quite common in the property industry and the incentive could be more highly geared at higher levels,

"Q. Have you ever seen an incentive fee of that nature in your life, namely a 17.5 or a high percentage above the bank's indebtedness, that sort of structure?

A. Incentive fees are quite common, and seem to work very well for both parties. I haven't seen one as high as 17.5%.

Q. Have you seen one that is structured so that it only kicks in after the mortgagee is paid in full?

A. Not specifically, but I have seen them where the incentive is more highly geared at that level, yes, but not specifically at that exact price."

358. In his report, Mr. Shierson commented,

"I do not think the reasonable IP would have accepted the structure of APAM's Exit Management Fee/Value Enhancement Fee. Fee structures that provide a modest fee when the fee is being paid effectively by the charge holder, but a significantly higher fee when it is coming out of unsecured creditors' funds are the type of arrangement that was criticised by the Office of Fair Trading in their report "The Market for Corporate Insolvency Practitioners" dated June 2010. A reasonable IP would be aware of this report."

359. However, in cross-examination, Mr. Shierson put the matter slightly differently,

"Q. …I want to ask you about the question of APAM's fees. You criticise the incentive fee, don't you?

A. I do, yes.

Q. Why is that?

A. There has been general criticism by -- in a number of reports into the insolvency profession, they have criticised the tendency, as they see it, for fees to be very modest when the chargeholder is paying for it, but become somewhat more extravagant when the unsecured creditors are paying for it."

360. I think Mr. Shierson's oral evidence more accurately summarised the 2010 OFT report than his written evidence. The OFT report did not in fact consider the specific type of incentive arrangement in issue in this case. What the OFT concentrated upon was evidence and economic data as to the workings of the insolvency market generally, and one of its main findings was that secured creditors were much more effective at controlling fees in an administration than were unsecured creditors, who were less able or willing to become involved in the process. Accordingly, the OFT found that in a typical administration, like-for-like fees were 9% higher when secured creditors recovered their debts in full and the unsecured creditors paid the administrator's fees out of their own claims, than if the fees simply came out of secured recoveries.
361. In my view, that evidence does not support the submission that incentive arrangements of the type in issue in this case are inherently inappropriate. Providing a financial incentive to office-holders and/or agents for an asset to be realised for more than just the amount owing to a secured creditor may very well be in the interests of the unsecured creditors. Indeed, such contractual arrangements would directly address one of the points made by the OFT at paragraph 4.113 of its report, namely that in pre-pack administrations there was a lack of a systemic incentive for insolvency practitioners to realise assets for more than is owed to the secured creditor,

"Due to the limited ability of unsecured creditors to be involved in the process or to mount a challenge in court after the event, IPs may have little incentive to sell a business as a pre-pack for any more than the total of the amount owed to secured creditors and the level of IPs' fees."

362. In my judgment, what is important is whether, in the specific case, the structure and terms of the incentive are appropriate. That will depend upon the levels at which the incentive is designed to operate compared to the likely range of sale prices, and the amount (i.e. the percentage and absolute amount) of the incentive.
363. In that regard, Mr. Davies repeated his criticism of the Administrators for not having obtained a reliable valuation of Angel House at the start of the administration, and suggested, for example, that if an independent valuation had concluded that Angel House would be worth £20 million with planning, then no reasonable insolvency practitioner would have agreed to give APAM 17.5% of the sums received over £16.7 million, because on that basis there would be no "enhancement". He also criticised the use of £16.7 million as the trigger point for the incentive fee as "an arbitrary number pegged only to Dunbar's debt and not to the value of the property".
364. I accept in general terms Mr. Davies' point that an incentive fee of the type in issue in this case should only be payable to reward an enhancement of the value of the property. On the facts of the case, however, the example which Mr. Davies gave was not a good one. At the time of the agreement with APAM, Angel House did not have any planning permission, and APAM were engaged in part to oversee the process by which such planning would be obtained to enhance the value of the property. Hence a sale for £20 million with planning might well have been seen as an enhancement over the value "as is". Moreover, on the information available to Dunbar and, I have found, to the Administrators, the "Red Book" valuation by Savills was an indication upon which reliance could properly have been placed in January 2013 that Angel House was worth materially less than the amount of Dunbar's debt, either without planning or with planning on the basis of the then extant scheme (£6 million - £8 million formally and up to £10 million informally compared with a debt of £16.7 million).
365. On this basis, Mr. Money explained that he viewed the figure of £16.7 million above which the incentive fee would kick in as "a high hurdle rate". Mr. Shierson also accepted that an administrator in Mr. Money's position might well have taken the view that APAM would have to put in a significant amount of effort to earn a Value Enhancement Incentive Fee, so that it could be thought that the incentive arrangement was either useful or harmless,

Q. … for the Administrator looking at the proposed fee, it would require an extraordinary amount of effort by APAM to get into incentive territory, wouldn't it?

A. He might well take that view, yes.

Q. And that that could be achieved if APAM could turn around the property, maximise the planning and sell it really well, and that would be very much in the interests not only of Dunbar but also of those who otherwise had no realistic prospect of getting anything, that is to say the unsecured creditors and the shareholders. Do you agree?

A. Yes. Mathematically, yes, I do agree.

Q. Do you agree that that is a very powerful incentive on APAM to get the best possible price?

A. You can argue that. You could also argue that fixing an incentive fee at a level that is unrealistic is no real incentive.

Q. It is either harmless or it is useful, isn't it?

A. Yes.

Q. If it is harmless it doesn't matter and if it is useful then it's a good thing. Do you agree?

A. Arguably, yes."

366. I agree with that analysis. I also do not accept Mr. Davies' submission that there was anything wrong in the incentive fee only operating above the level of Dunbar's debt. Once it is accepted that the Administrators thought that the likely value of Angel House was significantly less than the amount of Dunbar's debt, agreeing that the incentive would only kick in at the level of Dunbar's debt was entirely logical. Fixing it to operate at any lower amount would have been open to the criticism that APAM would have had a material incentive to achieve a sub-optimal result which gave no benefit to unsecured creditors (and indeed the payment of the incentive fee would have ranked ahead of the unsecured claims as an expense of the administration). Agreeing that APAM were only paid an incentive fee if they actually achieved a price that exceeded the amount thought to be owed to the secured creditor gave them the best incentive to achieve a return for those creditors.
367. A further point raised in argument by Mr. Davies concerned the issue of whether the incentive fee might have been payable to APAM in the event of a funded rescue of the company as a going concern. The question of whether such a fee would have been payable to APAM in the event of a funded rescue is somewhat unclear from the terms of the engagement letter of January 2013. That letter refers rather vaguely to an incentive fee being payable on an "exit" (which is not defined) and on one view the reference to APAM providing, "strategy formulation and exit execution with a view to maximising sales proceeds to the Administrator and Dunbar" might suggest that it would only be on a sale of Angel House that an incentive fee would be payable.
368. Mr. Money's evidence was that when this point was discussed with Mr. Sandall in November 2013, they did not think that APAM would be entitled to be paid a fee in the event that AHDL was rescued as a going concern. Accordingly, when a breakdown of APAM's fees was provided to Ms. Davey's advisers on 29 November 2013, it did not include a figure in respect of any incentive fee. In cross-examination, Mr. Davies put to Mr. Money that this would have been a "massive disincentive" for APAM to favour a funded rescue rather than a sale of Angel House. Mr. Money's answer was that this would have made no difference, because it was the Administrators' decision, and not APAM's decision, as to which route to take. In his written closing, however, Mr. Davies adopted the opposite view, asserting that the incentive fee was payable to APAM on the terms of the agreement (though he did not elaborate upon that) but alleging that this would not have been justified.
369. It seems to me that this point cannot be a valid criticism of Mr. Money's decision to engage APAM on the terms of 24 January 2013. If, as appears to have been the view taken by the Administrators, the fee would not be payable to APAM on a funded rescue, the real issue is whether this had any bearing upon the decision of the Administrators to accept the offer from LBS/Cubitt for Angel House, rather than to pursue Ms. Davey's offer to refinance AHDL further. That issue is relevant to Issue 4 (below). If the fee would have been payable to APAM in the event of a funded rescue, then the point goes nowhere, because there would have been no reason for APAM to favour either alternative.

Conclusion on Issue 2

370. I therefore reject the argument that the Administrators acted in breach of duty when appointing APAM at the outset of the administration or on the terms of the letter agreement of 24 January 2013. As I indicated, I shall return to consider the question of whether the Administrators should have looked to APAM for advice on marketing and selling Angel House under Issue 3 below.

Issue 3: Did the Administrators act in breach of duty by failing to obtain a proper price for Angel House?

371. In many ways, this issue is at the heart of the case against the Administrators. It also gave rise to a fundamental difference between the parties as to the correct legal test to be applied to a sale of property by an administrator.
372. Before dealing with the case as argued and presented to me at the hearing, I should draw attention to the manner in which Ms. Davey's case against the Administrators concerning the sale of Angel House was pleaded.
373. In paragraphs 25 and 26 of the Re-re-Amended Particulars of Claim, it was alleged that the Administrators owed the following "Fiduciary Duty", "Duty of Care" and "Selling Duty" to AHDL,

"Fiduciary Duty"

"25.6. By paragraph 69 [of Sch B1 to the Insolvency Act 1986], in exercising his functions under Sch B1 [the Administrator] acts as an agent of the Company, such that he owes a fiduciary duty of loyalty to the Company to exercise his statutory powers and to perform his statutory functions in his capacity as statutory office-holder with the aim of protecting the Company as principal and, in particular:

25.6.1. He must exercise his powers in good faith.

25.6.2. He must exercise his powers for a proper purpose and/or not irrationally."

"Duty of Care"

"25.7 [The Administrator] owes the Company a duty to exercise skill and care in the performance of his functions to the standard of a reasonably skilled and careful insolvency practitioner."

"Selling Duty"

"26.1. the Administrators were not free to sell Angel House at a time of their choosing if, in all the circumstances, a better price could be obtained were it to be sold at a later time;

26.2 the Administrators were under a duty to take all reasonable steps, including delaying realisation, to obtain the best price for Angel House that circumstances permitted; and

26.3 such reasonable steps included formulation of a sales strategy to bring Angel House to the attention of all probable purchasers and so as to induce such competition over a sufficient period of a sales campaign as would be likely to secure the best price."

374. The pleaded allegations concerning the alleged deficiencies in the sales process were extensive, but the core allegations appear from the following extract,

"Allowing the Planning Application to lapse

….

66. By allowing the [2012] Planning Application to lapse, the Administrators were in breach of Fiduciary Duty and/or the Duty of Care and the Selling Duty in that:

66.1. The substantial part of the realisable value of Angel House lay in its development potential, in respect of which the maintenance and pursuit of the Planning Application was of the highest importance.

66.2. The Administrators could easily have avoided the lapse of the Planning Application but failed to take all reasonable steps to do so.

66.3. No attempt was made to negotiate and reach agreement with the Project Team as a whole in circumstances where it was clear that the Project Team would accept a payment of 50% of the arrears.

66.4. Funds would have been available to pursue the Planning Application to permission were it not for the APAM Appointment and, in particular, APAM's Fee Structure.

66.5. Further, arrangements could and should have been made with the Project Team to ensure they were paid, if necessary:

66.5.1. out of floating charge realisations, including the Company's rental and other income; and/or

66.5.2. out of moneys received by the Administrators belonging or payable to Angelic Interiors Limited paid to the Company, both prior to and after the date of administration, pursuant to the terms of an agency agreement in writing between AIL and the Company dated 8 November 2012; and/or

66.5.3. by [Ms. Davey], whom the Administrators negligently failed to inform that the Planning Application would lapse unless funds were found to pay the Project Team; and/or

66.5.4. as a first charge over the proceeds of sale of Angel House with planning permission.

66.6. Although as appears in paragraph 73.1 below, Dunbar subsequently represented that it was prepared to fund a new planning application to suit its purposes, the Administrators did not seek to persuade Dunbar to fund the existing Planning Application to permission (on the basis that pursuit of a new planning application would be more expensive than pursuing the Planning Application to permission).

66.7. Instead, the Administrators surrendered their discretions to APAM and/or Dunbar who effectively decided how the Administrators should proceed in relation to the Planning Application and planning matters generally.

Preferred Bidder

67. Both in relation to the APAM Appointment and subsequently, the Administrators failed to exercise their own judgment and/or make their own decisions relating to the sale of Angel House independently of the wishes and direction of Dunbar and/or APAM (who were, in effect, Dunbar's agents appointed to manage Angel House).

68. As a consequence of this abrogation by the Administrators of their Duty of Care, on a date unknown to the applicant they wrongly allowed APAM and/or Dunbar to make arrangements to ensure that Angel House was sold to a preferred bidder of their own choosing ("Preferred Bidder") and, that, at some point undisclosed to the applicant, the Preferred Bidder became the ultimate purchaser, described variously as ED Group Holding Ltd, LBS Properties and/or Cubitt Limited.

69. Dunbar and/or APAM were able to make the arrangements referred to in paragraph 68 above because the Administrators allowed the sale to take place in the following circumstances:

69.1. No Sales Agent, still less a Recognised Agent, was appointed.

69.2. Angel House was not advertised for sale or properly exposed to the market.

69.3. No overseas marketing took place.

69.4. The sale process, including all information relating to it, was tightly controlled by APAM.

69.5. A reasonable time was not provided to potential bidders for the purpose of completing valuations, due diligence and funding.

69.6. Insufficient information was provided to potential purchasers via APAM's data room.

69.7. APAM could engineer the award of the sales contract to the Preferred Bidder.

69.8. The applicant, as the individual who would arrange and complete a Funded Rescue and thereby achieve Objective 1, was not consulted on, nor given disclosure of, the following facts and matters, until as late as possible in the sale process, thereby providing insufficient time to achieve Objective 1:

69.8.1. The Savills Report and/or its contents (not provided at all).

69.8.2. The APAM Terms (not provided at all).

69.8.3. The decision to use APAM as selling agents (not informed at all).

69.8.4. The conclusion that the Planning Application was flawed (not informed at all).

69.8.5. The fact that it was considered that insufficient funds were available to pay the Planning Fees (not informed at all).

69.8.6. The fact that [the Council] threatened, in effect, to bring an end to the Planning Application if progress was not made by the Administrators (not informed at all).

69.8.7. The fact that the Planning Application had duly lapsed (not informed until during October 2013).

69.8.8. The decision not to advertise but to undertake Soft Marketing (see below).

70. It is inferred that APAM and/or Dunbar did not intend to pursue the Planning Application (or any planning application) to permission but (at least from about May 2013 if not before) intended to sell Angel House to a Preferred Bidder whilst at all material times until at least mid-October 2013 giving [Ms. Davey] the false impression that:

70.1. they had an open mind as to whether to pursue a fresh planning application; and

70.2. they intended to take all reasonable steps to obtain the best price for Angel House.

71. In reality, a sale would be orchestrated to a Preferred Bidder for purposes which were irreconcilable with the Selling Duty. The applicant is unable to identify the benefits/incentives received by APAM and/or Dunbar in return for ensuring that the Administrators agreed to sell Angel House to the Preferred Bidder, save that APAM was subsequently awarded by the Preferred Bidder the contract to manage Angel House after it had been so purchased.

72. Having wrongly surrendered to APAM and/or Dunbar their discretions in relation to the Selling Duty, the Administrators are bound by the consequences of their actions in relation to the Preferred Bidder and the acts and omissions of APAM and/or Dunbar to ensure that the Preferred Bidder acquired Angel House, including:

72.1. the decisions (described below) not to undertake full marketing but "soft marketing" and to fix a guide price of £14m to encourage prospective purchasers to stay within APAM's low range of suggested prices; and

72.2 ensuring that the Applicant was not aware of the material facts and matters referred to in paragraph 69.8 above for as long as possible, thereby rendering a Funded Rescue impossible or very difficult to achieve."

375. In essence, Ms. Davey's pleaded case was that the Administrators carelessly or in breach of fiduciary duty permitted Dunbar to dictate how they should conduct the administration; that the Administrators should not simply have accepted Dunbar's view that the 2012 planning application should not be pursued; and that whilst Dunbar gave the Administrators the false impression that they had an open mind about pursuing a new planning application and that they intended to take all reasonable steps to obtain the best price for Angel House, in reality the Administrators carelessly permitted APAM to orchestrate a sale of Angel House at an artificially low price to Dunbar's "Preferred Bidder", namely LBS/Cubitt.
376. That allegation is consistent with the way in which Ms. Davey's Counterclaim was pleaded against Dunbar in the second action. The essence of that pleaded case was that there was a conspiracy between Mr. Stenson and Mr. Connolly of Dunbar and Mr. Powell of APAM. It was said that Mr. Stenson and Mr. Connolly were motivated by what was defined in the pleading as the "PG Incentive" - namely an internal incentive scheme at Dunbar for bonus payments to be made to employees for achieving (i) asset realisations and/or (ii) payment under personal guarantees - and that,

"Due to the PG Incentive, Dunbar's intention throughout the sales process was to ensure that Angel House was sold for a sum which would enable Dunbar also to make full recovery under [Ms. Davey's personal guarantee.]"

377. In particular the pleaded case against Dunbar included allegations that,

(1) The 17.5% Value Enhancement Incentive Fee, "was designed to create the false impression that APAM was motivated to benefit the Company (and therefore Ms. Davey as guarantor, creditor and contributory) when, in fact, neither it nor Dunbar had any intention of doing so";

(2) Dunbar decided that the 2012 planning application should be allowed to lapse "and saw to it that it was not pursued";

(3) "Soft marketing" was imposed by Dunbar on the Administrators "as a means of going through the motions of appearing to expose Angel House to the market but was deliberately designed not to risk a sale to a genuine third party" by: (i) a failure to advertise, (ii) withholding of core information from prospective purchasers, (iii) giving prospective purchasers a £14 million "guide price" for offers, (iv) applying artificial time pressure; and (v) failing to accept significantly higher bids; and

(4) Dunbar prevented a funded rescue by Ms. Davey by (i) ensuring that she was given insufficient time by APAM to make the necessary arrangements, (ii) freezing her worldwide assets in the proceedings in relation to the personal guarantee, and (iii) requiring the payment of a £2 million non-refundable deposit as a condition of proceeding with the funded rescue.

378. At the outset of the hearing, Mr. Smith QC on behalf of Dunbar raised the question of whether, in light of the way in which Mr. Davies' written opening had put the case, Ms. Davey continued to make the allegations that the planning application and sale process had been deliberately manipulated by Dunbar and APAM in the manner pleaded. Mr. Davies declined to withdraw any of the pleaded allegations, which I must therefore take to have been part of Ms. Davey's case at trial.
379. Notably, however, the pleadings did not allege (at least in express terms) that the Administrators were parties to the alleged conspiracy between Dunbar and APAM. Certain paragraphs of the pleading did appear to hint at some complicity on the part of the Administrators (for example, the allegation of, "ensuring that the Applicant was not aware of … material facts and matters … for as long as possible"). However, the overall sense of the complaint against the Administrators appeared to be that they had unwittingly and incompetently allowed the conspiracy between Dunbar and APAM to happen by surrendering their discretion concerning the important decisions in the administration.
380. At the end of her cross-examination by Mr. Fenwick, Ms. Davey was invited to read the extracts that I have identified from her pleaded case against the Administrators. She then summarised her case against the Administrators rather more succinctly,

"Q. What I am asking in the light of that: are you saying that the Administrators were a party to that, in other words they were part of the plot, or not?

A. No, I am saying that they weren't part of the plot, that they were, I think, duped, perhaps."

The duties of administrators

381. Notwithstanding the pleaded case of the content of the "Fiduciary Duty", the "Duty of Care" and the "Selling Duty", in his submissions at trial on behalf of Ms. Davey, Mr. Davies contended for a higher duty to be imposed upon the Administrators. He submitted that because an administrator is a fiduciary, albeit not a trustee in the strict sense, he should be subject to the same equitable duties and standards as a trustee when selling property of the company under his control. Mr. Davies contended that the applicable duties and principles are those set out in Killearn v Killearn [2011] EWHC 3775 (Ch) at [16], namely that the administrator is obliged (i) to sell "under every possible advantage" to the beneficiaries; (ii) to secure "a proper competition" to obtain the best price; (iii) to investigate higher offers – even at a late stage; and (iv) not to advance the interests of one party at the expense of any other. Mr. Davies also contended (v) that the fiduciary bears the burden of justifying the sale; and (vi) that the fiduciary bears personal liability for loss.
382. For the Administrators, Mr. Fenwick rejected that analysis. He accepted that administrators are given the status of agents and specific statutory duties by Schedule B1 of the Insolvency Act 1986. He also accepted that, subject to modification as required by paragraph 3 of Schedule B1, this means that administrators are subject in general terms to (i) the fiduciary duties of agents to act in good faith, loyally and for proper purposes, and (ii) a duty to exercise reasonable skill and care. However, he submitted that this regime leaves no place for, and that it would be inappropriate to impose upon administrators, the wider and more onerous duties in relation to sales of property imposed upon trustees in the strict sense.
383. Accordingly, whilst Mr. Fenwick accepted that, when acting as agents to sell AHDL's assets, they owed a duty to the Company "to take reasonable care to obtain the best price which the circumstances of the case permit", he disputed the suggestion that the Administrators owed the more onerous duties of a trustee selling trust property as set out in Killearn v Killearn. Mr. Fenwick contended that the relevant standard of care is simply that of "an ordinary, skilled practitioner", so that to establish a breach of duty, Ms. Davey would have to show that the Administrators "made an error which a reasonably skilled and careful insolvency practitioner would not have made".
384. I consider that Mr. Fenwick's analysis is broadly correct and I reject Mr. Davies' (unpleaded) attempts to introduce duties analogous to those of a trustee in relation to the sale of company property by an administrator. I shall consider separately which of the duties owed by the Administrators qualified as fiduciary duties under Issue 5 below.
385. The starting point for any analysis is that the office and role of an administrator is a creation of statute, and paragraph 69 of Schedule B1 expressly provides that in exercising his functions under the Schedule, the administrator of a company acts as agent. The legislature must be taken to have been well aware of the difference between agents and trustees, and to have understood the legal consequences of specifying that the administrator has the status of the former rather than the latter.
386. It should also be borne in mind that an administrator is empowered pursuant to paragraph 68 of Schedule B1 to manage the affairs, business and property of the company, and to do so without interference from the directors, whose own powers of management are correspondingly restricted by paragraph 64 of Schedule B1. The administrator is thereby primarily responsible for the management of the company's affairs, business and property, and the directors are confined to a residual role. It is inherent in the nature of the role that the administrator may come to the appointment with very limited knowledge of the affairs of the company, and he will have to take commercial and business decisions, often under considerable time pressure caused by the insolvency or threatened insolvency of the company. Given that the directors whose powers are restricted by the appointment of the administrator are not regarded as trustees in the strict sense, or subject to the heightened duties of such trustees when selling the property of the company, I see no obvious reason why the administrator should have any higher duties imposed upon him by equity or the common law.
387. Mr. Fenwick's submissions were clearly based upon the decision of Millett J in Re Charnley Davies (No.2) [1990] BCLC 760. The case concerned a claim under what is now paragraph 74 of Schedule B1 of the 1986 Act, claiming that a sale of the business of an insurance broking company in administration had been conducted with undue haste and had realised less than the true value of the business. Before considering the facts, at pages 775e-776a Millett J stated what was common ground as to the legal test to be applied,

"It was common ground that an administrator owes a duty to a company over which he is appointed to take reasonable steps to obtain a proper price for its assets. That is an obligation which the law imposes on anyone with a power, whether contractual or statutory, to sell property which does not belong to him. A mortgagee is bound to have regard to the interests of the mortgagor, but he is entitled to give priority to his own interests, and may insist on an immediate sale whether or not that is calculated to realise the best price; he must 'take reasonable care to obtain the true value of the property at the moment he chooses to sell it': see Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] 2 All ER 633, [1971] Ch 949· An administrator, by contrast, like a liquidator, has no interest of his own to which he may give priority, and must take reasonable care in choosing the time at which to sell the property. His duty is "to take reasonable care to obtain the best price that the circumstances permit": see Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938, [1982] 1 WLR 1410.

It is to be observed that it is not an absolute duty to obtain the best price that circumstances permit, but only to take reasonable care to do so; and in my judgment that means the best price that circumstances as he reasonably perceives them to be permit. He is not to be made liable because his perception is wrong, unless it is unreasonable.

An administrator must be a professional insolvency practitioner. A complaint that he has failed to take reasonable care in the sale of the company's assets is, therefore, a complaint of professional negligence and in my judgment the established principles applicable to cases of professional negligence are equally applicable in such a case. It follows that the administrator is to be judged, not by the standards of the most meticulous and conscientious member of his profession, but by those of an ordinary, skilled practitioner. In order to succeed the claimant must establish that the administrator has made an error which a reasonably skilled and careful insolvency practitioner would not have made."

(emphasis in original)

388. Although not the result of contested argument, that exposition of principle by one of the most distinguished judges of equity must command considerable respect. It has been cited with apparent approval since, albeit obiter. So, for example, in Silven Properties v Royal Bank of Scotland [2004] 1 WLR 997, in a case dealing with the duties of receivers, Lightman J (speaking for the Court of Appeal) said, at [24]-[25],

"24. The critical issue raised is whether (as contended by the claimants) the wider management duties imposed on a receiver (but not on a mortgagee) may require a receiver (and in particular a receiver appointed the agent of the mortgagor) to postpone a sale until after steps have been taken (in this case proceeding with an application for planning permission and with the grant of a lease) calculated to increase the price obtainable in a sum greater than the cost of taking those steps plus the sum representing accrued interest over the period whilst those steps are being taken.

25. The existence and scope of the duties of an agent, fiduciary and otherwise, depend on the terms on which they are acting: see Kelly v Cooper [1993] AC 205, 214. In the case of an agent appointed to manage his principal's property on his behalf alone, general agency principles will apply. The agent will be obliged to pursue single-mindedly the interests of his principal and he will owe the duties to his principal for which the claimants contend. This is reflected in the passage in the judgment of Millett J in In re Charnley Davies Ltd (No 2) [1990] BCLC 760 [at 775 et seq]. The administrator as agent for the company owes a duty of care to the company in the choice of the time to sell and (by parity of reasoning) in the decision whether to take the appropriate available advantageous pre-marketing steps which are calculated to achieve the best price. The issue raised is whether receivers who are appointed by a mortgagee to act as agents of the mortgagor are in a like legal position and owe a like duty to the mortgagor."

389. In Silven, the claim was brought by a number of mortgagor companies, complaining that receivers appointed by the defendant bank had sold a number of the mortgaged properties at an undervalue. As Lightman J explained at [8]-[9], the particular complaint which was the subject of the appeal was that the undervalue was attributable to the decision of the receivers to sell a number of properties without first obtaining planning permission for development in accordance with their initial strategy and some advice that they had received at the start of the receivership. By proceeding with the sales immediately, the receivers decided to forgo any potential increase in price that might have been obtained if the sales were delayed until after the result of the planning applications, but obtained the advantage to the bank of saving the costs of that exercise and obtaining an immediate realisation and partial repayment of its secured indebtedness.
390. The Court of Appeal affirmed the decision of Patten J that the receivers breached no duty to the companies in deciding to take that course. Lightman J concluded, at [29],

"29. In summary, by accepting office as receivers of the claimants' properties the receivers assumed a fiduciary duty of care to the bank, the claimants and all (if any) others interested in the equity of redemption. This accords with the statement of principle to this effect of Lord Browne-Wilkinson in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, 205E-H relied on by the claimants. The appointment of the receivers as agents of the claimants having regard to the special character of the agency does not affect the scope or the content of the fiduciary duty. The scope or content of the duty must depend on and reflect the special nature of the relationship between the bank, the claimants and the receivers arising under the terms of the mortgages and the appointments of the receivers, and in particular the role of the receivers in securing repayment of the secured debt and the primacy of their obligations in this regard to the bank. These circumstances preclude the assumption by, or imposition on, the receivers of the obligation to take the pre-marketing steps for which the claimants contend in this action. Further no such obligation could arise in their case (any more than in the case of the bank) from the steps which they took to investigate and (for a period) to proceed with applications for planning permission. The receivers were at all times free (as was the bank) to halt those steps and exercise their right to proceed with an immediate sale of the mortgaged properties as they were."

391. As indicated, Silven concerned receivers. The instant case is different. Administrators operating in accordance with paragraph 3 of Schedule B1 are plainly intended by the legislature to have regard to wider considerations than receivers or administrative receivers, whose primary duty is to their appointor. In Goode, Principles of Corporate Insolvency Law, 4^th ed. at 11-27, Professor Goode commented,

"In this respect, [an administrator] has less freedom than that possessed by the administrative receiver, because the latter, whilst under a duty to use reasonable endeavours to obtain the best price, was free to determine the timing of any realisations and could thus proceed to an early sale even if delay would have resulted in enhancement of the value of the security and would not have prejudiced his debenture holder. Now he has to avoid unnecessary harm to the general body of creditors. "Harm" is considered to be the equivalent of "prejudice". He is still entitled to subordinate the interests of the general body of creditors to those of secured and preferential creditors, since para.3(2) of Sch.Bl makes it clear that his duty to the general creditors is subject to the pursuit of the third objective. But he must avoid causing harm which is not necessary for the protection of the creditors for whom his realisations are intended. This imposes on him the duty to consider all aspects of the administration, including the timing of realisations. It is also a signal that the existence of security substantially in excess of the debt owed to the secured creditor or creditors does not entitle him to be lax in managing the business and realising the assets."

392. I respectfully agree with that analysis, which appears to me accurately to reflect the changes introduced into the corporate insolvency regime by the Enterprise Act 2002. Those changes limited the use of administrative receivership and, by introducing the hierarchy of objectives in paragraph 3 of Schedule B1, require administrators to have regard to the interests of a wider group of stakeholders rather than simply the holder of the qualifying floating charge who appointed them. In particular, as Professor Goode puts it, the administrator cannot simply decide to sell the company's assets at a time to suit the interests of the secured creditor, if by doing so he causes harm to the unsecured creditors which is not necessary for the protection of the interests of the secured creditor. The interests of the unsecured creditors therefore receive enhanced protection in an administration compared with a receivership.
393. Given this specific protection built into the statutory framework and the commercial setting within which administrators are required to operate, I do not think that Parliament could have intended that there should be, or that it would be appropriate for equity or the law to impose, more extensive obligations upon administrators of the type owed by trustees to their beneficiaries when selling trust property.

Ms. Davey's complaints about the sales process

394. I therefore turn to consider the specific areas of complaint made by Ms. Davey about the Administrators' conduct of the sale of Angel House. I do so by reference to the way in which the points were set out in Mr. Davies' written opening and closing submissions, which (broadly speaking) reflected many of the matters identified in the sub-paragraphs of paragraph 69 of the Re-re-Amended Particulars of Claim which I set out above.

Allowing the 2012 planning application to lapse

395. The essence of Ms. Davey's complaint is that the Administrators acted unreasonably in allowing the 2012 planning application to lapse. Ms. Davey contends that the 2012 planning application had the potential to increase the value of Angel House and that in in the absence of funding from Dunbar, the Administrators could and should have made alternative arrangements to obtain funding to enable it to continue to be pursued. Ms. Davey's case is that the Administrators unreasonably concluded that Dunbar was the only source of funds to pursue the existing planning application, and that after Dunbar declined to fund the continuation of the 2012 planning application, the Administrators should have pursued alternative sources of funding such as the income stream from Angel House or Ms. Davey herself.
396. As to the merits of the 2012 planning application, I should note that from the outset there were real doubts as to whether the grant of planning permission for a development based upon its parameters would have been sufficiently attractive to a purchaser of Angel House to increase its value by a material extent. Those issues largely concerned the requirement of the Council, as a matter of policy, for the residential component of the proposed development to include 35% of affordable housing. It was common ground that adherence to this requirement in the redevelopment of Angel House would have had the effect of significantly reducing the sale price of the private residential units which lay at the heart of the profitability of the project for a developer, and hence the price that a developer might be prepared to pay for the site.
397. These points had been made to Ms. Davey in Mr. Lea's email of 7 December 2012 which Ms. Davey forwarded to Dunbar on 10 December 2012. The basic point made by Mr. Lea was that the level of affordable housing significantly and detrimentally affected the gross development value, so that even with the benefit of a planning consent based upon the 2012 planning application, the value of Angel House was likely to fall far short of the amount owed to Dunbar. Moreover, in their first substantive telephone call at the outset of the administration on 4 January 2013, Ms. Davey told Mr. Sandall that she agreed with Mr. Lea's advice that 35% affordable housing rendered the project uneconomic, and expressed the view that it would be necessary for a review of the existing application to take place.
398. Against this background there were different opinions expressed in the evidence as to why it might have made sense to continue with the existing planning application. One was that it would provide a framework within which to seek to negotiate with the Council a reduction in the basic requirement for 35% affordable housing. Although Ms. Davey suggested in her evidence that if she had been asked, it might have been possible for her simply to persuade the Council to accept such a reduction, I do not accept that was a realistic possibility. The clear evidence of those involved in the planning process, such as Ms. Wheldon, Ms. Wilson and Mr. Leeson was that in the first part of 2013, the only way in which it might reasonably have been anticipated that AHDL could obtain a reduction in the Council's requirement for 35% affordable housing was to obtain a credible viability assessment to show that a development with that proportion of affordable housing would not be commercially viable because it would not increase the existing use value of the site by more than about 20%. There is no evidence that any such assessment had been commissioned by AHDL or that one would have been available.
399. A second potential reason to continue with the planning application would have been if AHDL could have offered a quid pro quo to the Council for the 35% affordable housing requirement, either by the provision of an alternative site for the provision of the required affordable housing, or simply offering to pay a substantial sum of money in lieu, with which the Council could itself build affordable housing elsewhere. However, in the instant case AHDL did not own an alternative site or have any substantial monies available to it. Although Ms. Davey gave evidence suggesting that she had a suitable plot of land available off-site (referred to as The Triangle) which could have been offered for this purpose, the extent to which that land was unencumbered or subject to charges to secure debt to Ms. Davey or other group companies was wholly unclear. In any event Ms. Davey never suggested to the Administrators that she would be willing to make that site available.
400. The third alternative - which did for some time commend itself to the Administrators, APAM and Mr. Stenson - was that if AHDL could obtain planning permission, even for a sub-optimal development with 35% affordable housing and a hotel, that would amount to a "foot in the door" demonstrating the development potential of the site and make the property more attractive than rival sites in the locality where no planning permission of any type had been obtained. This option was summarised in Mr. Stenson's recommendation in his internal report of 18 April 2013 and his email to Mr. Money the next day after his report had been sent back from the RMRC.
401. Whatever the merits (or otherwise) of the existing planning application in this respect, there were two practical problems facing the Administrators from the outset of the administration in seeking to progress it. The first was that the various members of the planning team were owed substantial arrears of unpaid fees (understood to be about £265,000) at the commencement of the administration, and were unwilling to continue to provide the further work that would have been required to progress the existing planning application (over £150,000) unless offered some assurance that they would be paid for that further work, as well as some deal in relation to their outstanding fees. Some of the existing team were also threatening to assert ownership over the design documentation to prevent others being brought in from outside to finish the job.
402. As indicated above, the Administrators and APAM negotiated with McBains Cooper and had reached an agreement in principle for them to accept a reduction of 50% of their outstanding fees. This is something which Mr. Shierson accepted was a "perfectly sensible negotiation for the Administrators to undertake", and "probably a predictable outcome". I therefore cannot see that there is any basis for criticising the Administrators in respect of their approach to the existing planning team.
403. The second, and critical problem facing the Administrators, was a lack of available funding. The only source of cash flow in the administration was the rental and service charge receipts from Angel House. Although ostensibly caught by Dunbar's fixed charge, in practice these monies were treated as floating charge realisations and made available to the Administrators to pay administration expenses. The simple fact, however, is that they were not enough to pay the agreed arrears of professional fees or the further professional fees for the planning team together with all the other expenses of the administration. Quite apart from the very fact that AHDL had been unable to pay the substantial arrears of the planning team's fees that had accumulated long before the start of the administration, Ms. Davey conceded in cross-examination that there was probably not enough income from Angel House coming into the administration to pay for the planning application. In addition, the expert insolvency practitioners jointly concluded,

"We agree that the Administrators did not have sufficient funds under their control in the administration to pursue the 2012 Planning Application submitted by the company without additional, external, financial support,"

404. The obvious source of "additional, external, financial support" was Dunbar, and for a substantial period during 2013, with both APAM and Mr. Stenson in support, it looked likely that Dunbar would agree to provide the necessary funding. However, as indicated above, first APAM and then Mr. Stenson changed their advice and recommendations, and on 10 July 2013 Dunbar's RMRC eventually decided that it would not fund the progression of the existing planning application. Mr. Money's evidence was that he believed that Dunbar had considered whether to fund the existing planning application and decided not to do so because it was flawed. He stated,

"This was a matter for Dunbar alone, and there was nothing further that I could reasonably have done to change that outcome. The Administrators were in no position to require Dunbar to provide funding or support, and the Administrators (and APAM) provided Dunbar with as much information as was possible to enable it to reach an informed decision."

405. I accept that evidence. Whether Dunbar's decision was the result of a genuine view as to the lack of merits of the existing planning application or (as Ms. Davey's pleaded case suggests) was part of a plot between Dunbar and APAM to engineer the sale of Angel House to Dunbar's "preferred bidder", it is not suggested that the Administrators were in on the plot, and the simple fact was that the Administrators had no control over Dunbar's decision whether or not to provide the necessary funding to continue funding the planning application. That was also Mr. Shierson's view,

"Q. But [while Dunbar was making up its mind what to do] the Administrator was seeking to keep the Planning team on board and stopping them downing tools and pursuing claims, and also keeping the London Borough of Tower Hamlets as happy as possible and preventing them from treating the scheme as abandoned.

A. Yes, to try and endeavour as best he can to keep all the balls in the air while, hopefully, the decision is to be made.

Q. Yes, but at the end of the day, unless Dunbar agreed to fund it, there was nothing that the Administrator could do to make them do so.

A. Certainly you couldn't force it anyway.

Q. And there were not enough funds within the administration to do so; correct?

A. Correct."

406. I also do not accept that the Administrators' reaction to Dunbar's decision was unreasonable. Specifically, I do not think that any reasonable administrator would have insisted upon continuing to pursue the existing application or would have been able to find the additional external funding to do so as Ms. Davey alleges.
407. The first point to make in that regard is that the Administrators were not facing a situation in which Dunbar had simply refused to be involved in a planning application of any sort and had therefore left the field open. Although declining to fund the continuation of the existing planning application, Dunbar had indicated that it would be prepared to commit significant funds to designing and pursuing a revised scheme in parallel with a soft marketing test.
408. Mr. Money's evidence in that respect was that he thought that Dunbar were willing to fund the pursuit of this revised planning option to the tune of £500,000 in fees with a view to enhancing the value of the property if the soft marketing did not indicate that acceptable offers would be received for the site without planning. That evidence is consistent with the events that followed Dunbar's decision. The Administrators, APAM and Dunbar met on 16 July 2013 to agree an action plan which was set out in APAM's email of 23 July 2013. In relation to planning, the email stated,

"Architects Interviews

APAM is to finalise and agree three architects to be interviewed by the w /c 29 July with interviews to be held in August. APAM's suggested draft architects list is Ian Simpson, BPTW and John Thompson and Partners.

Planning Team

APAM strongly recommends that the current planning advisor, CgMS, is retained owing to the strong relationship that it has with Tower Hamlets.

Tower Hamlets

A meeting is to be arranged through CgMS with Tower Hamlets planners as soon as possible. It will be explained that following a review of the existing planning application, it has been decided to proceed with a new detailed planning application. In parallel to this, it will also be communicated to the planners that we will be investigating potential joint venture partners and that they may be contacted independently by these parties."

409. Those proposals were duly followed up. APAM met CgMS on 13 August 2013 and CgMS followed up that meeting with a very enthusiastic email recording that the proposed new detailed application would provide for a fresh and more negotiable start, with a new mix and approach. This was followed up the next day by CgMS with a fee proposal and a programme for a revised planning scheme, together with a draft brief for the interviews with new architects. That draft brief indicated that the revised planning application would be for a mixed-use scheme, focussing on maximising the number of residential units, with some office and retail space plus on site car parking spaces. On 22 August 2013, APAM sent the planning brief with an invitation to pitch for appointment to three firms of architects who had confirmed their interest in the project (with copies to the Administrators and CgMS).
410. It was put to Mr. Money in cross-examination that his report to creditors of 10 July 2013 made no mention of the change of direction by Dunbar or the Administrators, but continued to indicate that the existing planning application would be pursued. That report stated, inter alia,

"General overview

….

1.4 The commercial premises are currently subject to a planning application for redevelopment.

The application was initiated by the Company prior to the administration and the joint administrators and the secured creditor are keen to progress it in order to enhance the value of the building.

1.5 While the application process continues, the joint administrators will continue to run the Company's business.

….

Planning Application

2.13 At the date of appointment the Company was in the process of making an application for planning permission for redevelopment of the Property. This is an avenue that the joint administrators and Dunbar wish to pursue with a view to enhancing the market value of the Property.

2.14 APAM will assist and advise the administrators in relation to the planning application as there are a great number of factors that need to be considered, such as the funding of the project and selecting the team who will work on it."

411. Mr. Money's evidence was as follows,

"Q. …. There is nothing in this report to creditors which suggests that the old planning application is going to lapse because you can't provide the information and … a brand new application is going to be made, is there?

A. No, there is not in here. I mean, I suppose what I don't know, looking at this, is whether that is an unfortunate coincidence of timing or not, because the report would have been prepared in advance of the 10th, when we didn't have feedback [from Dunbar]. But I am not going to -- I don't want to speculate on that particular point."

412. I do think that it is unfortunate that the Administrators sent their progress report to creditors in the form that they did on 10 July 2013. However, I do not believe that this was done deliberately to conceal matters from creditors generally, or from Ms. Davey in particular. No credible motive for the Administrators taking such a step was suggested and I think that it is far more likely, as Mr. Money supposed, that this was an unfortunate coincidence of timing and a consequence of the fact that the report was obviously drafted at an earlier stage and that no-one thought to prevent or amend the report being sent out on 10 July 2013 in light of the communication received from Dunbar the same day.
413. In short, I find that having discussed matters with APAM and Dunbar, the Administrators thought that Dunbar's new approach of funding the development of an improved planning scheme and submission of a new planning application in parallel with soft marketing was a genuine proposal and a reasonable course for the Company to follow given the financial constraints in the administration. In those circumstances it is somewhat unrealistic to suggest that a reasonably skilled and careful administrator would have insisted upon attempting to pursue the existing 2012 planning application against the advice of APAM and the wishes of Dunbar. That conclusion is consistent with Mr. Shierson's evidence in cross-examination,

"Q. Yes. In the circumstances of what we have agreed so far in relation to the Savills valuation, and whether or not you get a separate valuation at that stage, do you suggest that Mr Money should have done more to obtain the support of Ms Davey to pursue the planning application? …

A. I have to accept that Ms Davey had not been particularly forthcoming with her advice to the Administrators and to Dunbar; she had volunteered it but didn't actually proffer any, didn't attend meetings when it was requested, and the Administrator might well form the view that, "She has not co-operated with me, I am not going to talk to her".

Q. I don't want to misunderstand you and I don't want to cut short any of your evidence, but do I take that answer to mean that you now accept that there was no criticism of Mr Money in failing to do more to consult with Ms Davey and obtain her support for pursuing the planning application, or, indeed, her views in relation to it? I just want to be clear. Because you say that in your report.

A. Well, let's -- at the point where Dunbar have said, "We don't like this planning application, we are not going to fund it", the Administrator then has one possible other source of funding, i.e. Ms Davey. Would he seek to impose a planning application that Dunbar have declined to fund on the chargeholder by using Ms Davey's funds to pursue it? I find that a very difficult question to answer.

Q. Do you mean to say you think it most unlikely that the reasonable administrator would have done so, or do you mean you are uncertain as to what answer to give?...

A. I think the reasonable administrator, in those circumstances, would have struggled to seek to impose the application on Dunbar using Ms Davey's money when they didn't like it."

414. Mr. Shierson's last answer in any event postulated that the Administrators would have had access to additional funding from Ms. Davey to pursue the existing planning application. However, I do not think that there is any reliable evidence that if the Administrators had approached Ms. Davey in mid-2013, she could have provided the necessary money to pay the planning team's fees and pursue the existing planning application in any event.
415. Although Ms. Davey's original witness evidence for the trial had asserted that,

"had [the Administrators] come to me and explained that there were no moneys at all to pay the Planning Fees such that they would have to let the application lapse, I would have raised funds with ease. Of this I am 100% certain."

No further detail or disclosure was provided to support this allegation.

416. Shortly before trial, Ms. Davey produced a witness statement which added,

"The decision to let the planning application to lapse seems to have been taken in May or June 2013. Had I been told at any time during the first half of 2013 that the planning application was about to lapse due to lack of funds, I would have moved heaven and earth to make sure that sufficient funds were available. If I had been asked to pay £300,000 in this respect I would have done so."

417. Ms. Davey's statement then gave a number of illustrations of how she might have funded such payments.
418. First, she asserted that her brother, Magnus, had procured a company of which he was the sole director and shareholder, to pay £1,596,000 of Ms. Davey's judgment debt to Dunbar in the first half of 2014. The reality in that regard, however, was that having had judgment entered against her in July 2013, Ms. Davey was not able to come up with any money to pay the judgment debt. Her response to Dunbar in early August 2013 was that she would have to liquidate some of her properties to find the money and needed 12 months to pay; and at the meeting on 25 September 2013 Ms. Davey told Dunbar that she had no cash to pay her debt. In the circumstances I do not think that the fact that Ms. Davey's brother subsequently assisted her to pay her judgment debt in 2014 provides any evidence that her brother would also have made funding available to her for a very different purpose in mid-2013, and no further evidence was adduced to support any such conclusion.
419. Ms. Davey's witness statement also referred to her having "borrowed and called in favours" to pay for the costs of instructing lawyers in England, California and Israel to defend the claims made against her by Dunbar under her Guarantee in 2013. That was, I think, probably a reference to a loan of £1 million which Ms. Davey stated for the first time in cross-examination that she had received from her ex-husband and had drawn down in four tranches in the first part of 2013. Ms. Davey explained that she needed this money for herself and her other company in the aftermath of the administrations of AGL and AHDL,

"Q. …. The £1 million loan came in from your ex-husband, available all at once, but with interest to be paid on it, and you didn't use any of that money to pay off either the professional team or the loans to the company or the interest, did you?

A. No, my Lord.

Q. Did you use any of that loan to pay off the guarantee to Dunbar?

A. No, my Lord.

Q. So it was all used on legal expenses. What else?

A. Consultancy fees, my Lord, legal expenses, living expenses, mortgage expenses. There were lots of expenses at the time that -- we had just gone into administration on the Group in October. We had lost income that had been tied up as a result of that, which had caused a real cashflow shortage. We then went into administration on Angel House Developments on 27 December 2012, and whilst I was hoping that the bank would give me a sort of a longer period, until 31 January 2013, that didn't happen. Then once we had gone into administration, sort of everything stopped, and I lost control of the company. So my main concern at the time was keeping my other company solvent and restabilising everything."

420. From this explanation I believe that it is relatively clear that this money was required by Ms. Davey to deal with her other pressing financial problems. I do not accept that a substantial proportion of it could easily have been diverted by her to discharge the overdue debts to the planning team and to fund the further fees required to progress the 2012 planning application.
421. Ms. Davey's statement also suggested that if she had been required to find £200,000 - £300,000 to pay the planning team, she would have been able to raise it by granting a second charge over her property at G3 Hanover House or her house in La Jolla, California. However, the Hanover House property was already subject to a first charge and Ms. Davey accepted in cross-examination that it would have been "tight" to raise £300,000 on it; and although the house in La Jolla had a significant amount of equity, Ms. Davey encountered significant difficulties when she tried to sell it to pay off the Guarantee debt due to Dunbar in the third quarter of 2013.
422. I therefore do not accept that Ms. Davey could have raised the necessary money to fund continuation of the 2012 planning application in mid-2013, either easily or at all.

No appointment of a recognised sales/investment agent

423. Ms. Davey's case is that the Administrators carelessly failed to engage an appropriate investment/selling agent to advise on the marketing and sale of Angel House. She contends that once the Administrators decided to undertake a "soft marketing" exercise, and certainly once they decided to seek firm offers for the property, they should have conducted a selection exercise and engaged a recognised international firm of specialist sales agents such as CBRE, Cushman & Wakefield, DTZ, Knight Frank, JLL, Savills or Strutt & Parker. She claims that instead, the Administrators simply relied upon advice from APAM, which had been instructed as managing agents for Angel House, but which did not have the requisite specialist knowledge and experience to act as selling agents. It is, I think, also implicit in Ms. Davey's case, that APAM's alleged lack of independence from Dunbar should have led the Administrators to insist on the engagement of a more recognised sales agent at this stage.
424. In their written evidence, both Mr. Shierson and Mr. Wolfenden drew a distinction between the roles of managing agents and investment agents, and stressed the importance of a selection process. The essence of Mr. Wolfenden's evidence was contained in the following paragraphs,

"9.1 … development properties like Angel House are best valued by the market itself, first by the Investment Agents who are operating in the market and then by full exposure to the market. The Investment Agents and the market can be trusted to identify the value. They will approach a property like Angel House, situated in an area of rapid development and with many adjustable development components, in a manner which is creative, innovative and imaginative. Strategies will vary and the desire to win such a development project will drive up the price, especially in an area like Marsh Wall in 2013/2014.

9.2 All the Investment Agents have global offices and contacts and tend to have their fingers on the pulse of the market appetite based on actual deals and actual communications with clients. For example, they would have been aware of 'new' entrants to the market …

9.3 A Beauty Parade is a simple and efficient means of bringing together the top Investment Agents to give their considered view on what price is achievable, how and why. The development permutations and potential variations on the McBains Cooper scheme would have been meat and drink to Investment Agents, each of whom would have been looking for the best and most profitable planning and development angles. With the pooled knowledge of such an exercise and the ability to interrogate during and as a necessary part of the process, the Beauty Parade was, in my view, the only way to proceed in this case.

…..

13.1 Angel House presented a significant development opportunity in an increasingly marketable location and was always going to involve sale proceeds of multi-millions of pounds. As I have said, in the usual course of events, administrators would be expected to instruct 'one of the big boys' to ensure the price secured represented the top end of what it could be expected to achieve. Instructing an Investment Agent would have allowed the Administrators to take for granted that the Property would be fully marketed and sold for the best price. In the unlikely event that this was not the case, these larger firms would have extensive professional indemnity cover.

13.2 On the other hand, an asset management agent is normally brought in to ensure that an asset is properly managed and that income is maximised while expenditure is kept to a reasonable minimum. The skills required of a competent Investment Agent differ significantly from those of a property management agent and while some professionals and companies are able to carry out both roles satisfactorily, they are very different functions. Many asset managers would not have the up-to-date knowledge of the buyers in the market (including the international market) or the appetite of the market. As I have described above, an Investment Agent, with knowledge of the local market and contacts in the industry is very well placed to put a value on a property to which the market will respond. I do not believe that it would have occurred to anyone with specialist experience of selling a property like Angel House in 2013 to have invited APAM to a Beauty Parade of Investment Agents."

425. Mr. Shierson agreed and described a typical selection process,

"4.20 …. in my experience the standard practice would be to invite a short-list of 3-5 parties to present to the IP and the secured creditor (the selection panel) in a competitive environment and to be questioned on their presentation. If an asset manager has been appointed they might join the selection panel. In that way the selection panel will receive alternative views on the property and will get indications whether different investment agents have different views on the merits, in this particular case, of selling pre or post planning. Each prospective agent would present on their view on the market, the timing of the sale, the sale process to be adopted and their recent experience of selling similar assets. In such Beauty Parades, the selection panel is effectively getting free advice from the prospective agents and an insight into the market…."

426. Mr. Shierson then commented in relation to the facts of the instant case,

"4.45 In my view there were two obvious points in time in this case where the reasonable IP might have appointed investment agents. The first was roughly in the February to June 2013 period where he had decided to pursue the planning application and he might have wanted to seek the investment agent's views on that strategy, on the application itself and on the uplift to be gained if a consent were forthcoming.

4.46 The second opportunity arose when the planning application was either (i) successful or (as happened) (ii) was abandoned by Dunbar and before APAM commenced soft marketing in July/August 2013.

4.47 At both dates I would have expected this to be achieved by a Beauty Parade as described above….

4.48 I would have sought investment advice before commencement of soft marketing and I would have expected the investment agent to recommend going to formal marketing with the investment agent very much leading the process, possibly with APAM support as the asset manager."

427. It should be noted that Mr. Shierson's written evidence was only that a reasonable insolvency practitioner "might have wanted" to seek the views of an investment agent whilst pursuing a planning application between February and June 2013, and not that this was essential. That was a view that he made clearer in cross-examination,

"Q …You said a little while ago that the Administrator would want advice as to whether to pursue the planning application, but you seem to have formed the view, without such advice, that it was appropriate to pursue it. How do you get to that point, given your earlier answers?

A. I do form that view without advice … You have got a planning application that is well-progressed, where a lot of money has been expended, a reasonable amount of money is outstanding on it and a reasonable sum needs to be incurred in completing it, but everyone seems to think that there is a significant planning enhancement for the property, and it does seem -- my gut reaction would be that that looks to me to be the right strategy.

….

Q. …. you do agree that it was a reasonable decision of Mr Money to recommend that it should be pursued.

A. I don't criticise Mr Money for that decision.

Q. Right. Of course, if that is the approach you have taken, and you have appointed an asset manager, you don't need an investment agent at that stage, do you?

A. You don't necessarily need an investment agent."

428. In light of this evidence from Mr. Shierson, I cannot accept that the Administrators did not act with due skill and care in not instructing an investment agent in the first half of 2013.
429. Mr. Shierson was, however, critical of Mr. Money's subsequent decision to proceed to soft marketing with APAM rather than a more experienced selling agent,

"Q. What the Administrators were doing was they were working on Dunbar's statement that they would let the planning application lapse because it wasn't good enough, and they would pursue, as primary objective, a new planning application, but do some soft marketing in the meanwhile in order to test the market. That is what was going on, wasn't it, as you understand it?

A. That is what was going on, yes.

Q. Yes, and I would suggest to you that in those circumstances it is perfectly reasonable, in making that sort of decision, to use APAM to do your soft marketing.

A. I disagree. I would have gone to an experienced selling agent.

Q. I hear what you say, but the question I am asking is whether you suggest that no reasonably competent administrator could have taken the decision that given that the primary objective was to pursue the planning for a new application, with soft marketing being to test the market, it was reasonable to use your existing agent to do the soft marketing process to assist you in your decision as to whether to sell or apply for planning?

…

A. It was sensible to establish what the market appetite for the building was through a process. Whether you do that through soft marketing or you go straight to full marketing is something you should take advice from your chosen investment agent.

Q. Do you agree that it was not something that no reasonably competent administrator could do, to decide to use your existing agents, APAM, in order to carry out that soft marketing process before making a decision of whether or not to sell?

A. If your intention was to appoint a selling agent when you got to full marketing, it would seem eminently sensible to consult with that investment agent, selling agent, regarding the soft marketing process before APAM go out and ...

Q. But if you haven't decided (a) when to sell, and, therefore whether to sell with planning consent or without planning consent, and whether to use another agent as well as APAM, do you agree that it is reasonable to use APAM for the soft marketing process?

A. I would need -- I will come back and repeat what I said before. I think if you are going to market this in any form, you should market with an experienced agent , and I would take the advice of that agent as to whether I soft market before we go to full marketing."

430. Mr. Shierson was also cross-examined on the Administrators' subsequent decision to use APAM for the final stage of the marketing of Angel House,

"Q. I think you suggest, in your evidence, that assuming APAM was appointed for the soft marketing, that they should not have been appointed for the final marketing. Yes?

A. Yes.

Q. Do you agree that … an administrator is entitled to form a view, based on his experience of an agent, as to whether they would, in fact, be suitable as a selling agent?

A. Yes. He is entitled to form a view.

Q. Where the expectation is that the selling price is not likely to meet the secured creditors' debt, he is entitled to listen to and heed the views of the secured creditor as to the suitability of that niche operator as a selling agent?

A. Yes. It is a view he would have to take into account.

Q. Yes, and where, as here, Mr Money has had experience of APAM and their competence, knowledge and professionalism over a period between January and September or October, do you agree that it was open to Mr Money, if he so concluded, to decide that for this property APAM was an appropriate selling agent?

A. I depart from you at that point. I fail to see how an agent who has demonstrated capability in managing the asset -- it doesn't flow from that at all that he will make a good selling agent."

431. Although disagreeing with the Administrators' reliance upon APAM for soft and final marketing, I take from those exchanges that Mr. Shierson accepted - as I think must be right - that an administrator is entitled to have regard to his own experience of a candidate firm when deciding who to engage as selling agents. Mr. Shierson also accepted - and again I concur - that in a case in which it is doubtful or uncertain whether the sale price will exceed the secured debt, the administrator must be entitled to take into account the views of the secured creditor as to the identity of any agent who will be engaged to assist in the sale process.
432. The cross-examination of Mr. Shierson then continued,

"Q. Right, but you don't have any personal knowledge of APAM and you weren't working with them, as Mr Money was, over a period of time.

A. No. That is true, my Lord. I was not. I have seen their credentials pack, as it forms part of the relativity database, and their selling experience that they put into that credentials pack, in comparison to CBRE and others like them, it's insignificant.

Q. Of course it is, because CBRE is a global organisation. It doesn't mean to say they are not capable of selling well a property with which they have become very familiar, in a market which they have had to study in order to make their recommendations to the client. Do you agree?

A. I agree with that, but I would also say that it is the IBM factor as well. You can't be criticised if you go with IBM, and here we find ourselves -- Mr Money finds himself in this room, having gone with APAM.

Q. …. It doesn't mean to say that it is necessarily the appropriate or only reasonable decision to make, does it?

A. No, of course not.

Q. Right. If Mr Money, acting reasonably, heeding Dunbar's experience with APAM and heeding their own experience with APAM, had concluded that for this particular administration, in the situation which they found themselves, where there was still uncertainty, APAM was the appropriate selling agent for this property, then you would accept that that was reasonable, wouldn't you?

A. I am afraid I don't. I would say I would still wish to go with a recognised selling agent."

433. Although Mr. Shierson adhered to his opinion that an administrator should select what he described as a "recognised selling agent", I think that this view was essentially due to what he described as "the IBM factor" - namely that selecting a large established firm is a "safe" option that would avoid any criticism, whether or not that criticism was well-founded. A similar sentiment is also apparent in the remarks of Mr. Wolfenden in paragraph 13.1 of his written evidence (above) that instructing "one of the big boys" would allow an administrator to "take for granted that the Property would be fully marketed and sold for the best price", and would have given the Administrator access to the potentially higher professional indemnity cover of the larger firm.
434. But simply avoiding criticism or litigation is not the relevant test that I must apply. The question is whether, in relying upon APAM in relation to the sale of Angel House rather than selecting "one of the big boys" after a beauty parade, the Administrators made an error which a reasonably skilled and careful insolvency practitioner would not have made. In that respect, it seems to me that as a matter of principle, it cannot be the case that the established "big boys" have a monopoly on competence or relevant local knowledge so that it is necessarily negligent not to instruct them. That is why Mr. Shierson readily (and in my view correctly) accepted two propositions: first, that just because APAM were not the same size as (say) CBRE, it did not mean that they were incapable of selling well a property with which they had become very familiar into a market which they had had to study; and secondly, that selection of a large firm was not the only reasonable decision that an administrator could take ("No, of course not.").
435. In that respect, the evidence of the Administrators was that although they did not initially think of APAM as selling agents, as time progressed, APAM earned their confidence and acquired considerable familiarity with the property and the market in the local area. Although there was no evidence that APAM had sold a property in the Docklands before, they did have experience as selling agents generally, and the Administrators took the view that they had the great advantage of having become very familiar with Angel House and other developments in the local area over a six-month period.
436. Mr. Money's written evidence was that by July 2013,

"127. …Having worked with APAM for six months by this stage, I had no doubts whatsoever as to their competency and I was entirely satisfied that it would be appropriate for them to carry out this [soft] marketing exercise. Had I not been so satisfied, I would not have instructed them to undertake it and would have instructed different agents instead.

128. I do not believe that I specifically at this stage considered whether APAM would be acting or should also act as the eventual sales agents. I will state that I was confident at this stage that APAM understood the asset and the market generally, and would continue to consider the best strategy for maximising the value of the asset. In addition, APAM's apparent knowledge of what was happening in the local area provided me with reassurance that other options were not being missed."

437. Mr. Money made a similar point in cross-examination when asked about a passage in Mr. Wolfenden's report,

"Q. …. The investment agents and the market can be trusted to identify the value. They will approach a property like Angel House, situated in an area of rapid development and with many adjustable development components, in a manner which is creative, innovative and imaginative…. Then he says: "All the investment agents have global offices and contacts and tend to have their fingers on the pulse of the market appetite based on actual deals and actual communications with clients." You wouldn't disagree with that, would you?

A. Well, as a description of investment agents it is probably reasonably accurate.

Q. APAM didn't have a global office, did it?

A. No, they didn't.

Q. And you couldn't say that you had any evidence that they had their fingers on the pulse of the market appetite down in the vicinity of Canary Wharf based on actual deals and actual communications with clients, can you?

A. Actually, I disagree, because APAM reported on a reasonably regular basis during the course of the administration on what was actually taking place in that area…"

438. Mr. Money also dealt with the decision to continue to instruct APAM for the final stage of marketing, including the point that some of the larger firms were on the list of parties approached to pass details of Angel House on to any of their clients who might have been interested,

"Q. … You at no time sought to engage as selling agents any of the recognised agents?

A. That's right. Yes.

Q. Why was that?

A. Because as we moved through the process, and I think I say this in my witness statement, but as we moved through the process and continued to work more closely with APAM, my view was that the advice that I was getting from APAM, the thoughts that they provided on the approach to maximising … value from this asset were such that it gave me the confidence that as we moved into the marketing process, the asset was properly exposed. And I suppose to the extent that I might have been concerned that if APAM had been doing this without any reference to some of the larger organisations, that was allayed by our discussions when we decided that they would include Savills and CBRE within the lists of parties contacted. Because I think it is reasonably -- it is reasonable to assume that if they had parties who would have been an interest, and indeed Savills did introduce somebody for this, well, I mean, they would have their own incentives to go out there and find clients …"

439. I shall return to the importance of the inclusion of Savills and CBRE on the list of parties to be contacted in relation to Angel House when I consider the question of whether the property should have been advertised for sale (below), but for present purposes it suffices for me to say that I regard this evidence from Mr. Money as credible and reasonable. Having read the various reports and advice provided by APAM, I do not consider that they were in any way inadequate or lacking in appropriate analysis of the property or the market.
440. Picking up the point which I left unanswered in relation to Issue 2 above, I also do not think that there is any basis for criticising the Administrators on the basis that they should have reached a conclusion that APAM were not sufficiently independent from Dunbar to be used by the Administrators at this stage of the marketing and sales process.
441. The first point in that regard is that no allegation was put to Mr. Money that any particular event should have alerted him to the (alleged) fact that APAM were conspiring with Dunbar to harm the interests of unsecured creditors or Ms. Davey.
442. The only basis for such an allegation is therefore the inherent potential conflict between the interests of a secured creditor in achieving a sale at a level which sees it paid out, and the interests of the unsecured creditors in holding out or doing more to achieve a sale at a higher level. That is the inherent conflict to which I have already referred above. But on the particular facts of this case, I think that any reasonable administrator would have thought that by the time it came to the final sales process, given that the soft marketing had demonstrated that a sale might be possible above the level at which APAM would have become entitled to a Value Enhancement Incentive Fee, APAM were in fact highly incentivised to maximise the sale price for their own financial reward.
443. Accordingly, in all the circumstances, I am not persuaded that the Administrators acted as no other reasonable insolvency practitioners would have acted when they chose not to engage the services of a larger firm of investment agents to work together with, or instead of, APAM in relation to the marketing and sale of Angel House. I think that having (legitimate) regard to the views of Dunbar, to the Administrators' own experience and assessment of APAM's capabilities and its acquired knowledge of the property in question and the local market, and to APAM's financial incentive to achieve the maximum price for Angel House, the Administrators reasonably concluded that APAM could competently provide the necessary independent marketing and sales advice.

Were the Administrators entitled to rely upon APAM?

444. That finding leads to a further legal point. If the Administrators did not act carelessly or in breach of duty in instructing APAM to conduct the soft marketing and the final sales process, were they entitled to rely upon APAM's advice thereafter, such that even if APAM acted wrongly or negligently, the Administrators would not be liable without personal fault?
445. Mr. Davies submitted that, applying by analogy the dicta of Lord Walker in Pitt v Holt, Futter v Futter [2013] 2 AC 108 at [78], the Administrators could be held liable, even if they were following professional advice if their decision, judged objectively, was unreasonable. Mr. Fenwick countered that this was not a correct reading of Pitt v Holt. He submitted that following incorrect professional advice should not lead to liability for administrators if the advice was apparently competent and the decision was within the scope of their statutory powers.
446. Pitt v Holt concerned two applications, (i) to set aside a voluntary disposition on the ground of mistake, and (ii) to set aside a trustee's exercise of a power of advancement on the basis that it had been made without proper consideration. In the course of his judgment, Lord Walker observed,

"78. It is undoubtedly correct that trustees may be liable for breach of trust even though they have acted in accordance with skilled professional advice. Such advice cannot protect trustees from potential liability for a loss to the trust fund resulting from a decision that is, judged objectively, beyond the trustees' powers and detrimental to the trust (though professional advice may lead to their obtaining relief under section 6 of the Trustee Act 1925). An example mentioned in argument is Dunn v Flood (1885) 28 ChD 586, in which trustees had sold by auction 73 plots of freehold land at Reading, subject to special conditions which the court held to be severely depreciatory (as Fry LJ put it at p 594, "eminently calculated to frighten away purchasers"). The Court of Appeal, upholding North J, refused to force a doubtful title on a reluctant purchaser. The fact that the trustees had consulted respectable solicitors was no excuse. It was not a reasonable exercise of discretion: Baggallay and Bowen LJJ at p 592; Fry LJ at pp 593-594. But the trustee's breach of duty was not in the manner of their decision-making (as to which we know nothing other than that they consulted respectable solicitors) but the loss to the trust property that their unreasonable decision appeared to have caused.

79. Further examples are provided by the decision of the Court of Appeal in Perrins v Bellamy [1899] 1 Ch 797 and that of the Privy Council, on appeal from the Supreme Court of Victoria, in National Trustees Co of Australasia Ltd v General Finance Co of Australasia Ltd [1905] AC 373. These cases, discussed by Lloyd LJ at para 124 of his judgment, were both examples of action taken by trustees on professional advice which was unequivocally incorrect: one a sale of leaseholds when the trustees had no power of sale; the other a distribution (resulting from "some extraordinary slip" by solicitors of high standing) of a deceased beneficiary's vested share to persons who were not entitled to it under the intestacy law of Victoria in force at the beneficiary's death. As Lloyd LJ observed, the issue in these cases:

"is altogether different, as it seems to me, from the question whether, if trustees take advice properly, and act on that advice in a matter which is within their powers, the fact that the advice has misled them as to the true position in a relevant respect means that they acted in breach of fiduciary duty."

80. I respectfully agree. Trustees may be liable, even if they have obtained apparently competent professional advice, if they act outside the scope of their powers (excessive execution), or contrary to the general law (for example, in the Australian case, the law regulating entitlement on intestacy). That can be seen as a form of strict liability in that it is imposed regardless of personal fault. Trustees may also be in breach of duty in failing to give proper consideration to the exercise of their discretionary powers, and a failure to take professional advice may amount to, or contribute to, a flawed decision-making process. But it would be contrary to principle and authority to impose a form of strict liability on trustees who conscientiously obtain and follow, in making a decision which is within the scope of their powers, apparently competent professional advice which turns out to be wrong."

447. When the entirety of this passage is seen, I consider that Mr. Fenwick is correct. Paragraph [80] makes it clear that Lord Walker was not suggesting that a trustee who relies upon apparently competent advice should be liable if that advice turns out to be wrong. The trustee will only be liable if the decision which he takes is outside the scope of his powers or contrary to the general law.
448. For completeness I should also briefly refer to the other cases which have considered the same question in relation to mortgagees and receivers. In particular, in Raja v Gray [2003] 1 EGLR 91, the Court of Appeal considered an appeal by a valuer who had been appointed by a receiver to strike out a negligence claim against him by a mortgagor who accused him of negligently valuing property which was then allegedly sold at an undervalue by the receiver. In considering the question of whether the valuer instructed by the receiver owed a duty of care to the mortgagor, the Court of Appeal considered (obiter) the question of whether, if the receiver were sued by the mortgagor, he would be able to say in his defence, "We entrusted the sale to apparently competent professionals, and if they were negligent it is not our fault". The Court of Appeal was of the view that a mortgagee could not run such a defence; and it was implicit in the assimilation of the duties of a mortgagee and a receiver in Medforth v Blake [2000] Ch 86 that the same analysis would apply to a receiver: see per Clarke LJ at [29]-[32].
449. In reaching that conclusion, the Court of Appeal referred to and relied on an obiter dictum to that effect of Cross LJ in Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949 at 973. Cross LJ had indicated that the underlying rationale for the view that a mortgagee should be liable to the mortgagor for the negligence of the mortgagee's agent was that the mortgagor would not necessarily have any direct cause of action against the mortgagee's agent himself. Earlier in the same passage, Cross LJ explained the distinction between such a case and the law applicable to a trustee,

"[Counsel for the mortgagee] further submitted that even if we should be of opinion that a mortgagee was liable to account to the mortgagor for loss occasioned by his own negligence in the exercise of his power of sale, it was not right that he should be liable for the negligence of an agent reasonably employed by him. … counsel pointed out that a trustee is not liable for the default of an agent whom it is reasonable for him to employ. But the position of a mortgagee is quite different from that of a trustee. A trustee has not, qua trustee, any interest in the trust property, and if an agent employed by him is negligent his right of action against the agent is an asset of the trust. A mortgagee, on the other hand, is not a trustee and if he sues the agent for negligence any damages which he can recover belong to him…."

450. Applying that rationale, since an administrator does not, qua administrator, have any interest in the property in question; and since the agent will invariably be engaged by an administrator on behalf of the company so that any cause of action would be an asset of the company, the correct analogy for this purpose is indeed between an administrator and a trustee rather than between an administrator and a mortgagee or receiver.
451. Accordingly, I would accept the proposition that the Administrators cannot be liable in negligence to AHDL if they reasonably relied upon advice from APAM that appeared to be competent.

Advertising and exposing the property to the market

452. Ms. Davey's case is that Angel House should have been widely advertised for sale, including by way of advertisements in relevant publications such as Estates Gazette or Property Week, by way of a "For Sale" board at the property, and internationally including on the internet. Ms. Davey's contentions relied heavily upon the evidence to that effect of Mr. Wolfenden, who was supported by Mr. Shierson.
453. As a preliminary point, in his expert evidence and in cross-examination, Mr. Shierson suggested that because an administrator is a fiduciary, there is a necessity for advertisement in any sale process. He suggested that, as an administrator,

" …. I have a duty to ensure that I am running a transparent and fair process, and to my mind, advertising for sale is a part of that process, and there has to be a really good reason why you don't do it; and I have never had an investment agent telling me not to advertise."

454. I returned to this topic with Mr. Shierson at the end of his evidence,

"MR JUSTICE SNOWDEN: …. I understand, certainly, the attractiveness of what you describe as a, "transparent and fair process", but what do you regard as your main duty as an administrator?

A. To fulfil the objectives of the administration by realising the best possible price for the assets in all the circumstances.

MR JUSTICE SNOWDEN: Right, and if you were advised … that obtaining the best price in the circumstances would be achieved by not advertising, what would your decision be, and you had gone back and checked that and discussed it with the adviser?

A. Yes. I think the Administrator would ultimately have to take the advice of the agent, telling him that this is the best way to do it in these circumstances, and to get the agent to put that in writing to cover his risk management issues from breaking away from the norm."

455. There is no doubt that many of the cases on sales by insolvency office-holders refer to a requirement that assets to be sold should be properly exposed to the market, that public advertisement is accepted to be the normal means by which that might be achieved, and that inadequate advertisement might lead to liability. But I do not think that there is any special rule requiring advertisement by administrators or other insolvency office-holders. As I think Mr. Shierson ultimately accepted, it must be a question of fact in each case, depending upon the nature of the asset and the relevant market, as to whether, and if so, what type of marketing is required to discharge the administrator's duty to take reasonable care to obtain the best price that the circumstances permit. The precautions that Mr. Shierson identified of getting the agent to commit its advice to writing in order to address "risk management issues" and provide protection for the office-holder against subsequent criticism, are clearly sensible commercial practice, but I do not think that such matters can affect the underlying question of what is required.
456. In the instant case, a number of the witnesses disputed Mr. Wolfenden's and Mr. Shierson's view of the normal practice in relation to development properties, and suggested that there were good reasons not to advertise a property such as Angel House in trade journals. In particular, Ms. Seal pointed out that none of the commercial properties which had been identified by Mr. Wolfenden in his report as comparable properties to Angel House had been advertised in the Estates Gazette prior to sale, and only one had been advertised in Property Week. Ms. Seal gave clear evidence that the majority of development sites that she saw for sale were not advertised,

"Q. But you will agree, presumably, that there is an obvious risk that if you market to only a limited group you can't be sure you are achieving a true open market value?

A. For the purposes of a conversation like this, it is, of course, much easier to say the market value was achieved if you can see that a best practice style marketing process is undertaken, but that is only because it is more demonstrable. It is not because it is more true.

I think the significant piece of evidence that suggests that best price is achieved not by advertising is the fact that so few sites are openly advertised, and, obviously, agents aren't fools, if they can make bigger commissions by selling sites for more money, then they will go down that route. I think whilst -- that, to me, is a pretty compelling piece of evidence as to why not putting something in the Estates Gazette produces a more efficient and remunerative sales process than putting something in the Estates Gazette, in the majority of cases."

457. In cross-examination, Mr. Wolfenden accepted as correct Ms. Seal's evidence that there had been virtually no advertisement in trade journals of the properties that he thought were comparable to Angel House. However, he sought to explain this by reference to the identity of the selling agent,

"A. As counsel has just confirmed, all of those sales were handled by what I would call the big boys, the big firms. They all have offices around the world, and I have no doubt that Jones Lang, CBRE, DTZ and Savills will all have had conversations with their overseas offices to see whether they had clients who might be interested. Therefore, their way of marketing it was to use their global network and to approach international purchasers.

Q. Right.

A. APAM did not have offices other than an office in Manchester and an office in the West End.

Q. Let me get this clear. Your point is that it is not a failure to advertise per se, but rather the fact that APAM did not advertise; is that right?

A. Given the manner in which it was sold and by whom, it was, in my view, wrong not to have advertised it. They would not have had the exposure and the reach into markets which a Jones Lang, Savills, etc, will have had.

Q. But you would accept, would you, that if someone like Savills or Knight Frank or CBRE had been appointed as investment agent, then they, in all probability, wouldn't have advertised this property, would they, in an Estates Gazette or Property Week?

A. They may not have done. I agree."

458. That evidence suggests to me that what Mr. Wolfenden was actually criticising in the instant case was not the lack of advertisement of Angel House per se, but what he perceived as the limitations on the list of potential buyers who were contacted by APAM in comparison to the range of clients that might be known to a larger agency.
459. The underlying reasons why public advertisement of a property such as Angel House might not be the best way of maximising the sale price were explained by other witnesses. One such reason is that public advertisement naturally attracts a large number of expressions of interest from what were referred to by several witnesses as "time wasters" and "tyre kickers". Such persons are not serious bidders and would not actually have the ability to finance and consummate a transaction to buy a development property of the size and complexity of Angel House. Mr. Connaughton suggested that public advertisement might attract several hundred expressions of interest, of which about 80% would have to be weeded out for this reason. Although both Mr. Connaughton and Mr. Shierson thought that this weeding out would be the job of the selling agent and not a concern for an administrator, it was explained to me by other witnesses that this is not the full extent of the problem.
460. The issue is that there are a relatively limited number of potential buyers who have the expertise and financial backing to acquire large sites such as Angel House for commercial development. For them, assessing the property, arranging finance and making a genuine bid requires the expenditure of significant resources. The evidence was that such bidders are generally not willing to participate in a process which will attract large numbers of time wasters, or persons who might put in artificially high bids and then engage in underhand tactics such as chipping or withdrawing their bids late so as to try to obtain the property for themselves or for associates at a lower price. So, for example, Mr. Forgham told me,

"A. … the way that the market does work, is that it does put off a lot of bidders if a site is widely advertised, because they know that they are likely to be in a situation with time wasters, with people who put in high bids that they later chip or withdraw, and leave other parties to be then in pole position. It is -- in the agency world it is well-known that a lot of parties don't like, and won't bid, when things are widely advertised. They want to be in a situation -- they can't always be, and they're not -- where there is a more limited marketing and they will commit time and resource to their bids, which they otherwise wouldn't if it was widely marketed."

461. Mr. Shierson appeared to accept that point, albeit that he then reiterated his concern that an administrator would wish to see the property advertised for reasons of risk management for his own firm, upon which I have already commented upon above,

"Q. Do you agree with me that if you are one of a limited number of likely purchasers approached by an agent and given the opportunity of doing so, you are more likely to take that opportunity than if it is simply advertised in the Estates Gazette with everybody open to bid for it?

A. You could form that conclusion, yes.

Q. I suggest to you that in a case of a property such as this, that is exactly an appropriate conclusion which could be drawn and which would justify a decision to market it to a limited circle of potential buyers without advertising it. Do you not agree?

A. As an administrator, I would want to see it advertised.

Q. Do you not agree that when you add to those good reasons the concern that if it did not reach a price at which the chargeholder was prepared for it to be sold, and it might therefore be withdrawn from the market, there was every reason for a reasonable administrator to accept that the property should not be advertised?

A. No, I would be looking at the risk management profile that I was putting my firm under. If I am going to sell this off-market I am taking an additional risk, am I comfortable with that, or does the firm insist that it is advertised?

Q. Forgive me, Mr Shierson, I am not interested in risk management for your firm, I am interested in performing your duty of getting the best price that you can for the property. You are told the best way of getting a best price is not to advertise. Are you really suggesting your risk management is going to say, "Well, I will advertise anyway because I have got less chance of being sued"?

…..

A. No, I would insist on the agent giving me written advice to say, "This is why you shouldn't advertise", if that is their advice, and say, "Okay, under those circumstances, I am going to rely on your letter if this goes wrong"."

462. A further concern over public advertisement is that it might blight the property if it were not to command a suitable offer and had to be withdrawn from the market. That might be a particular concern if there was the possibility of pursuing an alternative course (e.g. a revised planning application). When this point was raised with Mr. Shierson in cross-examination, he clarified that he was not suggesting that Angel House should have been widely advertised as part of the "soft marketing" exercise carried out by APAM. However, he maintained that the position was different when marketing moved to the final stage,

"Q. Yes, so the downside of advertising, or one downside you identify is time wasters. What about other disadvantages?

A. The other disadvantage is if, for some reason, the property doesn't sell and you have to take it off the market, and you then, in six months' time or 12 months' time, bring it become to market, the market already knows that this is a property that failed to sell last time, and that can be a disadvantage.

Q. Of course, if you are in a position where the chargeholder is saying, "There is not enough money here to meet my charge, we will soft market it, soft marketing looks interesting, there is interest around 14 million plus, we will market it", again, the position may be that if you don't get enough money to cover the charge and the chargeholder says he would rather go for planning, you may well not … sell it. Do you agree?

A. Yes.

Q. In those circumstances, there would be every reason not to have spoiled it by advertising. Do you agree?

A. I have already said I wouldn't advertise at the start of a soft marketing process."

463. Taken as a whole, the analysis and evidence to which I have referred leads me to conclude that there could be no absolute requirement upon the Administrators to advertise Angel House for sale in the manner suggested on behalf of Ms. Davey.
464. There were certainly good reasons why a reasonable administrator might not have thought it necessary or appropriate to advertise Angel House for sale publicly at the stage at which APAM engaged in "soft marketing" and when it was uncertain whether the alternative course of pursuing a revised planning application would be pursued.
465. Some of the reasons against public advertisement (e.g. not wanting to attract time wasters or to deter serious bidders) would also have applied at the more formal final stage of the sales process. However, in that regard I accept Mr. Wolfenden's point about the difference between APAM and the practice of the larger firms such as Savills, Knight Frank or CBRE. Whether or not the type of considerations to which Ms. Seal and Mr. Forgham referred would have justified a decision not to advertise at that stage does depend upon whether the range of persons contacted by APAM was broad enough to ensure that a sufficient number of serious players in the market would have had the opportunity to consider whether to bid. That is the next issue to which I now turn.

The scope of marketing

466. After the initial decision was taken by Dunbar on 10 July 2013 to accept APAM's recommendation for a soft marketing exercise, the Administrators, APAM and Dunbar met on 16 July 2013 and agreed that APAM would finalise and agree a target list of potential purchasers to approach by the first week in September, together with a marketing pack to be presented to the potential purchasers on a face to face basis. The email dated 23 July 2013 from APAM recording the agreed action points from this meeting plainly envisaged the possibility of moving to a final marketing process after the end of soft marketing.
467. I have already set out in the chronology Mr. Money's evidence as to how the soft marketing "morphed" into formal marketing in mid-October 2013. As regards the scope of persons contacted by APAM, Mr. Money's evidence was,

"We had had the initial feedback to suggest that there was clearly interest in the property. We had asked APAM to prepare a list of the parties who they would then approach more formally, and to report back, then, on the results of that particular approach. So the initial -- what I would describe as the initial soft marketing was not aimed at 49 known or potential interested parties. I believe there was a sort of discrete number of people who were very likely to be interested, who were approached on that basis.

When the decision was then taken, which I think was getting into October, to start approaching the list of 49 or 50 parties, I would say that is the time when it moved from being soft to a more firm marketing process. So there was a greater likelihood that as a result of that exercise we might actually end up accepting an offer, so reaching a conclusion that would be acceptable in the administration."

468. In fact, according to the Marketing Report subsequently produced by APAM for the Administrators on 20 November 2013, APAM expanded its earlier list used for soft marketing to produce a "Targeted Parties List" of 45 potentially interested parties who were "known to have capital, an opportunistic strategy of buying development sites in this location in the current market and/or had indicated an interest in the property." The list included many well-known names in the commercial property world including (i) LBS (who were acting for the eventual purchasers of Angel House); (ii) Lycatel (who rented space at Angel House and were actively acquiring freeholds in Docklands and previously had discussions with APAM about purchasing Angel House); (iii) the Berkeley Group (who had bought South Quay on Marsh Wall); (iv) Chalegrove Properties (who were developing the Landmark Tower in Canary Wharf); (v) Commercial Estates Group (who were involved in a scheme at West India Quay); (vi) Essential Living (who were developing the Helix); (vii) Capital & Oriental (who had recently bid on a development site in Tower Hamlets and who had expressed interest in the site); and (viii) Healys (who were acting on behalf of a Chinese consortium that had missed out on an adjacent site). The Targeted Parties List also included a director of each of Savills and CBRE.
469. An information pack was provided to all interested parties in October 2013, a number of site inspections took place, and a data room was made available to the parties on 4 November 2013.
470. There was a difference of opinion between the experts as to whether this process was sufficient to bring Angel House to the attention of an adequate number of potential purchasers. Whilst Mr. Wolfenden acknowledged that he had heard of the majority of the parties named in APAM's Targeted Parties List, including many developers, some larger contractors and several funds, he was critical that the list failed to include any overseas investors and he set out a list of 37 other parties who he said he would have expected to be on the list.
471. In response, Mr. Forgham endorsed the particular relevance to Angel House of a number of the parties on APAM's list, and he expressed the view that whilst the Targeted Parties List was not exhaustive and there were additional parties that could be suggested, "it does represent an adequate number of appropriate market participants". As regards overseas investors, Mr. Forgham agreed that, "International investment was strong, and I agree that it would have been preferable to have targeted foreign investors and developers who may have been interested participants." However, he observed that APAM's Targeted Parties List included Healys who were acting for a Chinese consortium, together with Savills and CBRE who could have been expected to bring the opportunity to the attention of their overseas clients.
472. Ms. Seal's written evidence described APAM's list as "thorough", but acknowledged that it was not exhaustive. She also drew attention to the presence on the list of CBRE and Savills, commenting,

"Both Savills and CBRE are global firms with established presences in the development market and benefiting from powerful international networks. They have relationships with successful developers throughout the world and corporate structures designed to maximise the international benefit of those relationships. They would also have been motivated by potential acquisition fees to be behind a successful bid for the Property. In my opinion, the involvement of those agents is an important factor and means that the distribution list taken as a whole was appropriate and reasonable for the marketing of the Property."

473. Ms. Seal also criticised Mr. Wolfenden's list of additional names, pointing out that it included some names that were in fact on APAM's Targeted Parties List, as well as a significant number of firms that were not actually in the market for a tower development of the type envisaged for Angel House. It also became apparent in the evidence of Mr. Jonathan Fenwick that a number of the additional names suggested by Mr. Wolfenden were in fact aware of the opportunity to acquire Angel House but did not pursue any interest.
474. When these points were put to Mr. Wolfenden in cross-examination by Mr. Smith, the following exchange ensued,

"Q. The reality, Mr Wolfenden, is that there is no single correct list, is there? There is no single list that is right.

A. I agree.

Q. And the APAM list was an entirely reasonable list, wasn't it?

A. It was a list.

Q. It was a reasonable list, wasn't it, Mr Wolfenden?

A. The objective was to achieve the best possible price.

Q. Could you just answer my question and then please, by all means, elaborate on it?

A. It is a list. In my view, there were parties who would have been approached and I am sure that there were – I mean, Capital & Oriental was not on their list.

Q. Mr Wolfenden, can you just answer my question? APAM's list was a reasonable list, wasn't it?

A. My Lord, it was a list. Was it reasonable? I don't believe it was."

475. I was not impressed by that evidence from Mr. Wolfenden. He seemed very dogmatic and unwilling to explain his views, and his evidence concerning Capital & Oriental was simply wrong. Although Capital & Oriental had not been on APAM's "soft marketing" list, representatives of Capital & Oriental had been in contact with APAM in early October 2013 to express interest in Angel House, Mr. Money then met Mr. Connaughton on 15 October 2013, and Capital & Oriental was included in APAM's Targeted Parties List.
476. The involvement of Mr. Connaughton was also put to Ms. Seal in cross-examination,

"Q. Did you appreciate that [Mr. Connaughton] wasn't amongst the limited people who were chosen by APAM for the soft marketing?

A. I am aware that he became aware of the asset through the market being aware of it.

Q. Please answer the question.

A. I don't know. I have no correspondence between -- I assume that what you say is correct, that he was not directly contacted by APAM.

….

Q. Have you simply assumed that they went to the right people because they operated just as you would, or JLL or somebody else?

A. I haven't made that assumption. I have seen the list of people who they were having correspondence with. I am also aware that that list contained acquisition agents, and that they were exceedingly well-connected acquisition agents, and I was satisfied that a large enough proportion of the market, of the credible market, was aware of the transaction -- was aware of the property on the market; and that, combined with the fact that in my opinion the property sold for what demonstrably on paper it was worth, made me satisfied that it was a fair marketing process and that no better price could be achieved by telling other people about it."

477. In the end on this point, I prefer the evidence of Ms. Seal and Mr. Forgham to that of Mr. Wolfenden. I am simply not satisfied that APAM's Targeted Parties List was inadequate for the purpose of inviting formal offers for Angel House from a sufficient number of market participants who could reasonably have been expected to make serious offers. Still less am I satisfied that the Administrators acted unreasonably in accepting APAM's advice as to the contents of the list. Whilst the list could have included international investors, I accept Ms. Seal's and Mr. Forgham's evidence that the inclusion of CBRE and Savills went sufficiently far to off-set that omission.
478. I would also observe that the fact that there were other market participants who came to hear of the opportunity to bid but were not on the list tends, if anything, to support the view that the marketing was sufficiently wide. As some of the documentary evidence showed and a number of witnesses confirmed to me at trial, the market for development properties such as Angel House comprises a limited number of serious participants connected by an extensive network of agencies and other intermediaries through which information concerning opportunities is disseminated rapidly by informal means.
479. I should also deal briefly with a final point in this regard which was made by Mr. Davies at the end of his written closing on this topic. That asserted,

"Like [Capital & Oriental], one is left with a sense that the process was not conducted on a fair and transparent basis ("something doesn't smell right"). The fact that the [Administrators] have not seen fit to call APAM to justify their approach and alleged advice merely adds to that concern."

480. The quotation in parentheses was a reference to a passage from Mr. Connaughton's evidence. After having been told that he had not been selected as the successful bidder, Mr. Connaughton had expressed concerns to Mr. Money about APAM. A meeting had been held which had been attended by Mr. Connaughton and Capital & Oriental's managing director, Mr. Charles Calverley. When cross-examined about this, Mr. Connaughton said,

"A. ... When we went to the meeting with APAM there were a couple of concerns that we had. One was Charles Calverley, our MD, was concerned at who APAM were. He hadn't had any dealings with them. He had 25 years at the top of the companies dealing with most people in London, everybody knows Charles if you are in the property world and Charles knows everyone. He didn't know who APAM were. He thought -- he found it strange that for such a large size transaction, of such a decent bit of real estate in an area, that it was actually being conducted by APAM. He thought it would have been put to the likes of the Savills, the JLLs etc, because they tend to be the people who dispose of it.

When we came out of the meeting, Charles expressed his concerns about APAM to me, he just didn't feel there was something right in the meeting.

MR JUSTICE SNOWDEN: Was he more specific?

A. No. He just said something -- again, we walked out of the meeting and he said "Look, something just doesn't smell right to me. I don't think ..." In a lot of occasions -- I'm going to get shot when I tell everybody about our industry. In a lot of occasions, the façade of a sale is a façade. It is you'll invite a lot of bids. The reality is it is generally done before it even gets into a bidding process. There are so many brown envelopes in our industry it's ridiculous. Sometimes you feel like you're being used as what we call in our industry a "stalking horse", so you are being used to show, to go through the motions to try to make the thing look like it's an actual sale that is actually going on, but the reality is that the decision's been made beforehand. Somebody's kid has got a trust fund now, somebody's kid is getting an education, somebody's getting a brown envelope. So sometimes you get a feeling, when you are in meetings, that we are really here as a stalking horse so it can be shown a sale process actually occurred, but the reality is that a decision has already been made beforehand.

When Charles came out of the meeting he said to me, "I don't like the smell of this. There's something just doesn't feel right to me. I don't know who these guys are. The conversations we have had don't fill me with confidence. Therefore, Andrew, go out and try and find out what's going on".

481. That evidence was pure speculation and does not remotely advance Ms. Davey's case against the Administrators concerning the scope of the list of potential buyers used by APAM to market Angel House. Moreover, the suggestion that there was something sinister in the fact that the Administrators did not call APAM to give evidence is misconceived. For reasons that I have explained, the burden is on Ms. Davey to establish a breach of duty on the part of the Administrators. The Administrators do not have the burden imposed upon trustees of justifying the sale. Accordingly, I do not see that I can draw any adverse inference against the Administrators for not calling APAM to give evidence any more than I could draw an adverse inference against Ms. Davey for not having chosen to sue APAM given her contentions regarding their alleged conspiracy with Dunbar.

The timescales for sale and provision of information

482. Ms. Davey's case was that the timescales placed upon the sales process were unreasonably tight and "calculated to frighten away purchasers". Ms. Davey submitted that the market was rising and that there was no good reason for the Administrators to approve a tight timetable for the sale process. She contended that the inference to be drawn from the evidence is that the timescales were driven by Dunbar to meet its internal agenda and targets rather than any concern to achieve the best price for Angel House in the circumstances. She also contended that deficiencies in the data room APAM prepared for the sale exacerbated the time pressures.
483. As Mr. Money stated, the chronology of the sale commenced with APAM's action points email of 23 July 2013. That email suggested that soft marketing would commence in the first week of September, that a period of 4-6 weeks would be sufficient time for potential purchasers to carry out the required due diligence and that a deadline for final bids was likely to be in the week commencing 14 October 2013.
484. As it was, the soft marketing took longer than anticipated, and the results were only reported to Dunbar on or about 4 October 2013. APAM then sent a proposed sales timeline to Dunbar on 10 October 2013 and to Mr. Money on 15 October 2013. The timeline envisaged that lawyers would be instructed to prepare a data room and legal pack with standard replies to enquiries, and that in the first week of November (avoiding school half term weeks) APAM would "advise all interested parties of proposed process and ensure convenient and timely for all key bidders". Mr. Powell's covering email noted,

"We continue to be chased by the interested parties (daily in some cases!) who are keen to come forward with their offers. I have them all in a holding pattern!"

485. APAM continued to be pressed by potential purchasers of Angel House during October 2013. These included Albany Group, who met APAM and Dunbar on 18 October 2013. The Administrators also met Mr. Connaughton and his colleagues at Capital & Oriental on 15 October 2013 and on 17 October 2013 the Administrators sent Mr. Connaughton the email explaining the likely process to be followed. Mr. Powell also called Mr. Clarke (on behalf of Ms. Davey) on 30 October 2013 and informed him that the best bids deadline would be noon on 15 November 2013.
486. The data room link was sent out on 4 November 2013 and on Monday 11 November 2013 parties were invited to make their best bids by 12 noon on Friday 15 November 2013. Having received and considered those bids, on 18 November 2013 APAM sought improved offers by 5pm on 20 November 2013. After that deadline, Capital & Oriental's late bid was considered by APAM and the Administrators on 2 December 2013, and it was not until 9 December 2013 that contracts were exchanged with Cubitt.
487. As an overarching point, I do not accept that the Administrators can be criticised in principle for seeking to go to a full marketing and sales process once the soft marketing campaign had shown that there was interest in Angel House. The only alternative, given that Dunbar could not be required to provide the significant funding required for a revised planning process, was for the Administrators to apply to the court for an extension to the administration, in effect gambling that there would be a sufficient rise in the property market to offset the potential blight on Angel House caused by withdrawing it from the market, the increasing interest on Dunbar's loan, the additional costs of extending the administration, and any further losses from continuing to trade the Company. Although the market was rising, there could be no assurance that that would continue, or as to what difference it might make to the eventual sale price. In these circumstances, if Dunbar preferred that the Administrators should seek firm offers without delay, I do not believe that it could be said that the Administrators acted irrationally or unreasonably in agreeing to do so.
488. So far as the timing of the process is concerned, I would also observe that once it had been agreed in early October 2013 to seek firm offers for the property, the evidence shows that the Administrators very much relied upon APAM to advise them as to the process to be followed, to assemble the data room and to conduct the day-to-day mechanics of the bidding process. I shall return to consider the issue of whether there was a conspiracy between Dunbar and APAM later in the judgment, but at least from the perspective of the Administrators, I do not think that APAM's advice in this respect would have seemed questionable or that it would have appeared to have been unduly influenced by Dunbar.
489. In cross-examination, Mr. Money alluded to a number of these points and denied that there was any urgency about the sale process,

"Q. All I am putting to you is that the urgency didn't come from you, it came from Dunbar. You weren't stipulating that the thing should happen urgently.

A. The urgency did not come from Dunbar. Well, there wasn't any urgency, so I am not, you know, content to say that we are talking about urgency in this matter. There was no urgency. This process, there was a timeline that had been proposed, and it was fairly flexible, it had been proposed by APAM much earlier on. There wasn't an urgency that it related to. In fact, you know, to the extent that there was any urgency at all, it was only reflected in the fact that we were an administration losing money."

490. Moreover, the expert evidence does not support Ms. Davey's case either that the timetable recommended by APAM was too compressed or that the contents of the data room hampered the submission of bids. The evidence was generally to the effect that four weeks was an adequate period of time between a party being introduced to the site and best bids being requested. That was the opinion of Mr. Forgham and Ms. Seal as set out in the joint experts' report. In particular Ms. Seal's evidence was that it was usual for a development site to be launched four weeks before best bids are due and she gave by way of example the fact that Savills had launched the comparable property at Meridian Gate (without planning permission) four weeks before best bids were due. Both experts also drew attention to the fact that most potential bidders had already been alerted to the property during the soft marketing in September 2013 so that they would in fact have had much longer to familiarise themselves with the property and to gear up to make an offer if they were seriously interested.
491. Mr. Wolfenden's view, as expressed in the joint experts' report, was that this timescale would be "very tight" for a property like Angel House. He also suggested that the time needed was longer because the data room in relation to Angel House was inadequate. He criticised it for not including details of the McBains Cooper scheme and the lapsed planning application, or any documents in relation to rights of light.
492. Mr. Forgham and Ms. Seal disagreed, and countered that a potential bidder of the type likely to make an offer for Angel House would be sophisticated and would not rely upon such documents from a data room but would have checked the publicly available data on the Council's planning portal at an early stage in any event. Mr. Shierson also accepted in his cross-examination that it was a matter of judgment in a particular case whether to put planning information in the data room or leave it to a prospective purchaser to look at the planning portal of the relevant council's website. There was also no detailed evidence as to what rights of light documents existed or were omitted.
493. I prefer the evidence of Mr. Forgham and Ms. Seal to that of Mr. Wolfenden on these points, for the reasons that they gave. Mr. Shierson's evidence also makes it impossible for me to conclude that APAM's advice in these respects was so obviously wrong that it could not reasonably have been relied upon by the Administrators.
494. Mr. Wolfenden also drew attention to some of the factual evidence which he contended demonstrated that some market participants had found the timeframe to be too tight. In particular, Mr. Wolfenden referred to the written evidence of Mr. Connaughton of Capital & Oriental in support of the suggestion that the sale timetable was unreasonably short for proper due diligence to be done by a prospective buyer.
495. Notwithstanding his written evidence, Mr. Connaughton's evidence in cross-examination was that Capital & Oriental had been looking at Angel House since (at least) September 2013 and that the relevant property appraisals and financial due diligence had been done by it and Affinity before Capital & Oriental had put its bid in for Angel House,

"A. With regards to due diligence, the majority of the due diligence was undertaken by Capital & Oriental. We wouldn't take a deal to a funder, my Lord, and just dump a pile of paperwork on the desk. That's not what an equity partner or a funder, a JV, whatever you want to call it, would expect from us. They would have expected us to have done 90% of the work, just leaving them and their legal department, and they would obviously have their own internal people who would check over the due diligence that we had done, but we would generate quite a substantial pack on everything for an acquisition: bill costs, sales, legals, planning, etc. We would pull all that together ourselves.

Q. You would expect them, when you took the deal to them, to do their due diligence; yes?

A. I would definitely expect, my Lord, that they would have somebody check over our due diligence and maybe carry out some further checks themselves, just as checks and balances to verify the research and the facts that we were providing.

…

Q. Had you [completed] your due diligence on Angel House before you put your bid in?

A. We were satisfied with the due diligence that we had done. We had done significant due diligence on the actual scheme, yes.

….

Q. Had you completed your due diligence by then?

A. My Lord, you don't complete due diligence. Due diligence goes on until the day you actually complete on the deal. There is due diligence with regard to the scheme. There is legal due diligence. The legal due diligence would have been done by our lawyers but we were never given a contract to do that. So there is some due diligence you can't complete until you go further through the process. But with regards to due diligence of the --

Q. Had your funders carried out their investigations and due diligence before you put in your first bid?

A. Yes, my Lord.

Q. Which funders?

A. Affinity."

496. Mr. Connaughton's evidence as to the position of Affinity was less clear later in his cross-examination, when it became apparent that he really only knew that Affinity would have had the opportunity to access the material necessary to conduct due diligence into Angel House before Capital & Oriental had made its bid,

"Q. …. By 2 December what material had you provided to Affinity to enable them to carry out their due diligence on this transaction?

A. They would have had access to all the documentation that we had been able to access ourselves, so that would have been anything to do with the legal title, that were the information we could get hold of, it there would have been documentation around the planning, so the reports from CgMS, who were the planners for us. There would have been the information we had received from McBains Cooper, the architects. There would have been a financial appraisal. There would have been other details with regards to bench for tower buildings, there are certain benchmark figures that we have for building towers, we would have provided all that, so we could explain a justified bill cost.

….

A. It would have been -- again, this goes into the world of electronics, which I'm not really very au fait with. It would have been one of our partners, more than likely Chris Oatway, within the company. He was young, so he actually knew more about technology than the rest of us.

What we would generally do with all the process we have is we upload the information into some sort of Dropbox or something like that, because the file size is going to be quite large, and then we would invite parties in to be able to access that Dropbox and then see the documentation which we have built up during our due diligence process."

497. The position of Affinity was also referred to in emails sent by its solicitor, Mr. Fidler of Thrings. The first email from Mr. Fidler was dated 22 November 2013 and stated,

"We act for Affinity Corporation Properties PLC, who are negotiating a joint venture with Capital and Oriental Limited in relation to the acquisition of 225 Marsh Wall, London E14.

We advise that our clients have this morning provided to us a bank statement for a business current account in their name, which shows a credit balance in excess of GBP 17,500,000.00."

498. APAM raised a number of concerns about that email which were reported by Vale Retail to Mr. Connaughton,

"Dear Andrew

I have just spoken with William Powell. The letter from Mr Fidler is not sufficient, it refers to a negotiation between Affinity and yourselves rather than an agreement.

It requires a revised offer set out as follows:-

1. The price you are prepared to pay; namely £17.5M.

2. Confirmation from Mr Fidler and/or Affinity that they have an agreement with you to provide these funds and reconfirmation that the money is available.

3. The other cash proven offers that they have got are on a tight timetable for exchange ranging between 3 and 5 days, if we offer 15 days I think that will preclude us.

We need to get this through to him today as they are meeting at 10am on Monday morning to make a decision.

Could you please set out the offer in these terms to me and I will present a covering letter to William (to be approved by you)."

499. Mr. Fidler then sent a further email which was forwarded to APAM which stated,

"Thank you for your email, on which I have taken instructions. My clients have asked me to clarify that they are prepared to agree terms to enable Capital and Oriental to fund the acquisition at an acquisition price of £17,500,000. This of course is subject to the usual due diligence a prudent purchaser and funder would undertake for a building of this value."

(my emphasis)

500. That email simply served to add further uncertainty to the position regarding the contractual status of negotiations between Affinity and Capital & Oriental and the status of Affinity's due diligence.
501. After further internal exchanges over the weekend, the result was the submission of a formal bid from Jirehouse Capital on behalf of Capital & Oriental on Monday 25 November 2013. That bid was for £17.5 million and was supported by a letter from Mr. Fidler which stated,

"Following on from my previous correspondence on Friday, I can confirm that Affinity has provided to me a copy of a bank statement which confirms that Affinity have the necessary funds in place to fund the acquisition of Angel House at a purchase price of £17,500,000.

I understand that you have requested clarity with regard to exchange of contracts and as such can advise that Affinity confirm they will provide to Capital & Oriental the deposit payable on exchange of contracts within 15 working days from receipt of the draft contract and being provided with documents or access to a data room with documents necessary for Affinity to undertake and conclude satisfactory due diligence.

This confirmation is subject to satisfactory due diligence by Affinity and to Capital & Oriental being able to meet this timescale."

(my emphasis)

502. The formal bid letter also confirmed that as regards timescales,

"Our Client will require 15 days to exchange from receipt of full legal information and completion will take place within 2 months of exchange."

503. Mr. Connaughton's evidence in cross-examination was that Thrings were not suggesting that Affinity needed to investigate the commercial aspects of purchasing of the property, but that Mr. Fidler was simply referring to the need for Affinity to do legal due diligence. I have my doubts about that given the content of Mr. Fidler's emails and the repeated references to Affinity being provided with documents or access to a data room to undertake due diligence.
504. However that may be, what can certainly be said is that Mr. Connaughton's insistence that Capital & Oriental and Affinity were ready to proceed apart from legal due diligence gives no support to the suggestion by Mr. Wolfenden that the timescales set by APAM and the Administrators or the state of the data room prevented appropriate commercial due diligence being done on the property by potential buyers. Moreover, given the fact that a number of bidders plainly were able to instruct lawyers to do the necessary legal due diligence, there is no clear basis upon which I can conclude that the timescale was too short to permit that to occur.

The "guide price" and unconditional offers

505. Ms. Davey contends that APAM made it known to potential bidders that Dunbar was looking for a price for Angel House in the region of £14 million and that any offers for the property needed to be unconditional (i.e. not dependent on the grant of planning permission). She contends that these two features of the sales process had a depreciatory effect upon the price obtained.
506. There is evidence that the possibility of achieving a sale price of about £14 million or £14.5 million was referred to internally by the Administrators, APAM and Dunbar at various times. So, for example, in May 2013 the Administrators' internal case notes put the value of Angel House at between £8 million and £14 million; in July 2013 APAM recommended soft marketing "with a view to achieving a freehold sale in excess of £14 million"; and when Dunbar sought to instruct Pinsent Masons to act on the sale in November 2013, Mr. Stenson indicated that Dunbar was "expecting bids in the region of £14/15 million."
507. There is also some evidence that APAM made it known externally that the Administrators or Dunbar were looking for offers at or above that level. The first such piece of evidence is an email from APAM to another agent, Cherryman, of 24 October 2013 which stated,

"My client would need an unconditional offer of £14M +. Please let me know whether you believe you may have a client who may be interested at this level."

508. The second email was to APAM from another agent, MJP Associates, on 20 November 2013. MJP notified APAM that, having done their own due diligence, some Malaysian clients were not interested in Angel House but that MJP might put the opportunity to one of its UK clients. The email stated,

"I understand that the price you are looking for is now circa 14 million GBP ?"

509. Mr. Money denied that the Administrators had given any instructions to APAM to set or communicate a guide price to interested parties, and none of the other potentially interested parties in the market (such as Mr. Connaughton or Mr. Jonathan Fenwick) suggested that they had heard of any "guide price" of £14 million. On that basis I do not accept that there is any evidence that APAM widely communicated a guide price to interested parties.
510. Moreover, I do not think that any communication of a guide price to other agents by APAM is likely to have had any significant effect upon the offers that were received for the simple reason that offers were received well in excess of £14 million. My clear impression from the evidence was that any serious bidder for Angel House would have understood that it was in a competitive process against others, and would have simply formed its own commercial view, based largely upon appraisals, of what it was prepared to offer for the property as a development opportunity. Serious bidders would not have been limited or swayed in that exercise by informal indications from APAM.
511. Nor, in any event, do I accept that even if APAM had mentioned a figure to others, this was known to the Administrators. For the reasons that I have already explored, I therefore cannot see how this could have amounted to a failure by the Administrators to take due care in the marketing and sales process.
512. The question whether the Administrators should have instructed APAM that they were willing to entertain bids that were conditional upon the purchaser obtaining planning permission was not a pleaded allegation against the Administrators in relation to the sale process. The point was also only briefly put to Mr. Money in cross-examination as part of the wider case that it was indicative of Dunbar's desire for a quick sale. Mr. Money rejected the suggestion that Dunbar were pushing for an urgent sale and indicated that it was open to bidders to make conditional offers if they had wished.
513. In these circumstances I do not accept that any case has been made out that the Administrators acted without due care by not inviting conditional offers or that this had any effect upon the sale price.

The conclusion of the sales process

514. Ms. Davey contends that even if (contrary to her earlier submissions) the Administrators were acting reasonably in continuing the marketing process with APAM, when the best bids were received, the Administrators wrongly ignored the higher bid of Capital & Oriental and failed to engage with them, instead choosing a lower bidder - LBS/Cubitt - as Dunbar's "preferred buyer". Ms. Davey also contends that by merely extracting an increased bid from LBS/Cubitt that did no more than match the bid of Guildmore, the Administrators failed to capitalise properly upon LBS/Cubitt's position as a special purchaser.
515. Ms. Davey's case is that the Administrators should have continued the process with a further round of competitive bidding with a view to obtaining bids above £18 million. In that regard, Ms. Davey also suggests that if the Administrators had delayed the exchange of contracts and pursued other expressions of interest further, they could have obtained higher bids in excess of £20 million from Bowmer & Kirkland and Mr. Jonathan Fenwick.
516. Before examining the evidence in this regard in some detail, it is worth recording, by way of background, some features of the market for development properties and the types of behaviour of players in that market.
517. From the evidence, it became apparent that in addition to property companies with their own capital to deploy in acquisition and development of appropriate sites, the market is populated by agents, advisers and "runners" who seek to act as intermediaries or joint venture partners, finding and investigating development opportunities and seeking to connect them to parties with monies to invest. Moreover, not all parties who make an offer to acquire properties have immediately available and committed funding when they do so. Some may make offers with a view to finding a funder and completing due diligence only after the (subject to contract) offer has been accepted but before exchange of contracts. Even some confirmations of funding are not immutable. So, for example, in the instant case, the initially promising highest offer of £19.2 million made by Olympian Homes was withdrawn when the team at the funder, L&R, conducted their due diligence into Olympian Homes' financial computations.
518. I was also treated to a candid exposition by Mr. Connaughton of some aspects of what he described as "the dark art of land buying". These included, in particular, the practice of putting in a high offer and then chipping away (lowering) that offer after acceptance but before contract; and the "commonplace" practice of a buyer procuring another party to put in a high "phantom bid" which would be accepted by a seller, who would then engage with the high bidder and discontinue the process with rival bidders, only to find that the high bidder would withdraw at a late stage. The disappointed seller would then be more inclined to accept a lower bid from the real buyer who would offer to complete quickly and fill the void,

"A. … from my knowledge of the market and how these types of processes work, there are many companies that will put in phantom bids and use different bids and generally what they will do is they will fall away, so you generally -- again, this is the world of property, you need a wash when you go home. But what you will do is you will put in a larger bid. So you will, say, set up a company, … put in a bid and then you would sit as an underbidder of that and you know you are the underbidder and then what you will do is, as that process goes through, that company, or that shell or that form will fall away and you are then sat in the position of second position, therefore going to the top, therefore moving yourself up but not paying too much for the actual deal."

519. Given these (and other) features of the market, I accept that there is an obvious need for a seller to seek proof of committed funding from bidders. Further, as Mr. Money indicated when giving an indication to Mr. Connaughton on 15 October 2013 of how the Administrators were going to proceed with the bidding process, whilst the price offered is obviously a key factor, the buyer's ability to perform (i.e. to exchange and complete the purchase) is also a very important factor in the evaluation of any offers. That was also the view of Mr. Shierson,

"Q. …Would you also agree that in an administration such as this, there is every reason to expect that there will be time wasters of two types? One, those who punt in the property market, of which there are many, and we have heard about some of those. You agree?

A. Agreed.

Q. Second, there is also a real risk, in circumstances such as this, where the shareholder and guarantor is attempting to put together a deal, that there will be spoiling bids designed to persuade the Administrator not to proceed with a clearly solvent party. Do you agree?

A. You have to consider that that is possible, yes.

Q. Therefore, when you get a bid, you have to look critically, not just at the number but also at the ability to deliver. Do you agree?

A. Absolutely."

520. Against this background, I first observe that in my judgment the Administrators had an appropriately open mind as to which course to take and which offer to accept in order to maximise the recovery for creditors. That was Mr. Money's evidence and is well illustrated, for example, by his email to APAM on 25 November 2013, which I accept was a genuine expression of his view at the time,

"We now have the Olympian offer at £19.12m and JD's proposal to take the company out of administration. Both are so materially better than the LBS offer that a) I would like them to succeed, and b) it would be wrong for me simply to take the LBS offer as the easy option when there is a prospect of getting the bank out in full plus either a proportion of or all of the unsecured creditors."

521. After this email was sent, the withdrawal of the Olympian Homes' offer and the views expressed by a serious market participant such as Mr. Livingstone as to the "madness" of the offer of £19.12 million and the much lower value of £12-15 million which he would have been prepared to support, were significant matters. They illustrated both the importance of verifying that an offer was properly funded and deliverable, as well as the attractiveness of the other offers that had been received for Angel House.
522. I also accept that APAM's concerns about Capital & Oriental's ability to deliver a completed purchase in accordance with its bid were entirely reasonable and rational.
523. The Capital & Oriental bid was led by Mr. Connaughton, whose written evidence portrayed Capital & Oriental as an eager bidder with an established track record which had provided clear proof of funding for its bid from Affinity. He summarised his complaints (which were adopted by Ms. Davey) about the way in which APAM had handled the sales process in the following way,

"The headline points … are that, after various exchanges with James Money and APAM, I was led to believe that we needed to offer the amount required to pay off Dunbar and, on this basis, [Capital & Oriental] made an offer of £17.5 million. However, despite the fact that [Capital & Oriental] were willing to increase the offer, I was never advised that our bid was insufficient nor was I invited to make a higher offer. Subsequently, I was told that Angel House had been sold to LBS for almost £500,000 less than the sum we had offered. This reinforced the view I held from the outset which was that the sales agents, APAM, were not playing with a straight bat and that this was a "hooky" deal."

524. In cross-examination, Mr. Connaughton was first confronted by the fact that Capital & Oriental Limited was not, at the relevant time, a trading company, and had no track record of completed transactions at all. Mr. Connaughton thereupon explained that Capital & Oriental was merely a "brand name" for a group of people who individually had experience in the property market. His evidence suggested that they operated in a fairly informal manner, appraising potential development opportunities which they would then pitch to a number of potential funders with whom they had established contact and whom they thought would be interested in an opportunity with the investment profile in question.
525. Mr. Connaughton's assertion that APAM had ignored Capital & Oriental's bid was also unfounded. The emails in fact showed that there was direct contact between Mr. Money and Mr. Connaughton in the days following submission of Capital & Oriental's bid, and that Mr. Money sought a revised indication of the ability of Capital & Oriental to exchange contracts more speedily that their formal offer had indicated.
526. It is also clear that APAM had concerns about Affinity's ability to fund Capital & Oriental's offer and that there were unsuccessful attempts by Mr. Powell of APAM to speak to Mr. Whitton of Affinity (and vice versa) for several days before they finally spoke. Even then, as APAM reported to the Administrators on 2 December 2013, Mr. Whitton of Affinity did not make good on his promise to send APAM details of the funding of Capital & Oriental's offer and of its track record.
527. Indeed, Mr. Connaughton's evidence eventually showed that there was no firm commitment, still less a binding obligation upon Affinity to fund the Capital & Oriental bid. Mr. Connaughton was asked for his understanding of the position at the time that the bid was submitted to APAM,

"Q. Would you agree that no agreement with Affinity had been concluded at this point?

A. No, not at all. I believe that's -- again, I think that's more sort of legal parlance than actually the realities of what's happened. We had gone into it, we had sat down, we had had a meeting, we had discussed the terms that we were both looking for out of the deal, but nothing was finalised. As I say, a heads of terms is an understanding between the parties of what we are trying to achieve and what we feel we would share out of that deal….

Q. Right, so you think the heads of terms was more of an understanding between the parties of what they were trying to achieve, is that right?

A. Yes. You go to a meeting, you sit across a table, you discuss what you both want from it, you come to a sort of agreement on where the parameters on profit splits on ratchets and hurdle rates, we record that into a document, a memorandum of understanding or heads of terms, call it what you will, and that reflects the understanding we had. Then once we have the contract, Richard Fidler and our lawyers would have then made that into a formal document that would have been signed by both parties under some form of shareholders agreement or development management agreement, and that's what we generally use.

Q. Was an agreement of that nature ever entered into?

A. On the basis of what I have just said, we didn't get the contract so we didn't enter into that process."

528. Mr. Connaughton subsequently produced the document to which he had referred evidencing the state of negotiations between Capital & Oriental and Affinity. It was entitled "Indicative Heads of Terms & Conditions for discussion" and had not been updated from its creation in late September 2013. As its title suggests, it was very much an outline proposal rather than anything resembling a binding commitment to fund. That state of affairs is consistent with the heavily qualified terms of the emails sent by Mr. Fidler to APAM on 22 November 2013 which, as indicated above, did not clearly confirm that Affinity was committed to fund the offer.
529. APAM's concern about Affinity's commitment was accentuated by the way in which the parties involved in the Capital & Oriental bid had changed during the bid process. I have already set out how the initial approach from Mr. Connaughton had been on behalf of Capital & Oriental and had indicated that funding would be provided by Affinity. However, the first formal bid was made on 15 November 2013 by Jirehouse Capital on behalf of Regius Wharf supported by a funding letter from Voltaire Capital. An alternative offer letter was then submitted on behalf of Capital & Oriental on the same day.
530. After APAM raised the reliability of funding issue with Mr. Willans of Vale Retail, Mr. Connaughton and Mr. Willans corresponded on 20 November 2013 about what they identified as the "Catch 22" that Voltaire wanted a contract before they would "work towards liquidating monies" for the week before exchange, whereas APAM had made clear that they would only put the property under offer to a party who could prove that they had access to cash funding. With no resolution to that conundrum, on 21 November 2013 Mr. Willans notified APAM that "Voltaire have failed to produce proof of funds so my clients have dropped them", and that Capital & Oriental were reverting to an earlier offer of finance from Affinity. Mr. Willans indicated that the offer would be for £17.5 million with exchange 5 days from receipt of papers: as it was, the offer when it came was for £17.5 million, but required 15 days from receipt of a draft contract to exchange, and was accompanied by very much less than proof that Affinity had committed to fund the transaction for the reasons that I have already explained.
531. The position that had been reached was addressed in cross-examination with Mr. Shierson,

"Q. Yes, and when you have somebody like Capital & Oriental, who have changed funders twice, you are cautious about accepting their ability to deliver. Do you agree?

A. Yes. If funders are changing at the last minute, that does cause some concern.

Q. Where you ask the current funder to communicate with the agent and give them best possible information about funding and arrangements, and they don't do so, you are entitled to be sceptical about the viability of that bid. Do you agree?

A. Yes.

Q. And a reasonable administrator has to exercise judgment in such cases, doing the best he can. Do you agree?

A. Yes.

Q. He may get it right, he may get it wrong, but provided he exercises judgment in good faith, you wouldn't criticise him?

A. Agreed."

I agree with that assessment.

532. In the circumstances, I reject the complaint against the Administrators regarding the treatment of Capital & Oriental.
533. I therefore turn to the suggestion that the Administrators should have instituted a third round of bidding, or otherwise sought to exploit LBS's position as a special purchaser. Mr. Davies submitted that disclosing Guildmore's offer to LBS and simply asking LBS to match it, "is the exact opposite of exploiting the interest of a special purchaser", and Mr. Wolfenden's supplemental report contained a similar criticism that no effort was made by APAM to create competitive bidding up from £17.05 million.
534. This point was put to Mr. Money at the end of his cross-examination,

"Q. So it was particularly bizarre, wasn't it, just asking them to match the other bid? Given that they were a special purchaser, they had a special reason for buying the property, and somebody else who is not a special purchaser has already bid 17.05 million?

A… I don't think it was a bizarre thing to do, because you have got to balance the question of the fact that they are a special purchaser, which means that they are going to be keen to acquire the site, with the fact that if you push too hard they don't have to go ahead and actually follow that through… our advice was that we had got – you know, APAM were well aware of the fact, they had made the point that they were a special purchaser. They had no doubt reached their conclusion, in terms of whether or not the deal was or wasn't acceptable, based on that knowledge. So if they felt that there was more to be squeezed out of them, there would have been absolutely no reason not to try and squeeze it out of them.

….

Q. Why didn't you try and make them go higher? Is the answer simply: APAM didn't tell me to?

A. No. The answer was because APAM had concluded that it was the right price to accept. So we had already gone through the process of saying: right, they are a special purchaser. We had already got them up to a price; they had started lower than other parties, they had ended up higher than other parties. We had, I would --

Q. They weren't higher though, were they?

A. They were by the time we had got them to match the bid.

Q. They were the same as Guildmore.

A. They were the same as Guildmore but with better terms.

Q. The only reason that they were the same as Guildmore is because you asked them to be.

A. Yes, okay, they were the same because I had asked them to be, but the question was, you know, how far, how much further could you push it. So in my discussion with APAM I said, "Look, can we get them up at least as far as the Guildmore offer?" to which the response was, "We will try". Not, "Yes, you are going to get there", but, "We will try". Now, if they had felt that they could go further than that, they're not going to say, "Oh, James has said go up to the matching bid, and we won't try to go any higher". They clearly had a view as to what was or wasn't possible, and were satisfied with that.

Q. Mr Money, all that happened is that Dunbar wanted LBS to win that contract at 17 and 50, and that is what happened, isn't it?

A. Why would Dunbar want LBS to get that at 17 and 50 as opposed to the other party?

Q. That is something we will have to ask other witnesses, Mr Money.."

535. In fact, as was apparent from Mr. Money's email to Mr. Stenson of 21 November 2013 reporting on the process, Mr. Money asked APAM to go back to LBS to match the Guildmore offer in terms of price because he did not want Ms. Davey to be able to complain that the Administrators had not accepted the highest offer. In circumstances in which threats of litigation had already been made by Ms. Davey through her lawyers, I think that was an entirely understandable reaction. I also reject the suggestion that Mr. Money was simply doing what Dunbar asked to arrange a sale to its "preferred bidder". There was simply no evidence to support that allegation at all.
536. I also accept Mr. Money's evidence that he thought that there was a real question of how much further LBS could be pushed. There had been a competitive process, LBS had already increased its offer once, and as APAM advised Mr. Money, there was no guarantee that it would be willing to do so again. If asked to increase its offer, LBS might well have guessed that it was offering the best terms in relation to speed of exchange and certainty of completion, and simply decided to call the Administrators' bluff. There must also come a point at which even a special purchaser will reach the limit of what it thinks is a commercially viable investment, or simply resent its special status being exploited and pull out.
537. Whether or not that might have been the case, so far as Mr. Money was concerned, there was no reason whatever for him to think that APAM were not genuinely trying to get the maximum price that was reasonably attainable, and there was no reason for him to suspect that APAM were giving a false or inaccurate assessment of the risk of LBS withdrawing from the process. From Mr. Money's perspective, APAM had a direct financial incentive to maximise the sale price given their potential entitlement to a 17.5% share of any price in excess of £16.7 million, and although LBS had been identified as a special purchaser from the outset, on 24/25 November 2013 APAM had expressed some concern that if there was a delay in the process, LBS might withdraw its offer ("If we now delay LBS, will they be there in a week's time?"). The same point had also been reinforced by Mr. Money's solicitors, Pinsent Masons, at the end of their letter to Rosenblatt on 19 November 2013.
538. I also reject any suggestion that the Administrators were or ought to have been aware that, as Mr. Connaughton put it, APAM "were not playing with a straight bat and that this was a "hooky" deal". I shall address the underlying suggestion regarding APAM and Dunbar later in this judgment, but at least so far as the Administrators are concerned, I accept that they genuinely believed that APAM's advice reflected a competent analysis of the position that had been reached with the bids for Angel House.
539. Mr. Money explained his reasons for accepting the LBS offer in his email to Mr. Connaughton on 6 December 2013 which indicated that the decision had ultimately been his decision and that the key factors in his decision had been the combination of funding and ability to exchange and complete rapidly. Mr. Connaughton's response email of 11 December 2013 suggested that he was of the view that APAM had not played with a straight bat.
540. Mr. Money immediately replied - prior to completion - reiterating that the ultimate decision to accept the LBS bid had been taken by the Administrators, and seeking further particulars of Mr. Connaughton's concerns about APAM,

"I remain concerned that you do not believe that APAM have acted correctly throughout. I appreciate that you were reluctant to clarify your concerns when we met, but if these concerns persist, then I need to know. My experience of APAM has been excellent throughout the administration, so if there is something of which I need to be aware, then please let me know what it is."

541. Mr. Connaughton did eventually respond on 8 January 2014 - after completion had taken place - but did not specify any concerns. He was asked about this in cross-examination,

"Q. … did you ever express, either in the answer to the email of 11 December or at any earlier stage following that first meeting, to Mr Money what your concerns were in relation to APAM?

A. Again, it is not something I could actually pinpoint one particular thing. It was from -- I have to put it into context. I'm sat in a room in a meeting with APAM and sat beside me are some of the biggest people in this market [Mr. Connaughton's collegaues at Capital & Oriental] and they said they felt it was wrong.

MR JUSTICE SNOWDEN: … I think the question is, this is after the event, did you go back in response to that email?

A. No. It seemed pointless. At that point in time it looked like we'd lost the deal and to be honest it's a bit of crying over spilt milk, isn't it? We got played. That is the feeling in our company, that's what had happened, we'd been played, we had been used as a stalking horse. To go and delve through this and dig out and point fingers, it wasn't going to change the fact that I'd wasted -- our company had wasted five months of its time and we didn't get what we thought we were going to get. So I would rather move on and try and secure something else, than forensically go back through why I'm in this position. Anyway, that was the reason."

542. It was never suggested to Mr. Money that his email of 6 December 2013 stating that his experience of APAM had been excellent and asking for details of any concerns that Mr. Connaughton had was anything other than a genuine expression of his view at the time and an open invitation for Mr. Connaughton to respond. In these circumstances, I think it is simply impossible to accept any suggestion that the Administrators should have doubted the advice that they received from APAM or suspected that anything was untoward with APAM's management of or advice in relation to the bid process.
543. In my view, these factors all point to the conclusion that the question of how far APAM should have been instructed to push LBS to increase its "final" bid was a matter of commercial judgment, upon which Mr. Money was entitled to take APAM's advice and leave it to them to do the best deal that they could. Mr. Davies' allegations amount to a criticism that Mr. Money should have been more ambitious than he was, but I do not think that the evidence comes anywhere near demonstrating that any reasonably competent insolvency practitioner would have insisted on pushing for more.
544. Finally, I should deal with the suggestion in Mr. Wolfenden's report that APAM and the Administrators should have given more time generally for further increased offers to be received before accepting the bid from LBS/Cubitt. In this respect, Mr. Wolfenden's report referred to what he described as an offer to APAM from Bowmer & Kirkland on 29 November 2013 of £20 million; to an indication from Mr. Jonathan Fenwick on 9 December 2013 that he wished to put a bid on the table of £22 million; and to a reference in Mr. Fenwick's witness statement to a subsequent offer that he had made to Mr. Crawford of LBS to acquire Angel House by on-sale from Cubitt for £25 million.
545. In cross-examination of Mr. Fenwick, it became clear that these were not in fact firm offers or anything like it, but merely Mr. Fenwick, acting on his own behalf, chancing his arm and seeking to get into a position with APAM or LBS from which he could then try to interest others with funding (such as Bowmer & Kirkland) to become involved with him in a deal,

"Q. …You wrote to Mr Etchells at APAM [on 29 November 2013] saying, "I run a property development company". Can you tell my Lord what the property development company was that you referred to as running in November 2013?

A. Well I was referring -- you take a certain amount of poetic licence --

Q. Does that mean you lie?

A. No. I was basically trying to get ourselves in a position where I could engage properly with APAM, and that's a fairly standard way of doing that.

Q. You told them an untruth about having a property development company when in fact you had none, is that correct?

A. I wouldn't say I had none, because I had joint venture partners.

Q. But you have just told my Lord that you had no partnership agreement at that stage with Bowmer & Kirkland at all.

A. No, I had a situation where they would support deals as and when I brought them to the table.

Q. So they weren't a development partner at all. They were simply somebody to whom you could take deals, in the same way as you had taken deals to all the other individuals, like Mr Slatter at Olympian, and all the other people; is that right?

A. But I was a lot closer to them. Having dealt with them and had a JV partnership, they were slightly different to the others.

Q. You had not discussed with them making an offer of £20 million for Angel House, had you?

A. Not in detail, no. No.

Q. Not at all. Correct?

A. Correct.

Q. You hadn't discussed making an offer of 22 million when you raised your offer a few days later, had you?

A. No.

Q. Nor had you discussed an offer of £25 million when you went to the eventual purchaser, Cubitt, and offered them £25 million, had you?

A. No.

….

Q. No, you hadn't spoken to anybody anywhere who was showing the slightest indication of paying you money for this deal when you made those offers, had you?

A. Well, I had, you know, certain levels of interest and I -- you have got to have the courage of your convictions to try to run these things through, and that is what I was attempting to do.

Q. You had no knowledge at the time as to whether or not Bowmer & Kirkland or Peveril would be interested in these properties at this price or at all, had you?

A. I had knowledge of -- based on my past experience of what I believed they would potentially be interested in doing, and because I knew that part of this deal involved or could involve a budget hotel, which I had just finished developing on a similar site, that's why I thought that they would be interested and good partners to do this with.

Q. And you knew perfectly well that before they made an offer or allowed an offer to be made including their name, they would have wanted an appraisal done on the scheme as it stood, correctly and accurately, wouldn't they?

A. Possibly but not always.

Q. What, they would be prepared to offer 20 million quid on spec?

A. Well, there is a certain period of time that once an agreement was reached, then you would get into a requisite level of detail before you exchange contracts.

Q. Yes, so you make your offer, and when they agree to deal with you and say they will go with you rather than somebody else, you then have a period of time during which you can lower your offer if it turns out that your cigarette packet calculations are incorrect; is that right?

A. Possibly."

546. That exchange was illuminating, both as to the lack of any substance behind Mr. Fenwick's offers when made, and also as confirmation of the type of tactics in use by some players (and hence pitfalls for vendors) in the property industry at the time. It graphically confirmed the view of APAM and the Administrators of the need for caution in relation to offers received.
547. I therefore reject the contention that the manner in which the Administrators, advised by APAM, dealt with the closure of the bidding process lacked the necessary skill and care. The Administrators were advised by APAM, who the Administrators had every reason to believe were incentivised to maximise the sale price. APAM gave the Administrators advice which appeared (as appears to me) to be entirely reasonable as regards the bidding process and the merits and risks of the leading offers. In particular, the Capital & Oriental bid was reasonably regarded as uncertain in terms of funding and ability to complete, and the offers by Mr. Fenwick were without substance.

Conclusion on Issue 3

548. I conclude under Issue 3 that Ms. Davey has not succeeded in showing that the Administrators failed in their duty to take reasonable care to obtain the best price that the circumstances permitted. The Administrators acted, and were entitled to act on the basis of APAM's advice, and it has not been demonstrated that such advice and the sales process which took place was unreasonable or inadequate in any material respect.

Issue 4: Did the Administrators act in breach of duty by failing to explore and pursue a funded rescue?

549. I have already considered and rejected the suggestion that the Administrators had a legal duty to approach Ms. Davey at the outset of the administration and to ascertain whether she was minded to launch a funded rescue of AHDL as a going concern. There is also no basis for any suggestion that the Administrators should have done so as a matter of best practice. As I have pointed out, Ms. Davey did not see it as part of her own game-plan to pursue a funded rescue at the outset of the administration, and after the initial contacts with Mr. Sandall, Ms. Davey was uncooperative with the Administrators for much of the administration. She also strenuously resisted the claims by Dunbar under her personal Guarantee, which gave no indication that she had any readily available financial resources to mount a rescue of AHDL.
550. When Ms. Davey first surfaced with any positive suggestion to the Administrators, it was not as a potential rescuer for AHDL. The first such contacts with her were in late September 2013 and early October 2013 when she gave an indication that she wished to assist the Administrators in relation to planning and the sale of Angel House. Thereafter, commencing with the approach from Mr. Clarke on 18 October 2013 and the meeting between him and the Administrators on 23 October 2013, Ms. Davey's interest was that of a potential bidder for Angel House.
551. The first indication to the Administrators that Ms. Davey was in fact exploring the possibility of mounting a funded rescue for AHDL came with the letter to the Administrators from Rosenblatt several weeks later on 13 November 2013. That letter also sought to halt the sale of Angel House, and I have no doubt that given the earlier approach from Ms. Davey, Mr. Sandall's initial concern that the funded rescue proposal might be a tactic to delay a sale and deter other buyers was a genuine and reasonable concern at the time.
552. That initial approach was followed by the meeting between the Administrators and Ms. Davey and her funders and advisers on 18 November 2013. There were two attendance notes taken of that meeting by Mr. Sandall and by Rosenblatt. They naturally tended to focus on the matters discussed from different perspectives, but there was certainly consensus on important issues. Having reviewed them, Ms. Davey accepted in the course of her evidence that Mr. Money expressed the view at the meeting that if Ms. Davey could come up with the money to pay off the Dunbar debt and the costs of the administration so as to rescue the Company as a going concern, there would be no need to sell Angel House and that would be the best solution.
553. For my part I have no doubt whatever that at the meeting and thereafter, the Administrators genuinely thought that, provided that it could be substantiated, a funded rescue by Ms. Davey would be the best outcome because it provided the prospect of payment of the unsecured creditors. That belief was well illustrated, for example, by Mr. Money's subsequent email to Mr. Stenson on 22 November 2013 that, "Clearly the proposals from Julia Davey are attractive, not just for Dunbar, but for all stakeholders", together with his email to APAM on 25 November 2013, expressing the view that he would like either Olympian's offer of £19.12 million for Angel House or Ms. Davey's proposal to take the company out of administration to succeed because of "the prospect of getting the bank out in full plus either a proportion of or all of the unsecured creditors."
554. However, Ms. Davey criticises the Administrators (i) for their insistence on a "non-refundable deposit" of about 10% (£2 million), and (ii) for imposing what she contends was an unreasonable timetable on Mr. Eastwood and Blackcube to provide the necessary finance for her proposed rescue.

The non-refundable deposit

555. The requirement for payment of what was frequently referred to as a "10% non-refundable deposit" was first raised by Mr. Sandall in a conversation with Mr. Field of Rosenblatt on 14 November 2013 and was referred to by Mr. Field in his email to the Administrators the next day. It was then the subject of debate between solicitors and was discussed at the meeting on 18 November 2013.
556. The genesis of the requirement for payment of a non-refundable deposit of 10% of the amount needed for the funded rescue – which was subsequently approximated to a deposit of £2 million – was an indication from the Administrators that they needed some assurance that Ms. Davey was serious and that she would be able to complete the funded rescue transaction. Both attendance notes of the meeting record that the requirement was discussed in terms of the payment of a 10% non-refundable deposit for the equivalent of exchange of contracts on a property sale.
557. In the same way as exchange of contracts on a property sale necessarily means that the vendor is then not entitled to sell the property to someone else pending completion, I think that it would have been apparent to the professionals at the meeting that the Administrators were offering an arrangement under which, on payment of the deposit by Ms. Davey, they would agree not to sell Angel House for whatever period of time was agreed for completion of the refinancing. That was also Mr. Money's evidence of what he thought he had offered – namely that payment of the deposit would mean that for a period whilst Ms. Davey was given the opportunity to come up with the remainder of the money to take AHDL out of administration, the Administrators would not be able to sell Angel House.
558. Although Mr. Money accepted in cross-examination that he might not have made it clear to Ms. Davey at the meeting on 18 November 2013 that payment of the deposit would have the result that the Administrators would suspend the process for sale of Angel House, in my view it was made clear in the letters from Pinsent Masons on 19 and 22 November 2013 that payment of the deposit by Ms. Davey would enable the Administrators to "halt the sales process" of Angel House.
559. Moreover, although it was not explicitly stated in the draft Heads of Terms circulated on 25 November 2013 that the sale process for Angel House would be suspended if £2 million was paid on 2 December 2013, the clear implication is that this would be so. The agreement provided for AHDL to exit administration as a going concern if the balance of the debt due to Dunbar and administration costs were paid by Ms. Davey by 16 December 2013. The Heads of Terms would have made no commercial sense if the only asset of the Company - Angel House - had been sold in the meantime.
560. Ms. Davey was asked in cross-examination about her understanding of the purpose of the deposit,

"Q. What Mr Money was after was to be put in the same position with you and your backers as he would have been in if he had sold the property to a purchaser, that is to say with a fund of money which he could draw on in case you didn't go ahead with the transaction. You understood that, didn't you?

A. Yes, my Lord. Yes.

Q. That was perfectly reasonable, was it not, in circumstances where he did not wish to lose a keen purchaser?

A. Yes, my Lord, except that the 10% -- usually you would pay 10% and you would exchange, and so both sides would be secure.

Q. Yes.

A. In this instance it was 10% not to exchange but 10% down anyway. I understand what counsel is saying, but there was no guarantee that he still couldn't then go ahead. What we were looking for was some kind of mechanism that the money could be held to the order of us, or to my funded rescue, and not to be discharged or given over to Dunbar. So there was -- throughout this period there was an exchange of how that would work, and whether Dunbar would grant a second charge on the building to secure that money, how -- because the issue we did have was that nobody in their right mind would just put down … £2 million without any guarantee that it would be safe. So that is where it is slightly different. If it was in the normal course of business and I was just buying a building, yes, I would expect to exchange on 10%, but this was something different …

….

Q: Ms Davey, you were being told that if you put forward the £2 million then you would be given a reasonable and proper opportunity to complete the transaction by providing the remainder of the money necessary to pay off the Dunbar debt and the costs of the administration, weren't you?

A. We were told that, but we were also told that – by Mr Money, latterly, that he couldn't guarantee that he wouldn't exchange with somebody else.

Q. No. He was telling you that if you could come up with that money, on that basis, then he would give you a period of time within which to complete the transaction, during which he would not sell it to anybody else. Agreed?

A. That is what he said, yes, I agree."

561. Although Ms. Davey suggested that the situation differed from the normal payment of a 10% deposit on exchange of contracts to buy a property because Mr. Money could have sold Angel House notwithstanding the payment of 10% by her, she eventually accepted that Mr. Money had told her that if the deposit was paid, he would give Ms. Davey a period of time to find the rest of the money needed to complete the restructuring during which he would not sell Angel House.
562. On the basis of the evidence that I have set out, I conclude that both the Administrators and Ms. Davey did both understand shortly after the meeting on 18 November 2013 that the payment of the £2 million would entitle Ms. Davey to the same opportunity to complete the refinancing of the Company, as the payment of a 10% deposit would entitle a purchaser of property who had exchanged contracts the opportunity to pay the balance of the price to complete the purchase.
563. Ms. Davey's counter-proposal was that the £2 million would simply be put into escrow. As Ms. Davey appreciated, this would have meant that it would not be paid by the Company to Dunbar, but would be returned to her if the refinancing of AHDL was not completed. In her evidence (above) Ms. Davey suggested that no-one in their right mind would pay £2 million without a guarantee that it would be "safe". What this in effect meant was that she was asking for an arrangement under which her payment of £2 million would not be at risk if she did not complete the refinancing.
564. Such an arrangement would have been ideal from Ms. Davey's point of view given the uncertainties over the amount of the administration costs of the Administrators and APAM (both of which Ms. Davey questioned and sought the ability to challenge) together with the uncertainties over her own financing (see below). However, for the Administrators, having regard to the interests of the Company and its creditors (including Dunbar), this was unacceptable. The Administrators would have halted the sale process of Angel House and risked losing the purchasers for the property without any compensating payment which they could keep if the refinancing did not happen and they could not obtain bids for Angel House at the same level again. Moreover, the fact that Ms. Davey's money would be "safe" would have meant that she would have no incentive to complete the refinancing in any particular timescale. These points were well expressed in Pinsent Masons' letter of 19 November 2013 to which I have referred above.
565. I also note in passing that the requirement for a 10% payment to be made to the Company rather than by way of a payment into escrow appears to have been conceded by Rosenblatt by no later than its letter of 22 November 2013. That letter indicated that such payment was available to be made when the Administrators decided to enter into a contract with Ms. Davey for a funded rescue.
566. Accordingly, although Ms. Davey now criticises the Administrators' requirement as a matter of principle, ignoring for the moment the question of timing (which I will consider further below), in my judgment, from the perspective of the Company, payment of a non-refundable deposit by Ms. Davey was an entirely reasonable arrangement for the Administrators to require. I certainly cannot conclude that the Administrators' approach, supported by their solicitors, Pinsent Masons, was unreasonable, the product of a lack of due skill and care, or otherwise irrational.

The timescale imposed upon Ms. Davey and her funder

567. I therefore turn to the question of whether the timescale for the provision of the deposit and proof of funding imposed upon Ms. Davey and her funder was unreasonably short.
568. The background to this point is that Ms. Davey was not starting from scratch. She was the director of the Company and professed to have a clear understanding of the development potential of the Angel House site. Her evidence was also that she had begun to think about a funded rescue bid in late September 2013,

"Q. So at this stage there was a change in your view from allowing the property to be sold by the Administrators to one where you positively wanted to keep it; is that right?

A. Yeah, I understood that I had -- if I could bring the money, that I wouldn't need to compete in a commercial tendering process because I had the rights, as a director and shareholder, and the biggest creditor after the bank, that I could do a funded bid, as long as I brought all the money and said to the creditors that it could come back to me.

Q. But you knew all the way through 2013 that all you had to do was to produce the money to pay back Dunbar and you could have your property back, didn't you?

A. That's right.

Q. Yet you made, you say, no effort at all until 22 September 2013 to do so.

A. No. I was too busy with other things. That's correct."

569. As indicated above, Ms. Davey had also been aware of the proposals by the Administrators to soft market, and possibly sell, Angel House since about the same time and was at one point contemplating a bid for the property herself. She must therefore have appreciated that any rescue proposal for the Company would have to be made before contracts were exchanged for any such sale.
570. In addition, from at least early November, the importance to the Administrators of proof of a bidder's ability to finance and complete a transaction had been made clear to Ms. Davey's representative, Mr. Clarke, in the context of a potential bid by Ms. Davey for Angel House. Mr. Clarke accepted that proposition in his evidence,

"Q. ….It was made clear to you throughout by APAM and by Mr Money, at least, that it was very important that the purchaser with whom the Administrators were going to engage should have shown that they had the ability to complete the deal reasonably quickly and that they had the money behind them with which to do so. Do you agree?

A. Yes, my Lord, I do.

Q. You, with your distant but very real recollection of being involved as an insolvency practitioner, were aware that it was clearly important before rejecting some offers in favour of one, to make sure that that one horse was capable of passing the post?

A. My Lord, provided that the offer was a good enough offer in the first place, I would agree."

571. After Ms. Davey was unsuccessful in her attempts to interest various other financiers and people in the property industry to fund or enter into a joint venture with her, as indicated in the letters from Rosenblatt of 13 November 2013, and from Inland Homes on 15 November 2013, Ms. Davey had obtained the support of Mr. Wicks of Inland Homes for provision of about £18 million for her rescue proposal. That support appeared to have been obtained through Mr. Slatter of Olympian Homes who had acted as a liaison between Ms. Davey and Mr. Wicks and who attended the meeting with the Administrators on 18 November 2013.
572. The attendance notes of that meeting both indicate that Mr. Money initially required Ms. Davey to provide the non-refundable deposit of 10% for the equivalent of exchange of contracts in a property sale by close of business on Wednesday 20 November 2013 – i.e. within two days. Mr. Slatter indicated that the monies were available, but all of Ms. Davey's advisers protested (I think justifiably) that two days for the equivalent of exchange of contracts was too short. Mr. Slatter also indicated that the money was coming from a listed company which needed 14 days for its internal procedures and board meetings to approve the transaction. Mr. Clarke and the other advisers sought a similar period for due diligence.
573. In response, Mr. Money appeared to indicate that a week to the equivalent of exchange of contracts would be a reasonable period and that if he was provided with a list of questions, he would provide answers immediately. The list was provided later that day and the Administrators provided the requested information on 21 November 2013.
574. On Friday 22 November 2013, Rosenblatt wrote to the Administrators indicating that Ms. Davey had instructed them that she had received verbal confirmation from her funder that up to £20 million would be available for her proposal, that proof of funding would be available by no later than 26 November 2013, and that the necessary 10% payment could be made to the Company when the Administrators entered into the necessary contractual arrangements with Ms. Davey. By return, Pinsent Masons responded, refusing to give an undertaking not to exchange contracts for sale of Angel House, but indicating that such exchange would not in reality take place before Wednesday 27 November 2013, and was more likely to be later that week.
575. On the basis of the provision of information by the Administrators and the representations as to her own arrangements in Rosenblatt's letter of 22 November 2013, it is difficult to see how Ms. Davey can realistically criticise the Administrators over the timescale that they in fact imposed. Although undoubtedly tight, it was a timescale that Ms. Davey indicated through her lawyers that she could meet.
576. What the letter from Rosenblatt did not indicate, however, was that Ms. Davey had changed funder from Inland Homes after the meeting on 18 November 2013. What appears to have occurred is that after the meeting, Inland Homes withdrew its support for Ms. Davey. Mr. Slatter then approached Mr. Livingstone of L&R to take Inland Homes' place, but Ms. Davey decided to take her own course and to seek finance from Mr. Eastwood to whom she had been introduced in the meantime. Ms. Davey and Mr. Slatter then parted company. Mr. Slatter obtained the initial support of L&R for Olympian Homes' own bid for Angel House, whereas Ms. Davey tried to arrange matters with Mr. Eastwood.
577. Ms. Davey explained this in her cross-examination,

"A. What happened is, I was introduced to Mark Slatter, I had known him from about 20-odd years before, we had done some work together, and Jonathan Fenwick reintroduced us. At the time, I was -- we put together the offer, and Inland Homes said they would do the deal with us. When we then went to meet with Mr Money and put the offer forward, we were then told that they didn't know the full amount that was owed … we put the offer forward, we were told it wasn't enough to satisfy all the Dunbar debt and the Administrators' debt, and that it would be closer to £18 million. After Inland pulled out because they couldn't fit with the timetable that the Administrators had insisted on, Mark Slatter and I – he then wanted to bring another funder in…."

I said to him that at that point his best bet was to put his own offer together, because by that point I had been introduced to BJ Eastwood, who I felt would be better suited with me and he offered me a better deal. So I said to Mark Slatter that I didn't have any objections to him going himself and putting a deal forward. So the deal that he did, or tried to do with London & Regional had nothing to do with me. It was him with them."

578. Although Ms. Davey suggested that Inland Homes had withdrawn because of the timetable that the Administrators had imposed, this was not the reason attributed by Mr. Slatter to Inland Homes' decision in an email to Ms. Davey on 21 November 2013. Instead Mr. Slatter reported that part of the reason that Inland Homes had withdrawn was because it had discovered that another party had been approached by Ms. Davey to fund her proposal to the Administrators.
579. The change in Ms. Davey's preferred funder was only revealed to the Administrators during the evening of 22 November 2013, when Rosenblatt emailed Pinsent Masons with a letter from Mr. Eastwood of Blackcube, and Mr. Slatter separately emailed the Administrators with his offer on behalf of Olympian Homes, backed by L&R to acquire Angel House for £19.12 million, indicating that he understood that Ms. Davey was now "acting with other parties".
580. In the witness statement from Mr. Eastwood served prior to the trial, Mr. Eastwood complained in very general terms of (i) an unusually poor level and quality of communication from the Administrators, and (ii) the "impossible" timescales imposed by them. Mr. Eastwood's witness statement asserted that "all our people had worked hard and pulled out all the stops"; that when contracts were exchanged by the Administrators to sell Angel House on 9 December 2013, "we were about 24 hours away from being able to complete the deal"; and that he would have been prepared to invest nearly £3 million more than Angel House was sold for, in return for a 50% stake in a joint venture with Ms. Davey.
581. In the event, as I have indicated, Mr. Eastwood did not attend trial to give evidence or be cross-examined on his witness statement. However, the true picture of his involvement was capable of being pieced together from the contemporaneous documents. That picture, which is set out in some detail in the chronology above, tells a very different story from Mr. Eastwood's witness statement. In my view it shows that far from being uncommunicative or unreasonable in setting "impossible" timetables, the Administrators were in regular contact with Mr. Eastwood and went out of their way to assist him to perform his due diligence and commit the necessary funds to Ms. Davey's proposal.
582. In the end the Administrators gave Mr. Eastwood from 22 November 2013 to 9 December 2013 to come up with the necessary deposit and proof of availability of the remainder of the required funding. In my judgment that was ample opportunity to prove his ability and commitment to fund Ms. Davey's rescue bid. In return, as the chronology shows, Mr. Eastwood lied on a number of occasions to the Administrators about his instruction of solicitors and the transfer of the deposit to them, he showed no signs of having finalised his due diligence, and no solicitors had been properly instructed to produce the necessary legal documentation for his loan to AHDL.
583. In my judgment, the Administrators' email to Mr. Eastwood in the morning of 9 December 2013 was entirely justified, as was Pinsent Masons' letter to Rosenblatt of the same day which stated,

"Our clients consider that they have provided your client, Blackcube Group Limited ("Blackcube") and Mr Eastwood with ample opportunity to progress their interest in the refinancing proposal. Since we provided you with draft Heads of Terms on 25 November 2013:

Blackcube and your client do not appear to have carried out any meaningful due diligence in relation to the Property or the Company (as evidenced by Mr Eastwood's emails to Mr Money of this morning).

Despite numerous requests, our clients have had no satisfactory evidence of Blackcube's ability to fund either the £2m initial payment or full £20m refinancing. In correspondence, Blackcube claimed to have long track record in property development and substantial net worth despite being formed less than three weeks previously. The latest letter provided by Mr Eastwood from BSI SA refers to an individual unknown to Mr Money, to a purchase of the Property rather than a refinancing and is clearly not the non-refundable deposit requested by Mr Money as a condition of halting the sale process.

There has been no meaningful engagement towards implementing the Heads of Terms. The draft loan agreement provided appears to have been produced by someone who had not read the Heads of Terms.

Our clients and we have had a number of inconsistent messages on behalf of Blackcube and your client as to the status of the proposal, the instruction of lawyers and the transfer of monies.

In short, Blackcube and Mr Eastwood have not persuaded our clients that they are capable of delivering on their proposal.

….

Mr Money has been in regular contact with both Mr Eastwood and Mr Clarke in relation to the progress of the proposed sale. We have also separately kept you up to date. Blackcube and your client can have been under no misapprehension of what was expected of them and the deadlines involved.

In the circumstances, our clients consider that they have no alternative but to continue with the sale process and exchange contracts. This is likely to take place imminently."

584. When this letter was put to Ms. Davey in cross-examination, she was in my view unable to provide any meaningful contradiction of its terms.
585. Finally, in their joint report, the insolvency practitioner experts stated,

"3.2.22 We agree that neither of us had come across Blackcube as a funder/investor, and we further agree that Blackcube's approach to this transaction was not impressive and would not have impressed a reasonably competent IP. However, [Mr. Shierson] comments that the demand for a £2m non-refundable deposit was not reasonable and Blackcube's approach must be assessed in that context

3.2.23 Subject to [Mr. Shierson's] and [Mr. O'Connell's] differing view as to whether or not a reasonably competent IP would have found himself in this position, we agree that having ended up in the position of choosing between Ms Davey and Blackcube's Funded Rescue proposal on the one hand, and the LBS offer on the other hand, it was reasonable for the Administrators to accept the LBS bid. [Mr. Shierson] contends that, as already stated, a reasonably competent IP would not have found himself in this position and should have appointed other sales/investment agents and/or employed an alternative marketing campaign and/or progressed the planning application prior to finalising a sale of the Property."

586. For reasons that I have already explained, I do not share Mr. Shierson's views on the non-refundable deposit or whether the Administrators had acted as no reasonably competent insolvency practitioner would have acted in relation to the employment and reliance upon APAM, the marketing campaign and the planning application. I do, however, agree with the experts that at the end the Administrators acted entirely reasonably in choosing to sell Angel House to Cubitt rather than continue to wait and hope that Mr. Eastwood would at some indeterminate future time finally be able to procure the necessary financing for Ms. Davey's proposal.
587. I therefore conclude that far from failing to pursue a funded rescue by Ms. Davey, the Administrators did all that could reasonably have been expected of them to facilitate it.

Issue 5: Did the Administrators act in breach of duty by failing to exercise their own independent judgment in the conduct of the administration?

588. Ms. Davey argues that the Administrators acted in breach of fiduciary duty of loyalty to the Company by surrendering their discretion to Dunbar and thereby failing to exercise their own independent judgment in the conduct of the administration.
589. In submission, Mr. Davies relied upon the assistance which was given to Dunbar by Mr. Sandall concerning service of proceedings upon Ms. Davey and in relation to the supply of her personal information to which I have already referred. He also submitted that the evidence supported a conclusion that in relation to all important decisions, the Administrators simply adopted what Dunbar decided, rather than using their own independent judgment. In that regard he referred, in particular, to the selection and appointment of APAM, the decision to allow the 2012 planning application to lapse, the decision as regards soft marketing and the setting of the timetable for sale, and the ultimate decision whether to accept the bid from LBS and exchange contracts with Cubitt.
590. Before turning to the facts, I should first say that I accept the general proposition that an administrator must exercise independent judgment. He must not simply allow another person to dictate to him how he should exercise his powers as administrator. Nor should he unquestioningly act in accordance with the wishes of another. These propositions are an obvious consequence of the fact that the office of administrator is a personal office under the Insolvency Act 1986 and the relevant authority and statutory powers are given to the administrator and not anyone else. They are also consistent with the general principles that govern the exercise of discretionary powers by fiduciaries: see e.g. Pitt v Holt [2013] 2 AC 108 at [66] and [81] in relation to trustees.
591. So, in the instant case, I accept that it would obviously not have been appropriate for the Administrators to act with unquestioning obedience to Dunbar as regards dealings with Angel House or in relation to Ms. Davey.
592. However, this does not mean that an administrator cannot take account of the wishes of the relevant creditor(s) whose interests are likely to be affected by the decisions he takes. An administrator is entirely at liberty to consult with those creditors to ascertain their views, and in many cases it will be entirely sensible that he should do so. He is not, however, bound to follow their wishes.
593. Additionally, where an administrator seeks to sell an asset which is subject to a charge, further statutory considerations intervene. An administrator is generally authorised to dispose of assets subject to a floating charge as if the assets were not subject to that charge: see paragraph 70(1) of Schedule B1 to the 1986 Act. He is not, however, generally authorised to dispose of assets subject to a fixed charge unless the charge-holder gives its consent to such a disposal. The rights of the fixed chargeholder can be overridden by the court granting an order under paragraph 71(1) enabling the administrator to dispose of the property as if it were not subject to the fixed charge, but only if the conditions set out in paragraph 71(2) of Schedule B1 are satisfied, and then only on terms providing for payment of the proceeds to the fixed chargeholder together with any additional amounts necessary to produce the amount determined by the court to be full market value: see paragraph 71(3). As such, a sale by an administrator of a property subject to a fixed charge will necessarily require the administrator to seek the consent of the holder of the fixed charge to that disposal or to make an application to court if consent is not forthcoming.
594. Taking the matters relied upon by Mr. Davies in turn, I have already considered the manner in which Mr. Sandall gave assistance to Dunbar in relation to the pursuit of its separate proceedings against Ms. Davey under her personal Guarantee. I have concluded that such assistance was not given to further the objectives of the administration and should not have been given. However, I have also indicated that I do not think that there is any evidence that any antipathy that Mr. Sandall might have felt towards Ms. Davey (or Mr. Daniel) from about 1 February 2013 had any, or any material, effect upon the decisions taken later in the administration. Still less do I think that these matters relating to Mr. Sandall provide any evidence that the Administrators were acting with unquestioning obedience to the wishes of Dunbar.
595. I have also dealt with the issue regarding the selection of APAM to act as asset managers for Angel House and advisers in relation to the marketing and sale of the property. I have concluded that although the selection of APAM as asset managers was at the instigation of Dunbar, that was not, of itself, inappropriate in circumstances in which it was believed that APAM were suitable for the job and that the value of the property was likely to be materially less than the amount owing to Dunbar. I have also concluded that the reliance placed by the Administrators upon APAM in relation to the marketing and sales process was a decision that could have been reached by a reasonable administrator. There is, moreover, no indication that Mr. Money's decision to continue to use APAM for these tasks was the result of any instruction from Dunbar. Mr. Money's favourable views of APAM were, I believe, genuinely his own and not influenced by Dunbar.
596. I have also considered the reasons why the 2012 planning application was allowed to lapse. It will be recalled that although the initial proposal had been to continue with the 2012 application, and indeed that was the view of the Administrators, APAM and Mr. Stenson for some time, concern was expressed within Dunbar in April 2013 as to whether continued pursuit of the 2012 planning application was cost-effective. Those concerns prompted APAM to review its advice and led to it changing its recommendation to Dunbar and the Administrators in its memo of 17 May 2013. That in turn led eventually to Mr. Stenson changing his recommendation to Dunbar's RMRC in his memo of 3 July 2013. The RMRC eventually decided at its meeting on 10 July 2013 to abandon funding support for the 2012 application in favour of a twin-track approach of soft marketing and beginning to plan and engage professionals for a new revised detailed planning application.
597. It is, I think, true that the Administrators seem not to have questioned this decision of Dunbar. Although the Administrators were pushing Dunbar for a decision on the future of the 2012 application during May and June 2013, there is no evidence of separate consideration of what to do by the Administrators, and it was not until 16 July 2013 that the Administrators met Dunbar and APAM to consider a revised course of action.
598. However, I do not think that this shows that the Administrators had wrongly abandoned their discretion to Dunbar. As I have already found in relation to the allegation of failing to obtain the best price reasonably obtainable in the circumstances, in my view the approach of the Administrators simply reflected the reality that the Administrators had no separate source of funding with which to finance the continued pursuit of the 2012 application, and Dunbar's decision as to what it was prepared to fund was not one over which the Administrators had any control. After Dunbar's decision had been made, however, the Administrators were then involved in the decision to commence soft marketing whilst seeking indications of interest from professionals to work on a new planning application, as discussed at the meeting on 16 July 2013.
599. So far as the conduct of the eventual sales process and the actual decision on which bid to accept was concerned, the Administrators' understanding of their role was first set out in the email from Mr. Money to Mr. Connaughton on 17 October 2013. That email stated,

"Although the 'rules of engagement' have yet to be agreed, you are right in thinking that the decision will be based both on the ultimate price and on the ability to deliver. When we set a date for offers, it will probably be after confirming with serious bidders that the timing is realistic. The bottom line is that price will be the key factor. After the initial offers are in, we will be ensuring that we have evaluated the different bases used by interested parties, and there may be further opportunities for the highest bidders to clarify their offers.

While it is likely that APAM will manage the process, the decision will rest with BDO and Dunbar. Dunbar will have more influence if the level of bids is below their indebtedness. BDO will make the decision, albeit in close consultation with Dunbar, if the Dunbar indebtedness is likely to be fully repaid."

600. The second paragraph of that email suggested that the decision as to which bid to accept would be a joint decision between the Administrators and Dunbar, but with Dunbar having differing degrees of influence depending upon the price to be paid.
601. A similar process was envisaged in Mr. Money's email to Dunbar on 21 November 2013, in which Mr. Money said,

"I spoke to [Mr. Powell] earlier this afternoon and asked him to go back to LBS to see if they would go up to £17,050,000. I did not want Ms Davey to be able to complain that we had not accepted the highest offer. Will did so and succeeded. Accordingly, my recommendation to you is that we accept the LBS offer at £17,050,000. Do you need committee approval? If so, I attach a draft HoT for you to present to the committee. I look forward to receiving your formal confirmation."

602. Mr. Money was cross-examined on that email,

"Q. … So you are effectively recommending to Dunbar, and you are waiting for their decision, to agree to accept the LBS offer.

A. Well, isn't that the correct order, that the Administrator makes the recommendation to Dunbar based on the advice that I have had [from] my agent?

Q. In other words, it was at all times, and always had been, Dunbar that was calling the shots.

A. My Lord, I can't change what I have just said. It was for me to make the recommendation to Dunbar that they accept that offer, based on the advice that I have had from APAM."

603. Later in his cross-examination, Mr. Money was also asked about his email of 26 November 2013, reporting on the events of that day. Mr. Money's cross-examination on that later document concluded with the following exchange,

"Q. But up until now you have assumed that all offers made would be insufficient to pay Dunbar in full, and therefore it was for them, and not you, to decide whether to accept them.

A. No. I think both parties are deciding on whether it is an acceptable offer. I mean, clearly Dunbar, as the secured creditor, are not going to get all their money back.

Q. That is how you viewed it, Mr Money. Up until this point, you did not consider that you had received any indication of an offer that meant that Dunbar would be paid in full.

A. Well, I mean, that was the case. I mean, we hadn't had an offer.

Q. Yes, and up until this point, I am putting to you, you did not consider that it was your decision whether to accept an offer or not, rather it was Dunbar's.

A. Well, it is sort of self-evident."

604. I consider that Mr. Davies' criticism of Mr. Money's evidence in these respects was misplaced, and I think that Mr. Money's emails and evidence were essentially accurate. Angel House was subject to a fixed charge in favour of Dunbar, and for the reasons that I have explained, any decision by the Administrators to sell the property necessarily required Dunbar's consent or a court order to be obtained under paragraph 71 of Schedule B1. Given the level of offers which were being made, it was inevitable that the Administrators would have to consult Dunbar and seek its consent to the sale. The Administrators could only have felt able to proceed regardless of whether Dunbar consented if the price offered would have enabled Dunbar to be repaid in full from the proceeds so that a court order could be obtained. On the basis of the offers received, that was not the case.
605. So far as the process of seeking offers itself was concerned, I consider that the Administrators were acting with sufficient independence of mind and were not unthinkingly doing what Dunbar wanted. That is illustrated, for example, by the answers given by Mr. Powell to Mr. Clarke on 5 November 2013 as regards the nature of the sales process. These were the result of guidance given by the Administrators and not Dunbar. Although Mr. Stenson was copied into the original questions and the final response from APAM, there is no evidence that the Administrators took their lead from Dunbar or even discussed their answers with Dunbar in the interim.
606. Similarly, when it came to the final decisions as to which offers to pursue, how to pursue them, and finally the decision to accept the LBS/Cubitt offer, I consider that it is quite clear that the Administrators were taking their own view, independently of Dunbar. That conclusion can be illustrated, for example, by the way in which Mr. Sandall wrote his memo to Mr. Money on 14 November 2013 after the receipt of Rosenblatt's letter indicating that Ms. Davey was going to make an offer for a funded rescue of AHDL and seeking a suspension of the sale process for Angel House. Mr. Sandall's memo indicated that he had discussed the matter with Mr. Field of Rosenblatt and with Mr. Stenson of Dunbar, but the analysis in the memo seems clearly to have been Mr. Sandall's own work, and he did not in any way suggest that he thought that the decision as to how to proceed was for anyone other than the Administrators.
607. Mr. Sandall then went back to Mr. Field within a few hours having discussed the matter with Mr. Money. Mr. Sandall also informed Mr. Field (among other things) of the requirement for a 10% non-refundable deposit on acceptance of Ms. Davey's offer. Although Mr. Sandall had spoken to Mr. Stenson before writing his memo, I consider that it is clear from the tenor of the documents that this was Mr. Sandall's idea and (contrary to Ms. Davey's case) this had not been suggested to him by Mr. Stenson.
608. A further illustration is the exchange of emails on 24 and 25 November 2013 between Mr. Money and Mr. Powell following the receipt of the offer from Olympian Homes supported by L&R, and of Ms. Davey's proposal for a funded rescue of AHDL. In his email, Mr. Money commented that he would like one of these two offers to succeed because they were "so materially better than the LBS offer". He also recorded his view that,

"it would be wrong for me simply to take the LBS offer as the easy option when there is a prospect of getting the bank out in full plus either a proportion of or all of the unsecured creditors"

609. It was not suggested that this email did not reflect Mr. Money's genuine view of the situation. Those comments seem to me to underscore Mr. Money's understanding that he had an independent role to play in the decision as to whether to sell Angel House at all, and if so, to which purchaser. They certainly do not suggest any belief on his part that the result of the process had been pre-ordained by Dunbar or APAM in favour of LBS.
610. In that latter regard, reference should also be made to the email that Mr. Money sent on the evening of 26 November 2013, reporting the events of the day to Mr. Stenson. Whilst the email ended by seeking Mr. Stenson's immediate thoughts, it is clear from the penultimate paragraph of the email that Mr. Money's view was that it was still very much an open question as to whether the winner of the process would be Ms. Davey, LBS or Capital & Oriental. Moreover, in response, far from indicating that LBS was Dunbar's "Preferred Bidder", or even giving Mr. Money a clear direction that he should be deciding to sell to LBS, Mr. Stenson acknowledged that the decision as to how to engage with Ms. Davey was Mr. Money's decision as Administrator, and he sought to expand the group of potential purchasers of Angel House to which Mr. Money had referred, by expressing the hope that, "the other offeror, Guildmore, are also in the loop in some way".
611. Finally, I would refer to the events on and after 2 December 2013. On that date, Mr. Money received the final update of APAM's marketing report and gave instructions that a draft contract should be issued to Cubitt. However, he also instructed APAM to inform Ms. Davey that this had taken place and that in effect she had 2-3 days to trump the sale to Cubitt. Mr. Money then went out of his way to engage with Mr. Eastwood and Mr. Clarke notwithstanding the very mixed messages which he received from Mr. Eastwood and Mr. Davidson and the absence of any proof of funding. To my mind the evidence and the tenor of the contemporaneous documents demonstrate quite clearly that Mr. Money was acting independently in genuine pursuit of Ms. Davey's restructuring proposal. Mr. Money was certainly not simply acting at the direction of Dunbar, and Dunbar made no attempt to discourage him from so acting even though (according to Ms. Davey's pleaded case) a funded rescue of AHDL would have frustrated a sale of Angel House to Dunbar's "Preferred Bidder".
612. Finally, although Mr. Money checked with Mr. Stenson before issuing the draft contract and before exchanging contracts with Cubitt, there is nothing in those emails to suggest that Mr. Money was seeking instructions as to what to do from Dunbar. Rather, Mr. Money was taking the sensible precaution of checking with Dunbar as secured creditor that it consented to what he proposed.
613. I therefore reject the allegation that Mr. Money failed to act with sufficient independence in the administration of AHDL.

Issue 6: Was any breach of duty by the Administrators a breach of fiduciary duty?

614. This issue did not occupy much time at trial. One reason for that may well have been that Ms. Davey was refused permission to plead a case for equitable compensation based upon the current value of Angel House at the pre-trial review. In addition, my findings in relation to the most significant alleged breaches of duty render the question of whether any such breaches of duty were breaches of fiduciary duty largely academic. Nonetheless, for completeness I should briefly state my views on the points argued before me.
615. Mr. Davies contended that the Administrators were fiduciary agents in respect of the property of AHDL. He argued that each of the breaches of duty by the Administrators for which he contended were breaches of the "custodial stewardship duty" or the "management stewardship duty" as referred to by Lord Toulson JSC in AIB Group (UK) plc v Mark Redler & Co. [2015] AC 1503 at [51]; and he contended that these were fiduciary duties.
616. AIG v Redler concerned a claim by a bank (A) which had agreed to lend a sum of money to a husband and wife to re-mortgage their house. The solicitors instructed the defendant firm of solicitors to act for it, and paid the loan monies to the solicitors to be held on an express trust pending payment to discharge the pre-existing mortgage in favour of another bank (B) at completion. In error, the solicitors paid an inadequate sum of money to B to discharge the first mortgage, and paid too much to the borrowers. The borrowers did not use the extra monies to pay off the first mortgage, and the solicitors did not immediately tell A that it had not obtained a first charge. The borrowers later defaulted and the property was sold, whereupon A found itself postponed to B and received a lesser amount of the proceeds of sale than it expected. A sued the solicitors for compensation, claiming to be entitled to the full amount of its loan less the amount recovered. The solicitors contended that A should only be entitled to recover what it would have received if the solicitors had done what they ought to have done and paid the full amount needed to redeem the first mortgage to B.
617. By the time that the case reached the Supreme Court, it was accepted that the solicitors held the monies provided by A on trust as a result of the express terms of their contractual engagement by A. The question was whether, when determining the remedy to be granted for their breach of trust, the solicitors were obliged to reconstitute the trust fund in full as it existed prior to the re-mortgage transaction; or whether they were only liable to pay compensation for the losses suffered by A following the transaction and which could be said to have been caused by the breach. This question turned on an analysis of the decision of Lord Browne-Wilkinson in Target Holdings v Redferns [1996] AC 421, and in particular his statement (at page 439) that,

"Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests: to make good a loss in fact suffered by the beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach."

618. It was against that background that Lord Toulson JSC stated, at [49],

"49. The determination of this appeal involves two essential questions. The more important question in the appeal is whether Lord Browne-Wilkinson's statement in Target Holdings of the fundamental principles which guided him in that case should be affirmed, qualified or (as the bank would put it) reinterpreted. Depending on the answer to that question, the second is whether the Court of Appeal properly applied the correct principles to the facts of the case."

619. Lord Toulson JSC then continued,

"51. The primary criticism is that Lord Browne-Wilkinson failed to recognise the proper distinctions between different obligations owed by a trustee and the remedies available in respect of them. The range of duties owed by a trustee include: (1) a custodial stewardship duty, that is, a duty to preserve the assets of the trust except in so far as the terms of the trust permit the trustee to do otherwise; (2) a management stewardship duty, that is, a duty to manage the trust property with proper care; (3) a duty of undivided loyalty, which prohibits the trustee from taking any advantage from his position without the fully informed consent of the beneficiary or beneficiaries."

620. I do not think that these statements from AIG v Redler are authority for the proposition that Mr. Davies advances. AIG v Redler was a case on express trustees (albeit in a commercial setting) and was concerned with the question of the appropriate remedies for breach of trust. It was not a case which sought to examine or characterise the essential nature of particular duties owed by persons other than express trustees who, by reason of their office, have control and powers of disposition of property belonging to another. As such, I do not think that Lord Toulson was directing his attention to the question of whether the three types of obligations which he identified as being owed by a trustee were all properly to be regarded as fiduciary in nature, and I do not think that he intended to restate the law on the essential nature of fiduciary duties.
621. In my judgment, the leading authority in that area remains the decision of the Court of Appeal in Bristol and West Building Society v Mothew [1998] 1 Ch 1, and in particular the analysis of Millett LJ of the different nature of fiduciary duties and duties of skill and care. At pages 16-18, Millett LJ explained that not all duties owed by a person who may occupy a fiduciary position are fiduciary duties. He referred in particular to the dictum of Lord Browne-Wilkinson in Henderson v Merrett Syndicates [1995] 2 AC 145 at 205 to the effect that although equitable remedies are available for a failure by a fiduciary to perform his duties with due skill and care, it does not mean that the duty to take skill and care is to be regarded as a fiduciary duty. Millett LJ indicated that the fundamental and distinguishing duty of a fiduciary was the obligation of loyalty.
622. Building on this analysis, I think that it is only the "Fiduciary Duty" identified in Ms. Davey's pleading that could properly be regarded as a fiduciary duty. I do not think that the "Duty of Care" or the "Selling Duty" were fiduciary duties.
623. The component parts of the Fiduciary Duty were pleaded as (i) the duty to exercise powers in good faith and (ii) the duty to exercise powers for a proper purpose and/or not irrationally. I would accept that as a generally accurate formulation, albeit I would understand the reference to not acting irrationally to be another way of expressing the requirement to exercise powers for a proper purpose – i.e. not to act capriciously.
624. On that basis, I take the view that of the allegations levelled at the Administrators, it is only those that alleged that the Administrators surrendered their discretion to Dunbar, or acted with a view to serving the interests of Dunbar rather than AHDL, or acted out of personal antipathy to Ms. Davey rather than to advance the interests of AHDL, that would have qualified as allegations of breach of fiduciary duty.
625. The only such complaint that I have found made out relates to the assistance given by Mr. Sandall to Dunbar in relation to the pursuit of the guarantee proceedings against Ms. Davey personally. That assistance was not given to advance the interests of AHDL, it was therefore a failure to act for proper purposes, and to the extent that the Administrators are responsible for Mr. Sandall's actions, it did amount to a breach of fiduciary duty.
626. In my view, all of the other allegations against the Administrators were essentially allegations of a failure to take care – e.g. a failure correctly to investigate the possibility of a funded rescue, the appointment of APAM when they were unsuitable or on unsuitable terms, or a failure to obtain the best price for Angel House which the circumstances permitted. Even if made out, these would not, in my judgment, have qualified as breaches of fiduciary duty.

Issue 7: Was any breach of duty by the Administrators the cause of loss for which AHDL should be compensated?

627. I have found that the Administrators (via Mr. Sandall) breached their duties in giving assistance to Dunbar to sue Ms. Davey on her personal Guarantee. However, since the actions were directed at Ms. Davey, I cannot easily see how such conduct could have caused any significant loss to AHDL that could result in any compensation being awarded to AHDL against the Administrators under paragraph 75(4) of Schedule B1. The only basis upon which AHDL might have suffered loss in that regard was if and to the extent that the Administrators were paid fees from AHDL in respect of the time spent by Mr. Sandall assisting Dunbar. However, that loss was not pleaded or quantified and I received no submissions and heard no evidence as to it. In the general scheme of this case, such matters are likely to be de minimis.
628. As I did not find any of the other allegations of breach of duty to be made out, this Issue does not arise in any other respect. Specifically, it is not strictly necessary for me to decide whether AHDL actually suffered loss and if so, how much, either (i) because Angel House was sold at an undervalue, or (ii) because a funded rescue of the Company was prevented. However, since these allegations were the subject of considerable evidence and argument, I should state my views on the more salient points.
629. There was a fundamental difference in approach between the parties and their valuation experts as to the essential parameters that should be applied to any calculation of loss arising from the sale of Angel House.
630. Ms. Davey's primary contention was that but for the alleged breaches of duty by the Administrators, she would have financed the continuation of the 2012 planning application and that it would have been granted at some point in early 2014. She then contended that the expert evidence of Mr. Wolfenden showed that if properly marketed, a sale of Angel House with outline planning permission towards the end of the first quarter/early second quarter of 2014 would have achieved a price based upon a residual value calculation of £39.597 million.
631. For the reasons set out above, I do not accept that there was any duty upon the Administrators to seek funding from Ms. Davey for the continuation of the 2012 planning application. Nor, for the reasons which I have given, do I accept on the facts that even if asked, Ms. Davey would have been able to find the money for that purpose. Moreover, although favourably received by the Council's planners, the question of whether the McBains Cooper scheme would ultimately have obtained planning permission is uncertain. I therefore simply do not think that there is any realistic basis for assessing damages on the hypothesis of a sale with planning permission at some point in 2014.
632. Instead, I think that the most obviously relevant basis for valuing Angel House for the purposes of assessing any damages or compensation would be to determine the open market value of Angel House, without planning permission, at the time of its actual sale in December 2013. If there had been any breaches of duty by the Administrators in relation to the sale, the measure of compensation for AHDL would be the difference (if any) between the open market value and the price of £17.05 million for which it was actually sold.
633. Ms. Davey contended that the most telling direct evidence that the open market value of Angel House without planning permission in December 2013 was more than £17.05 million was the evidence of Mr. Connaughton that Capital & Oriental would have been prepared to pay up to £28 million for it; Mr. Fenwick's evidence that he would have been prepared to pay LBS £25 million for an on-sale; and the fact that Mr. Eastwood was prepared to agree a joint venture with Ms. Davey under which he was to contribute £20 million by way of loan to rescue AHDL and to acquire a 50% stake in it.
634. Alternatively, Ms. Davey relied upon Mr. Wolfenden's expert evidence to the effect that after the 2012 planning application had lapsed, a competent investment agent would have sold Angel House in the last quarter of 2013 after a full marketing process for a price calculated by the residual valuation method as at November 2013 of £33.268 million.
635. The Administrators and Dunbar disputed Ms. Davey's contentions based upon the evidence in relation to Mr. Connaughton, Mr. Fenwick and Mr. Eastwood, and submitted that there are more obvious pointers to a conclusion that the price actually obtained was the true market value. They also disputed Mr. Wolfenden's evidence. They relied upon the expert evidence of Mr. Forgham who valued the property using the residual value method at £16.3 million as at December 2013, and Ms. Seal who also valued the property using the residual valuation method at £17 million as at 19 December 2013.

The unconsummated offers for Angel House in November and December 2013

636. I accept in general terms the proposition that in determining the open market value of a property, a court should have regard to all of the contemporaneous evidence as well as the expert evidence at trial. However, given the practices in the commercial property market such as chipping and the making of phantom bids to which I have already referred, I think that the court needs to exercise considerable caution when considering the weight to be attached to unconsummated offers and expressions of interest. The court needs critically to assess both whether the offeror actually intended to complete a purchase at the price offered and whether it was capable of doing so.
637. In that regard, I should say at once that I do not regard the evidence concerning Mr. Fenwick or Mr. Eastwood as remotely reliable guides to the true value of Angel House in December 2013. I have already explained why, in my view, the evidence of Mr. Fenwick in cross-examination clearly exposed the fact that his expressions of interest in Angel House were without any financial substance to back them up. He was, as I have indicated, simply chancing his arm and trying to get into a position from which he could then try to arrange a deal with funders. I have also explained why, although Mr. Eastwood was apparently prepared to enter into a co-operation arrangement with Ms. Davey under which he was to provide up to £20 million by way of loan towards a funded rescue and in return would acquire 50% of AHDL, that was done at a time at which he had not conducted any due diligence into the present value of Angel House and had not secured funding. In my judgment the deal done between Mr. Eastwood and Ms. Davey says little about the then current value of Angel House as opposed to the anticipated amount needed to pay off AHDL's creditors and the costs of the administration.
638. Mr. Connaughton's written evidence was to the effect that Capital & Oriental had conducted an internal financial appraisal on 10 November 2013 which gave a residual land value of Angel House of £34.5 million. However, no such document was ever produced, and in cross-examination, Mr. Connaughton made it clear that such an appraisal would simply have been the product of changing the input variables on the computer spreadsheet and was not a price that Capital & Oriental would have paid. He also agreed that all of the appraisals which he had saved gave much lower values,

"Q. Do you say that you ran an appraisal in which you recorded the land value as being £34.5 million?

A. When I run an appraisal, my Lord, I run many, many figures through it. I will sit and play with it and look at -- by changing -- I don't know -- when you are trying to produce a figure for residual land value, what you do is you use the system that we have in the spreadsheet that we have to create -- to put in a different number for the residual land value and that will then affect gross margin, return on costs and IRRs. That will then dictate what we feel the value is.

MR JUSTICE SNOWDEN: Just pause there … can you point us to a document which contains that value of £34.5 million?

A. I would not have saved a document with that, because it wouldn't have been relevant for me to save it. It is not what we thought we were going to pay for it, so it was just an internal exercise of when I have modelled this, I have modelled it, most of the documents I have saved have been around the £16, 17, 17.5 million mark. That was when we were modelling out. We would have done even on the sensitivity analysis what we thought it was worth, and played with it internally within the company, looking at what do we actually think this is worth, once we have played with it, but I would not have saved that document because it wasn't relevant.

MR FENWICK: Thank you. As you say, all your appraisals ended up between about £12.5 and £17.5 million, didn't they?

A. Yes, my Lord.

Q. And you never prepared one, let alone submitted it to Affinity or your other funder, which showed a higher residual land value.

A. No, my Lord, what I did was provided a tab on the stack. There was a tab, a sensitivity tab, and that would show what we actually felt value was, and we would have had conversations with Mr Whitton at Affinity saying, "This is where we believe the value actually is, because of these reasons ..."

639. Mr. Connaughton also subsequently explained that although the individuals comprising Capital & Oriental had discussed a maximum price which they would have been prepared to pay internally, they had not discussed that with Affinity, their proposed funder. Mr. Connaughton was asked about an internal email dated 29 October 2013 among the principals of Capital & Oriental and Mr. Willans of Vale Retail in which Mr. Kennedy had expressed the view that they had to decide what the maximum they were prepared to pay was, and that, "My gut tells me the figure could be £16 m but we may be able to get away with £14m",

"MR JUSTICE SNOWDEN: Did you ever decide what the maximum price was that you were prepared to pay?

A. Internally, yes.

MR FENWICK: And what was that?

A. We said we would probably go up to about £25 million, possibly £28 million at a squeeze, but again we would have to justify that to our investors.

Q. Who was "we"?

A. The people within Capital & Oriental, my Lord.

Q. Right. Did you ever discuss that with Affinity?

A. We had had discussions with Affinity with regards to the purchase price and what we thought value was but we didn't discuss levels that we would go to, per se. We knew what the value was to us, so it was then for Affinity to say how far they would be prepared to go with the perceived risk of planning."

640. In the absence of any evidence that Affinity had ever even been asked to consider supporting an offer at £25-28 million, I simply cannot place any weight upon Mr. Connaughton's evidence that Capital & Oriental might have been prepared to stretch to such a sum. As it was, the evidence that Affinity were prepared to fund Capital & Oriental's offer of £17.5 million rested on little more than Mr. Fidler's confirmation that he had seen a bank statement showing that Affinity had that amount in a bank account, and as he also made clear, the commitment to fund was subject to Affinity undertaking and concluding satisfactory due diligence.
641. Against such evidence, I would note that the leading bidders in the final round of the competitive process all ended up making offers that were closely grouped together at between £17 million and £17.5 million, which tends to suggest that this was the correct range of values which bidders in the market were prepared to pay. Moreover, and significantly to my mind, although Olympian Homes made a higher bid at £19.2 million, that bid was withdrawn when its funder, L&R, examined the financial calculations for itself and concluded that Olympian's plan was "madness" and that the highest figure that could be supported was £15 million. I was repeatedly told that L&R were a serious and established participant in the commercial property market, and in my judgment their reported views provide a weighty counterbalance to any suggestion based upon the evidence of Mr. Connaughton that the true value of Angel House was significantly in excess of the price at which it was sold.

The expert evidence

642. I therefore turn to the evidence of the valuation experts. They agreed that at the relevant date in December 2013 the market was rising and that there were development opportunities for the Angel House site. They also agreed that an appropriate definition of market value was that provided by the RICS definition, namely,

"The estimated amount for which an asset … should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion."

643. The experts also agreed that the appropriate way to value a property like Angel House is by way of the residual valuation method. In essence, the residual valuation method involves working out the gross development value ("GDV") for the most profitable development that the prospective purchaser thinks would receive planning permission, and then deducting from that the costs that would be incurred in financing and carrying out the construction, together with the developer's profit, in order to arrive at a current net value for the land.
644. The experts did not agree on the particular scheme that a developer might have envisaged when performing a residual valuation. Ms. Seal considered a number of proposals, but her optimum scheme involved a 55 storey tower without any hotel element; Mr. Forgham produced his valuation on the basis of a scheme including a hotel along the lines of the McBains Cooper scheme that was the subject of the 2012 planning application; and Mr. Wolfenden also based his valuation upon the McBains Cooper scheme, but increased his valuation to take account of the possibility that a developer would envisage getting permission for an improved scheme (which he called "McBains Cooper plus").
645. In relation to their valuations, the experts identified the following possible components/inputs, although they were unable to agree upon the detail of any of them. The GDV would be made up of the value of (i) the private residential flats, (ii) the affordable residential flats, and (iii) any hotel to be included in the development. From the GDV would be deducted (iv) the construction costs, (v) any developer's contingency for unexpected costs, (vi) any Mayoral Community Infrastructure Levy, (vii) professional fees, (viii) marketing costs for the completed units and (ix) the developer's profits.
646. Of these inputs, plainly the most significant in computing the GDV of the development would be the value attributed to the sale of the private residential flats. The experts differed significantly over this input. Mr Forgham used a rate of £950 psf for flats in the McBains Cooper scheme; Ms Seal used a figure of £997 psf for the sale of private residential flats in her optimum 55-storey scheme; and Mr. Wolfenden used a figure of £1,055 psf as at November 2013 for the private residential flats in his "McBains Cooper plus" development.
647. To arrive at those values, Ms Seal used actual sales data for agreed and completed sales of apartments in Baltimore Tower which she considered (and no-one seriously disputed) was the closest comparable property to Angel House. Ms. Seal had the advantage that she had actually been engaged to perform a valuation of Baltimore Tower and had access to extensive sales data from November 2013. However, she gave evidence, which I accept, that a serious bidder in the market at the time would have also been able to obtain access to much of the same data through contacts at agents and developers at the time.
648. Ms. Seal extrapolated her data across all the units in the scheme and made appropriate adjustments in order to take account of the relative values of the different apartments due to height, arrangement, size and date of sale. She then chose a floor at random (floor 24) which produced an average value for the flats of £954 psf. Since Ms. Seal considered Baltimore Tower to be a materially better proposition to Angel House in terms of location, accommodation and amenities, she applied a discount to that price psf to derive values for Angel House. She considered Angel House to be 10 to 15% poorer, but reduced the discount to 7.5% to take account of the fact that such differences tend to narrow in a rising market. Ms. Seal then applied her resultant value psf for her sample floor 24 throughout the proposed development at Angel House, taking account of the fact that values tend to increase 1% per floor with height. This produced an average value of £997 psf for her optimum 55 storey scheme for Angel House.
649. Mr. Davies criticised Ms. Seal for not showing all of her data or her calculations in her report. She did produce her underlying data during her cross-examination and also fairly accepted that to check all of her workings one would also have to have access to a detailed floor-plan of Baltimore Tower. The specific criticism made of her computation of the average value of £954 psf for floor 24 of Baltimore Tower was that it was too low. Mr. Davies contended that the market was "hotting up" towards the end of 2013 and the sales that had completed nearer in time to December 2013 had been for more than that value, so the use of earlier comparables effectively depressed the average. Ms. Seal readily accepted that the market was rising and that it was a good time to sell flats, and dealt with these points in this way,

"Q. You will appreciate there is a difference between you and Mr Wolfenden in this respect, because he does caution against over-reliance on comparables in a market which is so hot. Do you recall his evidence on that?

A. I do recall his evidence on that. I would totally disagree. The only piece of information we have is what things sell for. There is no other information on which we can reach any conclusions.

Q. You can, of course, always factor in, can't you, by percentages or otherwise, just the very fact that purchasers are clammering for properties? ….

…

A. No, because the fact that people are clamouring to buy flats, as you say, is reflected in the price that they pay for flats, and therefore that information about the fact that the market is so hot is already visible in these contemporaneous comparables. Someone buys a flat in a roaring market for £750,000 because it is a roaring market. It is not then worth £800,000 because it is a roaring market, it is worth £750,000 because that is what somebody paid for it in a roaring market."

650. Whilst I appreciate that checking Ms. Seal's computations could not readily be done without access to her data and floor plans, I accept Ms. Seal's evidence as to the way that she had performed her analysis, and also her view that comparables can and should be used, even in a rising market. I also reject the criticism of her resultant average value based upon the selection of the two later sales of flats from her sample floor 24. As she indicated, these happened to be two of the more valuable flats on the floor and I have no reason to doubt her evidence that she had factored that into her analysis. As I have indicated, I was impressed by the thoroughness of Ms. Seal's work and her clear explanation of the logic that underpinned it.
651. Mr. Forgham also started from data for comparable sales in a number of developments, making appropriate adjustments and applying a £50 psf upwards adjustment across the board to allow for the fact that most of his comparables might have been agreed more than 3 months before the valuation date and the market was rising.
652. Mr. Wolfenden accepted that the approach of using comparable sales figures as at the date of the valuation which had been adopted by Ms. Seal and Mr. Forgham was the normal method that valuers would use. From his original report it was unclear precisely which comparables Mr. Wolfenden had used to arrive at his figure of £1,055 psf for November 2013. It seemed, however, that at least one source for his work had been the comparables included in the Savills Report from late 2012, and that the key assumption that he had made was that comparable flats to those in the proposed Angel House development would have had an average "base" value of £900 psf in March 2013.
653. Mr. Wolfenden explained his methodology thus,

"6. I have adopted an average sale price per sq. ft for the entire private residential area …as follows

Private: £975 per sq. ft. This is calculated by reference to a base figure of £900 per sq. ft, which I have increased by 5% to reflect future capital growth, and increased by a further by 3% to account for the additional floor area that I believe can be achieved (see para 9 below).

…

7. My initial approach was to look at the actual sales of apartments in late 2012/early 2013 - one source I have considered is the evidence presented in the Savills Report ... These are all existing schemes and helped to establish the base figure of £900 per sq. ft. for my calculations.

8. I have noted that the transactions referred to in the Savills Report are all either completed or well-advanced developments. As a result, the sales values used are by reference to those as at the date of the Report and no consideration is given to an increase in these figures in accordance with forecasts at the time. A purchaser of the Property would attribute a percentage increase in sales values as the development would not be completed for 4-5 years. Actual growth as per JLL's Report was 14.4% in 2013, and forecast growth for 2014-2019 was 29.4%. I have therefore applied a 5% increase to reflect what I believe the reasonable agent would have included to cater for this actual/forecasted growth.

9. I have adopted the floor areas from the McBains Cooper scheme which is a conservative assumption in light of the recent scheme proposed by Cubitt … and the proposals for Meridian Gate dated May 2014 which is for a 53 storey tower of 423 residential units (30% affordable housing) and associated commercial units. To counter this and to reflect the near-certainty of achieving planning permission for a larger scheme, I have increased the average sale price per sq. ft. for each unit (private residential, intermediate and affordable housing) by a further 3%. This results in an average price per sq. ft. of £975. The equivalent value in Savills appraisal of Quay House is an average £950 per sq. ft.

….

29. By late 2013 the market had over the period of the administration seen capital growth of circa 12%. I have therefore applied an increase of 8.2% to the residential sales value to reflect the increase from March 2013 to November 2013 (just over two quarters). This results in an average unit price value for private residential sales of £1,055 per sq. ft…"

654. However, the evening before giving his evidence, Mr. Wolfenden substantially amended these paragraphs of his report by deleting paragraph 29 entirely and altering the other paragraphs to read,

"6. I have adopted an average sale price per sq. ft for the entire private residential area …as follows

Private: £975 per sq. ft. This is calculated by reference to a base figure of £900 per sq. ft in March 2013. The agents pitching for the sale mandate will look to forecast what would be achievable at the time of going to the market. This I estimate to be Autumn 2013 and they would have applied a figure of £975 per sq. ft. This is what I believe they would have used in their pitch.

…

7. My initial approach was to look at the actual sales of apartments in late 2012/early 2013 - one source I have considered is the evidence presented in the Savills Report ... These are all existing schemes and helped to establish the base figure of £900 per sq. ft. for my calculations, in March 2013.

8. I have noted that the transactions referred to in the Savills Report are all either completed or well-advanced developments. As a result, the sales values used are by reference to those as at the date of the Report and no consideration is given to an increase in these figures in accordance with forecasts at the time. A purchaser of the Property would attribute a percentage increase in sales values as the development would not be completed for 4-5 years. Actual growth as per JLL's Report was 14.4% in 2013, and forecast growth for 2014-2019 was 29.4%. I have therefore applied an 8% increase to reflect what I believe the reasonable agent would have included, to cater for this actual/forecasted growth.

9. I have adopted the floor areas from the McBains Cooper scheme which is a conservative assumption in light of the recent scheme proposed by Cubitt … and the proposals for Meridian Gate dated May 2014 which is for a 53-storey tower of 423 residential units (30% affordable housing) and associated commercial units. To counter this and to reflect the near-certainty of achieving planning permission for a larger scheme, I have for the subsequent valuations in November 2013 increased the average sale price per sq. ft. for each unit (private residential, intermediate and affordable housing) by 8%. This results in an average price per sq. ft. of £1,055 per sq. ft. (£975 per sq. ft. x 1.08). The equivalent value in Savills appraisal of Quay House is an average £950 per sq. ft.

655. When asked in cross-examination about the reasons for these changes, Mr. Wolfenden was very vague. He said that when looking through his report in detail he realised that he had made a "mistake" and that there were "inconsistencies" in his report. He did not explain what type of mistake he had made or identify the inconsistencies.
656. Mr. Wolfenden gave the following explanation in cross-examination for the numbers in his revised report,

"In terms of my thought process, it remains that I believed the value per sq ft in March was £900. I believed an agent forecasting a sales figure would inflate it to -- and I arrived at £975, and that drove the actual value that was appropriate, in my view, for an agent pitching to win the mandate. The value as at November was looking at what the hypothetical purchaser would have paid, because that is broadly the date upon which offers were received and accepted, and in that case they would have been looking at the site without planning, but forming a view as to what they could build on the site. I formed the view that you would get the McBains Cooper scheme plus. That was my professional judgment, and that was my view. As I didn't know what the plus was, I was left to bridging the gap between what -- the McBains Cooper and what you might get, and in my view I applied an 8% upside."

657. I take both elements of that explanation in turn. First, Mr. Wolfenden never explained coherently why it was appropriate to discard the original 5% increase he had applied on account of the increase in capital values between March 2013 and November 2013, and instead to introduce into his amended report what he thought might have been said about property values by a hypothetical sales agent pitching in March 2013 to win a contract to sell the completed properties at a later date. I fail to see the relevance or any objective basis underpinning that idea.
658. Secondly, Mr. Wolfenden also did not explain why he had thought it appropriate, when trying to reflect the possibility that a buyer might have thought that he could get planning permission for something better than the McBains Cooper scheme, to discard the 3% increase that he had originally applied for this factor to his base figure of £900 psf as at March 2013, and to replace it with 8% which he now applied to the increased value of £975 as at November 2013.
659. Although Mr. Wolfenden denied it when challenged, in my judgment it is clear that the "mistake" that Mr. Wolfenden realised that he had made that caused him to correct his report, was that he had wrongly applied a second increase of 8.2% in paragraph 29 to take account of an anticipated increase in capital values between March 2013 and November 2013. The "inconsistency" that Mr. Wolfenden belatedly noticed was that the figure of 8.2% referred to in paragraph 29 was more than the increase of 5% which he had already applied for the same reason to his base figure of £900 psf in paragraph 8. He also realised that rather than applying the 8.2% increase to his base figure of £900 for March 2013, he had applied it to the figure of £975 which already reflected an 8% increase on the base figure. He had, in other words, plainly double-counted and wrongly inflated the relevant price psf.
660. Rather than accept his error and the obviously damaging consequences for his overall conclusion, in my view what Mr. Wolfenden sought to do in his revised report was simply to delete paragraph 29, and to increase the two factors in paragraphs 8 and 9 to 8% each. In my judgment this had no legitimate basis and was simply re-engineering the numbers so as to arrive at the same end result as before.
661. Mr. Wolfenden did not improve matters when cross-examined on whether, and if so, to what extent he had relied upon comparables to get to his original "base" figure of £900 psf for flats in the McBains Cooper scheme as at March 2013 or the increased figure of £975 psf for November 2013.
662. Although Mr. Wolfenden referred in his report and evidence to the Savills Report, he accepted that Savills had in fact used a figure of £864 psf as the basis for its valuation in December 2012. Mr. Wolfenden then indicated that he had also looked at comparables from Rightmove and Zoopla to justify his base figure of £900 psf as at March 2013. Mr. Wolfenden said that his notes containing the details of these comparables were at home and he agreed to produce them over the weekend. His subsequent evidence on this was as follows,

"Q. … From what you said to Mr Fenwick QC on Friday, I think you were saying you also relied on other comparables to support your £900 per square foot figure as at March 2013, which you got from RightMove and Zoopla. Do you remember giving that evidence on Friday?

A. I do.

Q. I think you agreed that you were going to produce evidence of those comparables. You referred to having notes. Do you recall that?

A. The main comparables, actually hard raw data, relates to the comparables that I have produced this morning which I brought in from home, which, in my view, supported the November assessment at £975. Although the March 2013 probably got miscorrectly labelled as a valuation, it was an opinion being expressed by a broker, an investment agent, as to what he would sell the building for later on in the year.

Q. Do you agree you haven't, in fact, produced any comparables looking at the position as at March 2013?

A. I reviewed -- I had the Savills Report, which was dated December 2012 --

Q. No, sorry, Mr Wolfenden, I am talking about what you have produced in this trial. Do you agree you haven't, in fact, produced any comparables looking at the position as at March 2013, which you said you had got from looking at RightMove and Zoopla?

A. I had -- as I have tried to explain, my Lord, I have a number of examples. One was the Savills Report, which listed lots of different transactions. I verified and checked them, and as you will see, I believe that one of them was incorrectly calculated, and yes, I looked around at what was going on at that time, and opined a view of £900.

Q. Did you keep records of the comparables as at March 2013 which you looked at?

A. I don't think -- I wouldn't describe them as comparables, because the opinion that I was expressing in March --

Q. Did you keep records of what you looked at, Mr Wolfenden?

A. No. I had a piece of paper which I was scrawling and scribbling on, and it arrived at a number.

Q. You didn't keep records, is the answer; is that right?

A. No. No, my Lord."

663. In fact, figures extracted from Rightmove for March 2013 did not support a figure of £900 psf. Mr. Wolfenden was shown those figures and asked about them,

"Q. …. This is the sort of data you would have obtained from RightMove, isn't it, if you had done a search when you were producing your report?

A. I did look at RightMove.

Q. Yes, and there is nothing in this data, is there, that supports a figure of £900 per sq ft for the Angel House development as at March 2013?

A. But I haven't, in my evidence, said that the value of Angel House was £900 in March 2013.

Q. You started, as I understand it, with a figure of £900 per sq ft as at March 2013. Is that not right?

A. Sorry, that's correct.

Q. Yes.

A. I started at £900 and then looked forward to what an agent would sell in the future.

Q. Yes, and you said, when we were asking you about the £900 figure, that you had supported that by looking at comparables on RightMove and Zoopla, and the question I am just putting to you is that if one looks at actual RightMove data as at March 2013, it doesn't, in fact, support a figure of £900 per sq ft; do you agree or do you disagree with that?

A. I think my evidence, my Lord, was that I looked at two sources of data. I looked at RightMove and I also reviewed the Savills report, which was December 2012 which also had in it a large number of comparables. I looked at the comparables, found one or two of them, I think, were incorrect or badly quoted, and the combination of those was what I arrived at the £900."

664. I do not think this was a satisfactory explanation. In my view there was no objective support in any comparables, whether derived from the Savills Report or RightMove, for Mr. Wolfenden's base figure of £900 psf as at March 2013. Even allowing for some up-lift in value on account of the rising market in late 2012 and early 2013, I cannot see any verifiable basis upon which Mr. Wolfenden based his uplift, other than his subjective "feel".
665. Nor did the position get any clearer or better for Mr. Wolfenden when he was asked about how he had arrived at his increased figure of £975 psf for November 2013. As has been seen, paragraph 6 of Mr. Wolfenden's original written report explained this uplift from £900 psf in March 2013 on the basis that it was the sum of the uplifts both for increase in capital values (5%) and the "McBains Cooper Plus" factors (3%). In the revised report it was put forward on the basis that it represented an 8% uplift in capital values for the same period. In cross-examination, Mr. Wolfenden then gave a third explanation,

"Q. Mr Wolfenden, just moving on from your £900 psf base figure you used in your report, as we have seen, you applied what is now an 8% uplift to that for capital growth. To be clear, what period of time does that 8% increase in capital growth relate to?

A. It would cover the period from some time in March up until late November, early December.

Q. How did you calculate the 8% figure? In other words, why 8% and not 7% or 9%?

A. I will have looked at data from Nationwide, Halifax, whatever, and then I also, as I have explained, did research in terms of the sales that had taken place at or around the time, which I have given you copies of.

Q. Right, so what methodology did you undertake, how did you produce an 8% figure? What calculation did you do? Can you help me with that?

A. The 975 was originally supported by the -- my views of discussions with the agents, my views of looking at actual sale prices. That came to 975, supported 975. Then I looked at the percentage change from 900 to 975, which was 8%, and then I will have looked at data that existed from Nationwide and others to see what their records were in terms of price change over a period of time."

666. Mr. Wolfenden was then asked about the manuscript notes which he had produced which he contended showed his research and supported his figure of £975 psf for November 2013. Those notes showed that he had arrived at an average price psf for sales of eight flats in the Baltimore Tower property of £964 psf which he had then increased to £975 psf for Angel House because he said he thought it was a better prospect. He was asked to explain this,

"Q. ….. That £964 is an average of which of these eight properties?

…

A. It is adding them and dividing by eight.

Q. Well, it is not, you see. Because I've done the arithmetic. If you take all eight, the value is £923. If you take out the first and the last, that is to say the first two on the list, it is £910. It is only if you take off the first one and leave in all the other seven that you can get to your figure of £964. So why did you omit the first one and include the last one?

A. Sorry, what are you describing is the first and the last?

Q. The first in time. So why is it that you removed the December 2012 one and left in the July 2014? What you did is you took the last seven on that list and you added the square footages, price per square foot, together, and divided by seven, and that got you a figure of £963 and a few pence. What was the reason for that?

A. I don't recall.

Q. Right. If we look at this, we see that the period covers, on that average, from two in September 2013 … one in November 2013, … one in December, … and three in March, June and July of 2014 … This is covering the period, therefore, between September 2013 and July 2014. Correct?

A. Yes.

Q. Can you explain how a figure of £964 for a period ending in July 2014, where the big numbers are at the end, in March and July 2014, can justify you in taking a comparable of £975 as at November 2013?

A. It was a conclusion I reached.

Q. But on what basis, Mr Wolfenden?

A. On the basis of discussions with the three different agents that I spoke to. They were between £875 and £925.

Q. Yes.

A. I got -- from what they were saying, I felt they were light.

Q. You felt they were light? On what grounds did you feel they were light?

A. That there wasn't a lot of substance in support of what they were saying, and I can only say, my Lord, that one is trying to bring an element of science to the process that just doesn't exist."

667. I regret that I think this was another example of Mr. Wolfenden seeking to reverse-engineer a result rather than working on the basis of objective materials. On Mr. Wolfenden's own evidence, his conversations with agents did not justify reaching a conclusion that average sales values for flats in the Baltimore Tower for November 2013 were any more than £875 - £925 psf. I can also see no logical justification, and Mr. Wolfenden did not offer one, for taking the view that those figures were "light". Although valuation is not an absolute science, I certainly do not accept Mr. Wolfenden's suggestion that it is an entirely subjective exercise devoid of any science. Nor do I accept that he provided any logical reason for excluding from his averaging computation a relevant sales figure from before November 2013 whilst including sales figures from 2014.
668. Finally, I also do not accept Mr. Wolfenden's explanation for selecting a factor of 8% to apply to his figure of £975 psf for November 2013 to reflect the improvement in outcome that he envisaged that a developer would expect to get from a "McBains Cooper plus" scheme. When asked to explain the basis for this 8% increase, Mr. Wolfenden said,

"A. …. as I have tried to explain, that £1,055 was made up of a base figure of £975 per sq ft and a premium of 8% for the various additional upsides that I believe the purchaser would factor into their bid.

Q. Let's test that. First of all, just tell us, and we will look at your document in a moment, what are the various upsides that you factored into the £975 in order to reach the figure of £1,055?

A. There were three main elements that, in my opinion, would benefit the site. The first was removal of the hotel component and making it residential; the second was a taller building, and I know that there had been discussions about a further eight floors to the tower; and the third element was the quantum of affordable housing."

669. There were factual difficulties with each of the three elements in this answer. For example, Mr. Wolfenden could not point to any factors which would have been apparent to a valuer in late 2013 to suggest that the Council would have agreed, without proof that the scheme was uneconomic or extracting a costly quid pro quo, to reduce the required proportion of affordable housing for the Angel House development below 35%. Indeed, everywhere else in his report Mr. Wolfenden had expressly assumed a minimum requirement of 35% affordable housing would apply. Likewise Mr. Wolfenden had also not attempted to evaluate how adding an additional eight floors to the building would also increase the construction costs, which represent the most significant deduction from the GDV in the computation of residual land value. Ms. Seal's report, for example, put the costs of building a 55 storey tower at over £101 million, compared with Mr. Wolfenden's estimated costs of £87 million for a 47 storey tower.
670. The overarching problem, as I see it, was that Mr. Wolfenden had simply not attempted to follow through and assess in any objectively justifiable way the impact of any of these additional features of his "McBains Cooper plus" scheme. This became apparent from the following exchange,

"A. … The other valuers then extrapolate out bigger buildings and larger buildings and variations to the McBains Cooper scheme. I did not do that. So in order to reflect the McBains Cooper scheme plus, I applied in November 2013 an 8% increase on the £975. I could have applied more square footage, I could have reduced the affordable housing content, I could have converted the hotel to residential. I took the decision not to do that.

MR FENWICK: Right. Having taken out paragraph 29 as it then stood, where, in your amended schedule 20, do you explain how you get from £975 to £1,055? Or don't you? Because I can't see it.

A. I don't, my Lord. I applied, I guess, valuer's judgment, professional judgment. I didn't know whether it was going to be 5% better or 10% better. It could have been 15% better. As it happens, it is probably 14% better. I didn't know, so I applied 8%, which seemed correct at the time."

671. Given the obvious complexity of the schemes and the fact that alteration of one of the parameters of the development would inevitably have an effect upon the others and hence the outcome, I think this was an obvious failure. I do not accept that Mr. Wolfenden's resort to "valuer's judgment" provides any meaningful explanation for what he was doing. He accepted that he had no idea whether the appropriate uplift would be 5%, 10% or 15%, and he provided no justification for his choice of 8% other than the meaningless observation that it "seemed correct at the time". Specifically, Mr. Wolfenden did not explain why a 3% uplift for the factors he had identified in the "McBains Cooper plus" scheme presumably "seemed correct" at the time he wrote his original report, but that by the time he actually came to give evidence, it was an 8% uplift that "seemed correct" to account for precisely the same factors.
672. Mr Wolfenden's figure of £975 psf for the McBains Cooper scheme in November 2013 was also significantly out of line with other contemporaneous indications of the value likely to be achieved for the flats in Angel House. For example, the advice given by agents to Mr. Connaughton at the time was that the flats would sell for between £800 psf for the lower floors and £1,000 psf for the upper floors, and Capital & Oriental used values of between £825 psf and £950 psf in their appraisals.
673. A number of Mr. Wolfenden's other valuation inputs in his computation of the residual value of Angel House were also subject to sustained criticism by the defendants. I think much of that criticism was justified, but I do not think that it is necessary for me to go into the criticisms in any detail given the inaccuracies in the most important factor of the price for the residential flats.

Market comparables for sales of development properties

674. Instead, I would stand back and look at the evidence as to the prices obtained in comparable sales of development properties. The experts generally agreed that such comparables are a helpful cross-check, and their use in disputes over market value is commonplace: see e.g. Banque Bruxelles v. Eagle Star [1995] 2 All ER 769 at 789f-g,

"All the experts were agreed that where a property has just been sold, the sale price is potentially the most cogent evidence of the open market value of that property. Provided that the property was properly exposed to the market and competently marketed, the market price will demonstrate the market value. The experts were also agreed that the fact that the property has just been sold does not relieve the valuer of the need to consider comparables. The conclusion that the valuer draws from comparables will be part of the material upon which he bases his valuation. If the comparables suggest a value that differs significantly from the sale price agreed, the valuer has to consider all the evidence in order to decide why the discrepancy exists."

675. In this case, in his report, Mr. Wolfenden identified a number of comparable sales of development properties, which he stated equated to the following price psf of net developable area: (a) 30 Marsh Wall: £63 psf; (b) Thames Quay, Marsh Wall: £38 psf; (c) Meridian Gate, Marsh Wall: £50 psf; (d) Baltimore Wharf: £40 psf; and (e) The Helix, Apsen Way: £55 psf. For comparison, Mr. Forgham's value of Angel House equated to £55 psf: the actual sale price and Ms. Seal's value was £58 psf. Mr. Wolfenden's without planning value equated to about £112 psf.
676. Mr. Wolfenden was asked how he could explain the fact that on this basis his value was about twice that of the relevant comparables,

"Q. So how do you justify the difference between your figure per square foot and that of everybody else, including Mr Forgham and Ms Seal?

A. That is for them to explain how they got to their values. I believe that the value is broadly within the ranges that I have put into my report.

MR JUSTICE SNOWDEN: Hang on. Sorry, as I understand it, your report gives a list of known comparables at a level which is significantly less than the values which you attributed. … You were obviously aware that that had occurred. Did you go back and at least explain to yourself why there was the difference? What is the reason for the difference?

A. If one goes back to Meridian Gate, there were questions about tenure, you were buying into a share structure, and it wasn't as simple and straightforward as it was. In other examples you had sitting tenants, … you had leases which were within the 1954 Act and therefore you were going to have to negotiate with tenants, or wait until the leases expired. So you had extended holding periods whilst you negotiated with the planners -- with the tenants; and then, of course, you would have the risk that you might have to go to court and the court could grant a new lease, in which case, … there is a further risk for you.

What Angel House delivered was … a rectangular site; buildings directly in front of it were held on a whole mixture of long leases, so you had certainty of views for a considerable amount of time; you didn't have to deal with any tenants; you had a clean freehold title. So a lot of the complications that existed on other sites did not exist on Angel.

Q. That is why you thought it was appropriate to value [Angel House] at twice the average from comparable transactions, is it?

A. Yes. I mean, I produced a model and the model came out with the answer. Yes, I did as all valuers should do at the end of the day, you look at the value, you step back, you look at where it is, you look at the market, and you ask yourself, do I believe and think this is a fair and reasonable value, my Lord, and I came to the conclusion that it was."

677. Ms. Seal commented on the reasons that Angel House had sold for slightly more psf than Meridian Gate (£58 psf rather than £50 psf) in her supplemental report,

"The two properties are adjacent, were sold within a few months of each other, had potential for tower developments and neither had planning permission. The only material difference between them was that Meridian Gate had a more complex title, being a collection of land parcels owned by a consortium of landowners rather than holding a single title. However, the selling agent, who I have spoken to when preparing this Supplemental Report, stated that, in their opinion, this had no material effect on the price achieved. Whilst slightly more time consuming in the execution, purchasers of complex developments such as these, who are prepared to take on the risks of navigating the planning process, the risks of market fluctuations over a protracted development, and the construction risks of building a skyscraper, are not going to be scared off or confused by needing to acquire an asset under a collection of title numbers."

678. Ms. Seal was not challenged on that evidence, which I find entirely persuasive. It plainly suggests that the true market value psf of net developable area of Angel House was not more than twice that of Meridian Gate. In my judgment, Mr. Wolfenden's valuation of Angel House was materially out of line with the comparables, and he provided no coherent explanation for that discrepancy.

Conclusion as to the market value of Angel House in December 2013

679. In the end, I have reached a very clear conclusion that Mr. Wolfenden's evidence as to the open market value of Angel House was, in important respects, not supported by sufficient objective evidence and reasoning, and I cannot place any weight upon it. In contrast, I found the evidence of Mr. Forgham and in particular Ms. Seal, well-reasoned and persuasive. That evidence shows that the open market value of Angel House was no more than the price for which it was sold. In short, in my judgment Ms. Davey has failed to demonstrate that AHDL suffered any loss arising from the sale.

Compensation for loss of a funded rescue?

680. I therefore turn to the alternative way in which Ms. Davey puts this issue. As pleaded, this is an allegation that by reason of their alleged breaches of duty, the Administrators caused AHDL to lose the benefit of a funded rescue which would otherwise have been achieved on the terms agreed between Ms. Davey and Mr. Eastwood on 27 November 2013. This is alleged to have resulted in a loss to the Company of the "developer's profit in the sum of £45 million".
681. The derivation of that figure was to be found in Mr. Wolfenden's report. At section 12 of his report, Mr. Wolfenden said,

"Using the formula actually agreed with Mr Eastwood on the basis that Ms Davey transferred 50% of her shares in the Company to Mr Eastwood/his vehicle, I estimate that the developer's profit in a Funded Rescue would have been £90.0 m, of which Ms Davey's 50% share would have been in a region of £45.0m."

682. It seems to me that the relevant claim under paragraph 75 of Schedule B1 must be the claim by AHDL to which the relevant duties were owed by the Administrators, and not a personal claim by Ms. Davey as a 50% shareholder. Quite apart from the limited terms of paragraph 75 itself, any claim by Ms. Davey as a 50% shareholder in AHDL is plainly barred by the reflective loss principle explained by Lord Millett in Johnson v Gore-Wood [2002] 2 AC 1 and by the Court of Appeal in Gardner v Parker [2004] 2 BCLC 554. As such, it must be recognised that the only legally appropriate claim is that the Administrators' alleged breaches of duty to AHDL caused AHDL to lose a profit of £90 million which it would have obtained by developing and then selling Angel House.
683. Mr. Wolfenden's report indicated that he computed this loss essentially by increasing the sale price psf for the residential units of his envisaged "McBains Cooper plus" scheme from £1,055 in November 2013 by 42% to a figure of £1,500 after a 4-5 year development period. He explained this on the basis of forecast capital growth and the added benefit of the expected launch of Crossrail in 2018. That gave him a gross development value of some £243 million. Over the same period Mr. Wolfenden increased the construction costs from about £88 million to £99 million, and concluded that the total costs that would be incurred by a developer would be £151 million, giving a developer's profit of about £90 million.
684. I do not think that this is a remotely realistic basis for quantifying compensation. On the facts, I have already indicated that I do not think that there was any reasonable prospect of a funded rescue being delivered by Ms. Davey in a timely fashion in November or December 2013, and that the Administrators were entirely justified in choosing to sell Angel House rather than continue their efforts to facilitate the funded rescue. That was not least because the extent of the due diligence that had been done by Ms. Davey's preferred funder - Mr. Eastwood - as well as his commitment to the proposal remained unclear until the end and the source of his access to the necessary funding was shrouded in mystery.
685. As a matter of quantification, I have also rejected Mr. Wolfenden's valuation of Angel House as at November 2013, and in particular I have rejected his central figure of £1,055 psf for the sales value of the residential flats at Angel House. Since this figure formed the basis for Mr. Wolfenden's further estimate of Angel House's valuation in 4-5 years' time, I must also reject that estimate for the same reasons.
686. However, the whole exercise which Mr. Wolfenden performed is, I consider, open to very substantial objection. The first objection, voiced by the other experts, is that using a residual valuation methodology as a basis for projecting over such a long future period becomes very speculative, and the outcome of the process is very sensitive to the inputs chosen and the time-frames used. So, for example, as well as making the broad assumption that there would be a very significant (42%) increase in the sale value of the residential flats, Mr. Wolfenden also assumed that all of the residential flats would be sold at the end of the development. He acknowledged in his report that the reality would be that a significant number would be pre-sold off plan at an earlier date (when sales values would be lower) but he was forced to accept in cross-examination that he had not allowed for holding costs associated with those that were not pre-sold and could only be sold after completion.
687. In addition, for AHDL to be able to obtain the developer's profit, it would have to raise a sum well in excess of £100 million to obtain planning permission and carry out the construction of the development. There was little or no explanation of how the finance costs of such an exercise had been computed. Moreover, the developer's profit on cost projected by Mr. Wolfenden in his computation appeared, for reasons that were not explained, to be over 60%, compared with the more normal 20% for his appraisal in November 2013 and the 20% which was identified in the body of his report.
688. Such difficulties mean, in my view, that I cannot accept that even if the claims for breach of duty had been made out, there would have been any realistic or sustainable basis for the claim by AHDL for £90 million for loss of developer's profit.

F. THE CLAIMS AGAINST DUNBAR

689. As indicated at the start of this judgment, the pleaded claims against Dunbar were essentially put on three legal bases: (i) that Dunbar sufficiently directed or interfered with the conduct of the administration by the Administrators that the statutory agency between the Administrators and the Company was displaced and Dunbar became liable for the breaches of duty by the Administrators; (ii) that Dunbar procured the breaches of duty by the Administrators so as to make it liable as a joint tortfeasor with the Administrators; and (iii) that Dunbar and APAM conspired together to cause loss to AHDL or Ms. Davey by unlawful means (the unlawful means being causing the breaches of duty by the Administrators). These issues are essentially reflected in Issues 8, 9 and 10.
690. The central motivation for the alleged wrongdoing of Dunbar was an allegation that Mr. Connolly and Mr. Stenson wished to ensure that the property was sold at a sufficiently reduced value so that Ms. Davey would remain liable on her personal Guarantee. It is said that they did so in order to benefit from an internal short-term incentive scheme at Dunbar that rewarded employees for recoveries made under personal guarantees.
691. The means by which this purpose was allegedly carried into effect was that Mr. Connolly and Mr. Stenson secretly arranged with APAM that Angel House should be sold to Dunbar's "Preferred Bidder" (LBS/Cubitt) following a limited sales process, rather than being fully exposed to the market. APAM's reward for participating in this scheme was allegedly the expectation of more work from Dunbar, the grant of a contract by LBS/Cubitt to manage Angel House after its purchase, together with other, unspecified, benefits.
692. Among other alleged aspects of this scheme, as I have indicated, it was pleaded that the term under which APAM might be entitled to a Value Enhancement Incentive Fee was a sham that was designed by Dunbar and APAM to create the false impression that APAM was actually motivated to benefit AHDL rather than just see Dunbar repaid in part; that Dunbar's representation to the Administrators in July 2013 that it was prepared to fund the development and pursuit of a revised planning application in place of the lapsed 2012 application was also false; and that the sales process and APAM's advice in relation to it was designed to result in a sale of Angel House to LBS/Cubitt notwithstanding the potential for higher bids or a funded rescue.
693. All such allegations were strenuously rejected by Dunbar.
694. Since I have found that the Administrators did not breach their duties to AHDL in any material respects and that Angel House was not sold at an undervalue, the claims against Dunbar must necessarily fail. Breach of duty by the Administrators and loss suffered by AHDL were an essential element of all three claims.
695. However, since the claims were fully argued, and because all of them were based upon serious allegations of deliberate wrongdoing by Mr. Connolly and Mr. Stenson (both of whom gave evidence), I think that it is appropriate that I should, as briefly as is possible, express my views on them.

Issue 8: Is Dunbar liable for any breaches of duty on the part of the Administrators by reason of its interference in the conduct of the Administration?

696. In relation to Issue 8, Mr Davies contended that it is well-established law that a mortgagee who interferes with the conduct of a sale by a receiver who he has appointed (who will invariably have been deemed in the mortgage to be the agent of the mortgagor company) can be liable if the property is negligently sold at an undervalue. Mr. Davies suggested that there was no reason to distinguish the position of a receiver and mortgagee from the position of an administrator and secured creditor holding a qualifying floating charge who had appointed the administrator.
697. In support of that contention he relied upon the dictum of Lord Denning MR in Standard Chartered Bank v Walker [1982] 1 WLR 1410 at 1415-1416,

"So far as the receiver is concerned, the law is well stated by Rigby L.J. in Gaskell v. Gosling [1896] 1 QB 669, a dissenting judgment which was approved by the House of Lords [1897] AC 575. The receiver is the agent of the company, not of the debenture holder, the bank. He owes a duty to use reasonable care to obtain the best possible price which the circumstances of the case permit. He owes this duty not only to the company, of which he is the agent, to clear off as much of its indebtedness to the bank as possible, but he also owes a duty to the guarantor, because the guarantor is liable only to the same extent as the company. The more the overdraft is reduced, the better for the guarantor. It may be that the receiver can choose the time of sale within a considerable margin, but he should, I think, exercise a reasonable degree of care about it. The debenture holder, the bank, is not responsible for what the receiver does except in so far as it gives him directions or interferes with his conduct of the realisation. If it does so, then it too is under a duty to use reasonable care towards the company and the guarantor."

698. In Gaskell v. Gosling, Rigby LJ traced the history of the common provision in mortgages and highlighted how, faced with the "almost penal liabilities imposed on a mortgagee in possession", the Courts of Equity had "favoured any means by which to allow mortgagees to obtain the advantages of possession without its drawbacks." Rigby LJ indicated that this had first included recognising contractual provisions that the mortgagor should appoint a receiver to manage the property and receive the income for the benefit of the mortgagee. These were followed by clauses under which mortgagees stipulated that they should have the power to appoint the receiver, and that he should be deemed to act as agent for the mortgagor. Rigby LJ explained,

"By degrees the forms of appointment of receivers became more complicated, and their powers of management more extensive; but the doctrine explained by Lord Cranworth in [Jeffreys v Dickson LR 1 Ch 183 at p.190] was consistently adhered to, and it remained true throughout that the receiver's appointment, and all directions and powers given and conferred upon him, were supposed to emanate from the mortgagor, and the mortgagee, though he might be the actual appointor, and might have stipulated for all the powers conferred upon the receiver, was in no other position, so far as responsibility was concerned, than if he had been altogether a stranger to the appointment."

Rigby LJ concluded, at page 697, that,

"a receiver and manager appointed by a mortgagee under an agreement that he shall be the agent of the mortgagor is in the same position as if appointed by the mortgagor himself, and as if every direction given to him emanated from the mortgagor himself"

699. Given these origins of what was essentially a convenient legal fiction to protect mortgagees, I think that it is no great surprise to find that in appropriate cases, the courts were willing to look beyond the contractual provisions to the reality of the situation. The contractual deeming provisions were based upon an assumption that the receiver should be free to exercise his powers as if he were directed to do so by the company, but as Lord Denning MR acknowledged in SCB v Walker, the contractual provisions could be displaced if, contrary to that assumption, the mortgagee in fact sought to exercise control by giving directions to the receiver or by some other personal interference with the conduct of the receivership.
700. The position was thus summarised by Mann J in American Express v Hurley [1985] 3 All ER 564 at 571 in a passage that was later affirmed and applied by the Court of Appeal in Morgan v Lloyds Bank plc [1998] Lloyds Rep Bank 73 at 82,

"Specifically in relation to the exercise of the power of sale once a receiver has been appointed the mortgagee's duties and potential liabilities are well settled. They were succinctly stated by Mann J in American Express International Banking Corporation v Hurley [ 1985] 3 All ER 564 at 571.

"I propose to proceed on the basis that the following propositions represent the law.

(i) The mortgagee when selling mortgaged property is under a duty to a guarantor of the mortgagor's debt to take reasonable care in all the circumstances of the case to obtain the true market value of that property.

(ii) A receiver is under a like duty.

(iii) The mortgagee is not responsible for what a receiver does whilst he is the mortgagor's agent unless the mortgagee directs or interferes with the receiver's activities.

(iv) The mortgagee is responsible for what a receiver does whilst he is the mortgagee's agent and acting as such."

That passage was not challenged before the Court of Appeal in National Bank of Greece SA v Pinios Shipping Co [1991] AC 637 where it was cited with apparent approval by Lloyd LJ at 647. It follows from this well-established state of the law that if a bank mortgagee, after appointing a receiver in exercise of its mortgagee powers, interferes in the receiver's conduct of the sale of the mortgaged property by insisting against the receiver's expressed wish on the employment of an inadequately experienced agent who thereafter conducts the sale negligently so that a sum below the open market is obtained, the Bank would be liable to the mortgagor in respect of that loss."

701. Mr. Smith accepted that the statements in the cases referred to above represented the law as applicable to mortgagees and receivers, but he contended that they had nothing to do with administrators and secured creditors. He submitted that the cases on mortgagees and receivers turned on the fact that the receiver was only deemed to be the agent of the company by the contractual provisions of the mortgage as between the company and the mortgagee. Mr. Smith submitted that the position was very different in relation to an administrator, whose agency derived from statute. He suggested that there was no indication in the Insolvency Act 1986 that the agency of the administrator could be displaced in the same way as the contractual agency of a receiver. He said that the provisions of paragraph 75 of Schedule B1 of the 1986 Act in relation to misfeasance claims against the administrator, together with the ordinary law governing accessory liability provided a complete code in relation to the potential liability of any third party who interfered with the conduct of an administration.
702. Mr. Smith's argument is ingenious, but I do not think it is right, at least in relation to sales of property subject to a fixed security by administrators.
703. In relation to administrators, it is true that paragraph 69 of Schedule B1 provides that,

"In exercising his functions under this Schedule the administrator of a company acts as its agent."

However, as that wording makes clear, the statute only deems the administrator to be the agent of the company if and in so far as an administrator is "exercising his functions under [Schedule B1]".

704. The functions of an administrator, and in particular his powers and duties, are set out in paragraphs 59 et seq of Schedule B1. In contrast to his powers in relation to property subject to a floating charge (paragraph 70), Schedule B1 gives no power to an administrator to dispose of or take action in relation to property which is subject to a fixed charge. The administrator can only do so with consent of the holder of the fixed charge or if he obtains a court order under paragraph 71 of Schedule B1, which contains its own provisions for ensuring that a proper price is obtained and that the interests of the chargeholder are protected. That structure accords with the fact that the appointment of an administrator does not prevent the holder of a fixed charge from seeking to appoint a receiver to deal with the charged assets independently of the administrator, albeit that such power is restricted by paragraph 43 of Schedule B1, and can only be exercised with the consent of the administrator or the leave of the court.
705. Accordingly, if an administrator seeks to arrange or complete a sale of property subject to a fixed charge, I do not think that there is any deemed agency in favour of the company that would prevent the court from finding, on appropriate facts, that in relation to such a sale the administrator was acting as agent of the secured creditor, so that the secured creditor could be held liable for any breach of duty to the company or others interested in the equity of redemption. In that regard, I accept Mr. Davies' submission that it is difficult to see any, or any convincing, policy reason why there should be any difference between the position that applies if the sale of the property were to be conducted by a receiver or an administrator. Whether Mr. Smith's submission that the statutory agency is not capable of being displaced in respect of other steps taken in the administration, or in relation to sales of property governed only by a floating charge, are not matters upon which I need to express any view in the instant case.
706. The question then arises, what level of involvement by the secured creditor is required in order to justify a finding that an agency relationship has been created between the administrator and the secured creditor or otherwise to justify the imposition of liability on the secured creditor? The formulation in the receivership cases, that the mortgagee might be liable if he "directed or interfered" in the conduct of the receivership, seems to be the appropriate standard. However, this must require something going beyond the legitimate involvement that a secured creditor could expect to have in the administration process by reason of his legal status and rights. The formulation seems to indicate that the administrator should either have been compliant with directions given by the secured creditor, or to have been unable to prevent some interference with his intended conduct of the administration.
707. So, for example, I do not think that an agency relationship would be established merely because the secured creditor gave its consent to a sale of charged property which had been organised by the administrator. Nor would that be the case simply because an administrator had consulted the secured creditor and taken account of its wishes, even on a regular basis. Nor would such a relationship be established merely because the secured creditor took a commercial decision in the exercise of its own rights which necessarily constrained the administrator's freedom of action. But if, in contrast, the secured creditor gave directions which the administrator unquestioningly followed, or if (to adapt the example in Morgan v Lloyds Bank plc) the secured creditor misled the administrators or exerted sufficient pressure on them so as to defeat their free will, then I see no reason why the courts should not be able to hold the secured creditor liable if the property in question was sold negligently for a price that diminished or eliminated the value of the company's equity of redemption.
708. Analysed in this way, it is apparent that to a very large extent, the question in the instant case is the converse of the issue of whether the Administrators exercised independent judgment in the conduct of the administration. I have already considered this question under Issue 5, and I have found that the Administrators did maintain an independent approach to the administration and were not simply beholden to Dunbar. I have also found that the complaint in respect of Dunbar's decision to cease funding the 2012 planning application was unfounded, because that was a decision that Dunbar was entitled to take in its own interest. I think that these findings are sufficient to dispose of the issue of whether Dunbar could be liable for directing the Administrators in their conduct of the administration.
709. That conclusion does not, however, dispose of Ms. Davey's case that Dunbar covertly interfered with the conduct of the Administration. Such interference is alleged to have involved the Administrators being misled into believing that they were receiving appropriate advice and services from APAM, when in reality they were being "duped" (to use Ms. Davey's word) as a result of a conspiracy between Dunbar and APAM. I shall consider the factual basis for those allegations under Issue 10 below.

Issue 9: Is Dunbar liable for procuring breaches of duty by the Administrators?

710. This Issue is one of accessory liability. The gist of Ms. Davey's case is that Dunbar caused the Administrators to pursue a particular course of action, knowing or being recklessly indifferent as to whether that course of action would injure the interests of AHDL and Ms. Davey, to which she alleged that the Administrators owed their duties. Mr. Davies contended that the tort applied to breaches by the Administrators of their "statutory, equitable and fiduciary duties". The relevant duties that Mr. Davies contended were breached were the statutory duties of the Administrators to perform their functions with a view to achieving Objective 1 or Objective 2 under paragraphs 3(1)(a) or (b) of Schedule B1; and the duty recognised by Millett J in Re Charnley Davies (No.2) to take reasonable care to obtain the best price for Angel House that circumstances permitted.
711. As a preliminary point, it is clear that any duties of the Administrators to which such a tort might relate were not owed by the Administrators to Ms. Davey, but were owed to AHDL alone.
712. I also accept Mr. Smith's argument that Dunbar could not, as a matter of law, be liable in tort for causing the Administrators to breach their fiduciary duties to AHDL, because the law does not recognise such a tort: see Metall und Rohstoff AG v DLJ Inc. [1990] 1 QB 391 and First Subsea Limited v Balltec Limited [2014] EWHC 866 (Ch) at [349] - [353]. The closest equivalent liability in equity would only arise if it could be shown that the third party had dishonestly assisted a breach of fiduciary duty by the Administrators (which was not alleged).
713. Mr. Smith did not seriously dispute that a third party could be liable in tort for procuring a breach of statutory duty or breach of a duty of care by administrators, but he contended that by parity of reasoning with the tort of inducing a breach of contract set out by Lord Hoffmann in OBG v Allan [2008] 1 AC 1 at [39] - [43], this would require both knowledge on the part of the defendant that he was inducing a breach of duty, and an intention to procure that breach. In OBG, Lord Hoffmann explained that knowledge would include a conscious decision not to inquire; and that intention required that the defendant must have aimed at bringing about the breach, rather than this being merely a foreseeable consequence of his actions.
714. Mr. Davies relied upon the decision of Burton J in Alpstream v PK Airfinance [2013] EWHC 2370 (Comm) concerning a claim against a defendant for inducing a breach of duty by a mortgagee who had sold property at an undervalue. Burton J held at [102] that what was required was that the defendant knew, or was reckless as to whether (i) the mortgagee was in breach of a duty, (ii) owed to the company, and (iii) that such breach was procured by the defendant. Although Burton J indicated that he had considered Lord Hoffmann's speech in OBG, I respectfully think that his brief formulation might be misunderstood as excluding Lord Hoffmann's requirement that the defendant should have aimed at bringing about the breach rather than this just being a foreseeable consequence of his actions.
715. On the facts of the instant case, this tort could only be made out against Dunbar if a person whose relevant knowledge and intention was attributable to Dunbar could be shown to have had the required knowledge and intention. The only two candidates alleged to have had such knowledge and intention were Mr. Connolly and Mr. Stenson.
716. Mr. Stenson clearly understood that the Administrators had a duty (as he put it in cross-examination) "to do the best for the creditors and rescue, if possible, an operational business", and I have no doubt that given his experience and position within Dunbar, Mr. Connolly was equally well informed.
717. Given my findings that the Administrators did not breach their duty to exercise independent judgment, such a claim could only succeed if it could be shown that Mr. Stenson and Mr. Connolly intentionally caused the Administrators to act in breach of their duties by conspiring with APAM so as to procure that the Administrators were given defective advice upon which they unwittingly relied in relation to the sale process. The issue therefore boils down to the same factual allegations that underpin the allegation of an unlawful means conspiracy between Dunbar and APAM. For reasons that I shall explain, it is also relevant to consider whether the alleged intention of Mr. Connolly and Mr. Stenson could in any event be attributed to Dunbar. I shall address those questions under Issue 10 below.

Issue 10: Is Dunbar liable for conspiring with APAM to injure AHDL or Ms. Davey by unlawful means?

718. An unlawful means conspiracy is committed where the claimant proves that he has suffered loss or damage as a result of unlawful action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him by unlawful means, whether or not it is the predominant purpose of the defendant to do so: Meretz Investments Ltd v ACP Ltd [2008] Ch 244 CA at [86] citing Kuwait Oil Tanker Co. v Al Bader (No.3) [2000] 1 All ER (Comm) 271, at 311-312. It is not necessary for the injured party to prove that causing him damage was the main purpose of the combination but that purpose must be part of the combiners' intentions: W.H.Newson Holding v IMI [2014] 1 All ER 1132 at [32].
719. I have already set out several times the essence of the pleaded case concerning the alleged conspiracy between Dunbar and APAM. In spite of the challenge made by Mr. Smith at the start of the trial, it plainly remained the central feature of Ms. Davey's case against Dunbar to the end. Echoing the point that I have made above about the factual relationship between Issues 8, 9 and 10, in his written closing submissions, Mr. Davies submitted that,

"The combination with APAM was essential in this case. Dunbar could not gain control over the Administrators without the assistance of an agent which answered primarily to Dunbar."

720. Mr. Davies' closing submissions then referred to the evidence upon which he relied to establish such a conspiracy, and concluded with a summary of Ms. Davey's case on conspiracy as follows,

"In this way, it is alleged that Dunbar and APAM acted in furtherance of a common design, namely, that the administration should be controlled by Dunbar via APAM to ensure that it was ultimately Dunbar and not the Administrators which decided when, how and in what circumstances Angel House should be realised as part of Dunbar's co-ordinated strategy also to recover in full under the Guarantee. Dunbar needed APAM to keep up the false appearance that the Administrators had their own agents from whom they were taking appropriate independent advice. APAM needed Dunbar because it was with Dunbar that they had the on-going business relationship and from which APAM hoped for more lucrative assignments. Together, they were able to interfere with the administration and to combine to achieve a sale of Angel House at a level which left an outstanding liability of the Company and Ms. Davey as guarantor."

721. Although a generic reference was frequently made in the pleadings and submissions to "Dunbar", it is clear that the alleged conspirators were Mr. Stenson and Mr. Connolly on the one hand and Mr. Powell on the other. Apart from the fact that they were the individuals centrally involved in the case at Dunbar, Mr. Stenson and Mr. Connolly were the only persons in regular contact with APAM and who were identified as having been personally motivated by Dunbar's in-house incentives to suppress the sale price for Angel House.
722. But the simple fact is that it was never put to Mr. Stenson or Mr. Connolly in cross-examination that they ever entered into any form of conspiracy with Mr. Powell of any description, still less one that related to a plan to suppress the sale price of Angel House. There was, moreover, no evidence or even suggestion of when or how such an arrangement might have been entered into. Nor was it put to either witness that their motivation for such a conspiracy was that they stood to make a personal gain as a result of the incentive scheme in operation at Dunbar if they could artificially suppress the sale price of Angel House so as to ensure that Ms. Davey remained liable on her personal Guarantee.
723. There were many questions put in cross-examination to Mr. Stenson and Mr. Connolly concerning the effect of the sale of Angel House on their year-end targets, and it was suggested to them that Dunbar wished to obtain a high level of control over the administration and to that end procured the appointment by the Administrators of APAM (as well as its panel solicitors DLA and Pinsent Masons), but none of those questions came remotely close to putting the allegation of a deliberate conspiracy involving the creation of false documents and the covert pursuit of a hidden agenda in accordance with Ms. Davey's pleaded case.
724. Of itself, these omissions would make it very difficult, if not impossible, to find that any conspiracy existed. But the truth is that there are many obvious features of the evidence that demonstrate that the essential elements of the alleged conspiracy simply do not stand scrutiny.

Dunbar's incentive arrangements

725. As set out above, Ms. Davey's pleaded case was that Dunbar's internal incentive programme applicable to Mr. Stenson and Mr. Connolly included bonuses for achieving personal targets for assets realisations and recoveries under personal guarantees. The original suggestion, implicit in the very loaded definition in the pleading of "the PG Incentive", was that it was the latter element of the programme that motivated Mr. Connolly and Mr. Stenson to suppress the sale value of Angel House. That was simply not the case.
726. The relevant incentive programme for Mr. Stenson and Mr. Connolly provided for a bonus calculated by reference to performance measured against personal targets that were set at the start of the year. Those targets included items such as "redemptions", "asset management", "restructuring and sale" and "provisions". There was no reward or encouragement given to employees to prioritise making recoveries under personal guarantees rather than by, say, the sale of assets.
727. By the time the matter came to be put to Mr. Stenson in cross-examination, the allegations had changed somewhat. The thrust of the first point put to Mr. Stenson and Mr. Connolly appeared to be that the existence of Ms. Davey's Guarantee meant that Dunbar could be more sanguine about selling Angel House for less than its market value because it would have the potential for recoveries from Ms. Davey's Guarantee to fall back on, and that it was Dunbar's pre-determined policy and intention to "go in hard" against Ms. Davey. The second broad point put was that a quick sale of Angel House enabled Mr. Stenson and Mr. Connolly to achieve their target for realisations before the year-end and hence to qualify for their incentive payments.
728. As regards the first of those points, Dunbar's approach to the sale price for Angel House given the existence of the Guarantee is illustrated by the following exchanges in cross-examination between Mr. Davies and Mr. Stenson,

"Q. From what we have seen within Dunbar's internal memoranda, there was never a time when Dunbar internally did not project to recover less than the full amount under the guarantee from Ms Davey.

A. This is because we did -- we never expected, until the sales process began, of actually being able to cover the facility, so yes.

Q. Yes. Dunbar, of course, wants to recover its debt in full, no more no less; yes?

A. Yes.

Q. So its target value for Angel House was calculated as a sum sufficient to repay its debt owed by the company, AHDL, after taking into account recovery under the guarantee of £1.6 million. I am ignoring professional fees for the moment.

A. But it would be easier to collect it under receipt of a sale, so a personal guarantee -- the enforcement of a personal guarantee is an arduous task, and if there was any way that was an easier task of recovering the facility owing, that would obviously be the path of less resistance. So the personal guarantee side of it is because at that time we did not believe that the receipts from a disposal would cover the facility owing.

….

Q. Of course, to state the blindingly obvious, but I think I need to say it for the transcript, the lower that target value is for Angel House, the easier it will be to sell it to meet the redemption targets. In other words, it is easier to sell Angel House at £15 million than it is at £16.5 million.

A. But then you would have to recover on the arduous task of a personal guarantee. So you sell for the open market value and the best value that you could garner in the market, so I don't accept that.

……

Q. What I am putting to you is that Dunbar's target value, Dunbar's target value for Angel House, always involved assuming that you were going to receive £1.6 million under the guarantee. That is what I am putting to you.

A. I don't accept that. The target value was the open market value achievable at that time.

Q. I am also putting to you that you are more likely to sell a property more quickly if you want, in my example, £15 million rather than 16.7 million for it.

A .… if you have competitive tension and a number of bidders bidding on a site, it will, by the laws of markets, find its way to open market value. So it would be harder to accept a lesser value than the open market value if you had more than one purchaser in a competitive tension."

729. As regards Dunbar's pursuit of Ms. Davey under her personal Guarantee is concerned, the evidence is fairly reflected by the following exchanges which took place with Mr. Connolly,

"Q. There was, within Dunbar, an understanding that you went in hard on guarantees. Do you agree that?

A. I am not sure who the understanding is by, but I wouldn't -- I mean, go in hard? I don't think I would use those words.

Q. What words would you use then? How would you describe Dunbar's attitude towards going after guarantors when the principal debtor is in default?

A. We would sit down -- we would look for -- we would, if we were forced to, call on the guarantee.

Q. Yes.

A. We would hope that the guarantor would come forward with a proposal, and if we could find a way forward, great, but if we couldn't, we would have to go to the next level, either judgment or straight to bankruptcy to recover the funds.

Q. So having called on the guarantee, you would pursue it unless somebody comes to you and offers payment. Is that what it boils down to?

A. Yeah, I think if the guarantee is demanded, there has to be an understanding by the debtor that they want this repaid, and we would hope that that would prompt a discussion around coming to an arrangement. But if that failed, we were left with no other avenue but to continue.

…..

Q. The point I am making is that during all of this period [from May 2013] you always intended to go in hard against Ms Davey in all the jurisdictions where your forensic private investigator was suggesting there were assets.

A. I think we were looking to what assets we could secure if we were successful in obtaining a judgment. But all the time, when all this was going on, there was time to still discuss matters with Ms Davey to try and find a sensible way forward.

…..

Q. Mr Connolly, it is a simple point. You intended, and you had a settled intention within Dunbar, the moment you got summary judgment, to go in as hard as possible in all of those four jurisdictions, including the UK. That is all I am putting to you.

A. I know, but I don't know this "hard". I mean, the time had passed to come forward. We didn't really know the value of assets in those jurisdictions, apart from what had been put on paper. We didn't know what we were going to be able to recover. We were owed £1.6 million, plus interest and costs. We were going to try and investigate what was there, so if we were successful we could try and attach that judgment to, and ultimately, if we had to enforce it, we would have to enforce it.

There is no going in hard. It is -- if there is no proposal being put forward, we would be see to recover our £1.6 million. That is the bottom line."

730. Later, in relation to the litigation objective in Mr. Stenson's personal assessment form, "To project manage actions against guarantors to ensure there is no delay in proceeding with an action", Mr. Connolly was asked,

Q. That is what happened in this case. You went against Ms Davey in England from February, you pursued her to judgment in July; that's correct, isn't it?

A. Yes, but if I can just add a bit of context around that point. If our committee made a decision to proceed with enforcement, Paul's objective would be to ensure that that is carried out. So if it is to get a Settlement Agreement signed up, it is to get a Settlement Agreement signed up, and he has got to get it done. And if there are no proposals and he has got to enforce, he has got to keep going until he gets a proposal in to come back to committee. I just think it needs a bit of context.

Q. You have said Dunbar were very keen to cut external costs, …. but if you take Ms Davey, you had already spent, by [1] November 2013, some £220,000 in enforcement costs against her under the guarantee?

A. Yes. At that point, my Lord, we had enforcement in four jurisdictions. A defence had been put forward in relation to our debt claim, which was dismissed. There were then applications made in all the jurisdictions, I think, everywhere except Switzerland, where they defended. Applications were put in place in Israel to revoke the applications that had been granted; they were dismissed. To just put it out that it was £200,000, I think the context is required around that to show that -- I mean, these should be straightforward procedural activity. It is straightforward to try and go ahead and domesticate your judgment. But we had to deal with numerous defences, which increased the legal costs considerably.

Q. The short point, Mr Connolly, is that you were hell bent on enforcing against [Ms. Davey] … and you were doing it rapidly and you were doing it simultaneously in all four jurisdictions.

A. Sorry, that is not correct. We were granted summary judgment on 24 July. There was a … five-month period whereby Ms Davey could have come forward with any proposal to settle that, but instead of that there was efforts made to frustrate the enforcement process which we were forced to go down …."

731. I accept the evidence of Mr. Stenson that recovering monies from individuals under personal guarantees is often far less efficient than maximising the value of sales of secured assets. I also accept his evidence that this means that it would have made no business sense whatever for Dunbar to have had a target price of anything less than open market value for the sale of Angel House. There was simply no sensible business reason why, at the start of the administration, anyone at Dunbar should have thought it desirable to concoct a plan with APAM to take steps to suppress the sale price of Angel House simply so as to retain the possibility of recovering from Ms. Davey on her Guarantee. Moreover, by the time of the move to a formal sale process in November 2013 it had become very clear that in spite of the intense and costly litigation against Ms. Davey, Dunbar had not made any recovery on her personal Guarantee and although Ms. Davey seemed to have assets in other jurisdictions, there was no prospect of any recovery in the short term. In those circumstances there was absolutely no sensible reason why Dunbar should have thought it in its interests to obtain any less for Angel House than its full market value.
732. Nor, moreover, was there in fact any basis in the evidence for the suggestion that a quick (and cheap) sale of Angel House would have provided any personal motive for Mr. Connolly and Mr. Stenson by reason of any desire on their part to meet their redemption targets.
733. The first point to make in that regard is that the timing simply does not work. At the start of 2013, by which time, according to Ms. Davey, the conspiracy with APAM must have been hatched so that the sham Value Enhancement Incentive Fee had been agreed, Angel House was not included in either Mr. Stenson or Mr. Connolly's redemption targets for 2013. At the start of the year, Angel House was included as an objective under the "asset management" heading for both men for 2013. I therefore simply do not understand why either man might have been motivated in early 2013 by the thought of meeting his targets for the year ahead to enter into a conspiracy with APAM in relation to the sale of Angel House.
734. The second point is that as matters progressed through 2013, a quick sale of Angel House was not in fact necessary for Mr. Connolly's targets for 2013 to be met. Mr. Connolly's year-end assessment mentioned Angel House primarily in terms of asset management, and the documentary evidence confirmed Mr. Connolly's oral evidence that his redemptions target of US$203 million had been achieved by October 2013, so he had no need to rely upon the sale of Angel House for that purpose. There was, moreover, no indication from the report that Mr. Connolly's line manager, Mr. Gilmartin, had placed any reliance upon the sale of Angel House in giving Mr. Connolly the highest grade assessment (5) for bonus purposes. These points were addressed by Mr. Connolly in his cross-examination,

"Q. First of all if you could just answer the question, I am asking you: did exchanging and completing on Angel House enable you to include that as a number in your Year End Assessment for your own personal performance?

A. It may have been mentioned by Kieran in my assessment, but I don't think it would have -- we had achieved our redemptions target, so I don't believe it would have had any impact in terms of whether it landed or not.

Q. The £17 million made no difference to your year-end performance assessment?

A. Well no, because we were -- I think I had achieved the target at this point. Kieran may have referenced it because he knew that there was a lot of work involved in Angel through the year, so he may have referenced it, I can't recall. But I don't think it would have made any difference, because we had delivered our redemptions target on the cases that were planned from the start of the year.

…..

Q. Are you telling his Lordship that on this Year End Assessment that you filled in on the left-hand side, where you had an objective for redemptions that you worked to surpass the redemptions target for 2013, and ensure direct reports achieve $110 million redemptions, and then we go through effectively your achievements for the year, and at the bottom you get "far exceeds expectations", and at the end you get the highest grade, don't you, 5, far exceeds expectations?

My question to you is: is your evidence to his Lordship that Angel House numbers, i.e. the exchange and completion of Angel House before the year end, was not taken into account for the purposes of this performance management Year End Assessment?

A. Yes, I believe so.

Q. You believe it was not?

A. No, it was not. It wasn't in our target at the start of the year. It didn't feed into surpassing that target, in my view. So, I mean, Kieran assessed me. My view was probably not. I am not sure what Kieran would say; he's the one who ultimately gave me the rating."

735. Unlike Mr. Connolly, Mr. Stenson would have failed to meet his redemptions targets for 2013 without the sale of Angel House. The exchange of contracts for the sale of Angel House did allow Mr. Stenson's line manager, Mr. Connolly, to treat Angel House as a redemption and thus to conclude that Mr. Stenson had met his redemption target for the year. However, I accept Mr. Stenson's evidence that this was not something that would have made any significant difference to his bonus prospects. Redemptions only accounted for 25% of Mr. Stenson's overall targets, and as at the end of November 2013 he had achieved about 70% of that target. Mr. Stenson also said - and I accept - that at the time he thought that he was already assured of a grade 3 in his assessment and that he did not think that exchanging on Angel House would have pushed him up to grade 4.
736. The view that the exchange of contracts on Angel House would have made no difference to Mr. Stenson's bonus prospects was confirmed by Mr. Connolly, whose evidence I also accept,

"Q. We have seen already, haven't we, Mr Stenson's self-assessment appraisal was saved, in the sense that he was able to meet his target, because Angel House exchanged before the year end.

A. Angel House is on Paul -- Mr Stenson's target. However, I have explained that we would look at all the redemptions, and if Angel House was never even heard of Paul, in my view, would have still met his expectations because there were two redemptions which would have been very unfair of me to penalise him. And our committee would not have made a decision, secondly, just so Paul Stenson could get a three or a four or a five. They wouldn't even have known about it. So it had nothing to do with it."

737. The (compelling) point made by Mr. Connolly at the end of that exchange - that the RMRC of Dunbar would hardly have changed its decision as to what to do with Angel House just so that Mr. Stenson could change his end-of-year bonus assessment rating from a 3 to a 4 - leads to the next point.

The role of the RMRC

738. Ms. Davey's conspiracy case wholly failed to address the fact that the ultimate decision maker within Dunbar as regards matters said to be central to the alleged conspiracy was neither Mr. Stenson nor Mr. Connolly, but the RMRC. Mr. Stenson and Mr. Connolly reported to the RMRC, but they were not members of it. Within Dunbar, it was the RMRC that had the final word on matters such as the appointment of APAM and its fees, the decision not to fund the 2012 planning application but to go to a soft marketing process in parallel with formulating a revised planning scheme, and in relation to the ultimate decision to sell Angel House to LBS/Cubitt.
739. As was very clearly demonstrated by the RMRC's rejection of Mr. Stenson's original proposals for funding and pursuit of the 2012 planning application, the RMRC was an autonomous body. Moreover, there can be no suggestion on the evidence that the members of the RMRC, who comprised senior individuals from Dunbar and its group companies, had any involvement in any alleged conspiracy. It is also obvious that they had no personal motivation artificially to limit the price obtained for Angel House. On the face of it, the only motivation of the members of the RMRC would be to achieve the best result from whatever source for Dunbar.
740. As supposed co-conspirators, therefore, Mr. Stenson and Mr. Connolly could have had no expectation at any time that their recommendations to the RMRC would be accepted. It would, as Mr. Smith observed, be a wholly impractical conspiracy. Moreover, Mr. Stenson and Mr. Connolly would have been taking an enormous risk in having to mislead and to conceal their true motives from the RMRC over an extended period of time.

The Value Enhancement Incentive Fee

741. A further broad point which tells strongly against any conspiracy, relates to Ms. Davey's pleaded allegation that the Value Enhancement Incentive Fee was inserted into the agreement between the Administrators and APAM, "to create the false impression that APAM was motivated to benefit [the unsecured creditors and Ms. Davey] when in fact they had no intention of doing so."
742. As Mr. Smith pointed out, that allegation was doubtless made because the existence of arrangements for the Value Enhancement Incentive Fee ran directly contrary to the allegation that APAM was party to a conspiracy to sell Angel House at an undervalue. If genuine, such a fee gave APAM a very real incentive to secure a sale of Angel House for a price that exceeded the level of AHDL's debt to Dunbar.
743. In fact, the contemporaneous documents show that a version of the Value Enhancement Incentive Fee pegged to the open market value of Angel House (to be agreed) was originally proposed by Mr. Powell to Mr. Stenson in late December 2012 or early January 2013, and it was then modified so as to operate by reference to the level of Dunbar's debt as a result of Mr. Connolly's brief comments to Mr. Stenson by email on the eve of Mr. Connolly's wedding on 3 January 2013.
744. If Ms. Davey's case that the Value Enhancement Incentive Fee was inserted into APAM's engagement letter to create a false impression was correct, then the plot must already have been hatched and the proposal from Mr. Powell, and the emails between Mr. Stenson and Mr. Connolly, were a deliberate concoction to lay a trail of false documents. I think that such a conclusion is simply unsustainable given the timing and terms of the documents; and again, no case that the Value Enhancement Incentive Fee was a façade or sham was put to Mr. Connolly or Mr. Stenson in cross-examination notwithstanding that they had both given evidence as to its purpose.
745. Moreover, given the observations that I have made above concerning the role of the RMRC, it is notable that when the RMRC considered APAM's fee structure on 23 January 2013, the RMRC approved a fixed Exit Management Fee of 2% but did not approve the Value Enhancement Incentive Fee, indicating instead that this was to be the subject of further discussion (which was recorded in the formal engagement letter). It is therefore wholly unclear on what basis it might be thought that the members of the RMRC understood that there was (still less agreed to go along with) such a pretence.

Mr. Stenson's support for the 2012 planning application

746. The next broad point relates to Ms. Davey's contention that a central feature of the alleged scheme to limit the value obtainable for Angel House was that Dunbar deliberately chose, with the connivance of APAM, to cast doubt upon the wisdom of pursuing the 2012 planning application and then to withhold funding for it. In his written closing, Mr. Davies submitted,

"Even prior to the appointment of the JAs, Dunbar resolved to install its own asset manager, APAM, as selling agent with a view to maintaining control of the administration … The conditions thus created gave Dunbar free rein during the administration to decide whether to pursue the planning application and to cause the same to lapse unnecessarily. Consequently, there was no real or genuine effort either to obtain planning permission or to keep the planning application alive pending sale."

(my emphasis)

747. I simply cannot see how these allegations can be reconciled, for example, with the fact that for several months after his proposals were returned to him for further consideration, Mr. Stenson continued doggedly to recommend to the RMRC that the Administrators should be funded to pursue the 2012 planning application until at least late June or 1 July 2013. If Mr. Stenson's efforts to obtain funding from Dunbar for the continued pursuit of the 2012 planning application were not genuine, there was no reason for him to have been so persistent, especially since his proposals for continued funding of the existing planning process could perfectly well have been accepted by the RMRC at any time.
748. Moreover, it is readily apparent from the contemporaneous documents that it was not initially Mr. Connolly or Mr. Stenson who raised the doubts about whether continuing to fund the 2012 planning application was a sensible course for Dunbar to take. Those concerns were raised by Mr. Hamilton who worked for Dunbar in Dublin in a similar role to that of Mr. Stenson, and who had prior experience of working in the property industry. However, there is no pleaded allegation, still less any evidence, that Mr. Hamilton was a party to any covert conspiracy of the type now alleged, and I have no doubt that his views were genuinely held.
749. Mr. Hamilton expressed early doubts from March 2013 of the wisdom of continuing the planning application. On 12 March 2013 he emailed Mr. Stenson to ask for an update on the planning application and said,

"Still don't see rational for spending a lot of money to try to get an outline permission, particularly given that neighbouring site has now been refused."

750. Mr. Stenson subsequently developed his RAM memorandum for the RMRC which was eventually completed and submitted on 18 April 2013. As I have described, it carefully and accurately summarised the position with regard to the planning application, the arrears of fees for the planning team and the likely cost of proceeding. Mr. Stenson concluded by joining in a recommendation by APAM and the Administrators that the existing planning application should be pursued. If the intention all along had been to stall or discontinue the existing application, Mr. Hamilton's earlier scepticism provided Mr. Stenson with the ideal opportunity to do so. The reality, however, was that Mr. Stenson submitted a proposal to the RMRC that it should be continued.
751. As it was, the RMRC rejected his paper, and Mr. Hamilton continued to question the wisdom of continuing with the existing planning application. Mr. Hamilton's first detailed review of the question of planning was dated 2 May 2013 and was accompanied by a residual appraisal which gave Angel House a range of low values which he contended cast doubt upon the commercial logic of continuing with the planning application. Mr. Hamilton also warned Mr. Stenson of the "huge" time commitment that would be required.
752. In his closing submissions, Mr. Davies dealt with Mr. Hamilton's interventions as follows,

"On 2 May 2013 Tom Hamilton produced his residual appraisal and cautioned against the cost of pursuing the planning application. On 7 May 2013 Dunbar and APAM met for dinner in Piccadilly and, the following day, Dunbar instructed APAM to produce a report by reference to Tom Hamilton's reservations. APAM's report, addressed to Dunbar, set the strategy which would result in the soft marketing and disposal without planning permission."

753. That submission might be taken to suggest that, given that Mr. Stenson was supposedly party to a scheme under which Dunbar would make "no real or genuine effort either to obtain planning permission or to keep the planning application alive pending sale", Mr. Stenson had eagerly embraced Mr. Hamilton's reservations and asked APAM at an undocumented dinner to produce a report endorsing them. But that is simply not the case. The email that followed the dinner in Piccadilly between representatives of APAM and Dunbar was sent by Mr. Stenson to Mr. Powell. It forwarded Mr. Hamilton's documents and stated,

"Firstly thank you for the hospitality last night it was a good night.

Following on from our Angel discussion see below.

As you can see from the second last paragraph the reluctance from Tom to stand behind the decision to carry on with the planning.

Can you throw your eye over his attached residual and come back with any critique as this [is] driving his decision.

As mentioned the other items of discussion were the broad commentary on the build cost, the no car parking and the view of active developers on the attractiveness of the site.

I will catch up with you over the next day or so."

754. That email suggests that what Mr. Stenson wanted was a "critique" of Mr. Hamilton's residual appraisal rather than an endorsement of it, because Mr. Stenson did not agree and wanted to go back and debate matters with Mr. Hamilton. That was also the tenor of Mr. Stenson's evidence,

"Q. You asked APAM to throw their eye over the attached residual and come back with any critique, as this is driving his decision. Do you see that?

A. Yes, I think it probably would have come up the night before. I think we were out for dinner in Zedel in Piccadilly, so I suppose discussing what the values were, I suppose what then Tom Hamilton had come back with, just asking him to see if he could throw his eye over it, just to interrogate it again. Not dissimilar, I suppose, to getting a second opinion, were his figures standing up to interrogation."

(my emphasis)

755. Moreover, even after Mr. Powell had come back to Dunbar on 16 May 2013 with APAM's updated report, changing its advice and recommending that the existing planning application should no longer be pursued, Mr. Stenson still continued to draft lengthy memoranda for the RMRC, arguing the case for the 2012 planning application to be pursued. He sent an early draft of his RAM memorandum to Mr. Hamilton for comments on 29 May 2013 and then produced a number of further iterations in June 2013 which contained (among a large amount of analysis) the following,

"Having spoken to Donal Mulryan and also Henry Smith (both of who are currently active in the residential land market and have a hands-on knowledge of the immediate area) there does appear to be a increase in activity and attractiveness for sites such as this one. This is positive and reinforces the site's appeal. We still feel that it warrants proceeding with the planning permission but feel that the actual eventual marketing campaign and the way the site is pitched are very much going to be decided by the prevalent market conditions.

The only other thing that may be worth considering is soft marketing the site in the next 6 weeks to a select community of developers to see if anyone would price in the eventual planning and offer a surprise unconditional bid due to the uptick in the market for sites like this. APAM considers the market would amongst other things now appraise the scheme without the hotel element replacing this with residential and this would be reflected in a bid 'as is' in the region of £9 to £10m, however there may be a surprise bid in excess of £10m in their opinion. The downside of this approach is the timeline that it will take to interact with interested parties however this could be run in parallel with starting up the planning application again.

The above comment is based on [the recent South Quay Plaza] transaction …

…..

While the above transaction represents a positive market move it still needs to be borne in mind that the more similar site next door to Angel House, Meridian Gate (which was dealt with in some detail in the last RAM), has still not sold after going terms agreed in March at a price somewhere in the region of £10m for 1 acre which would indicate a site value for Angel House in the region of £5m, it must be borne in mind that Meridian Gate does not have planning permission for redevelopment. It for this reason I am still recommending proceeding with the already initiated planning so as ensure that we a have an asset that has proved it is capable of development and hence more palatable to the market.

(emphasis in the original)

756. When cross-examined about his attitude to the existing planning application, Mr. Stenson's evidence was entirely consistent,

"Q. …. I think what you are saying is that you thought from the outset it was the wrong planning application, the wrong scheme?

A. Not at the outset, because we -- when we got into administration we understood that it was quite further progressed and that it was slightly different in its aspects to what we actually did find when we actually were able to talk to the Planning team.

Q. The McBains Cooper scheme had a hotel in it.

A. It did, yes.

Q. Your view was that that was not something that was the best or ...

A. That is what I had been led to believe by talking to different people in the market, that there was no longer a very active demand for development opportunities in hotels, given we had come the other side of the Olympics and there had been a lot of hotel development.

….

Q. What did you say, that there should be a different application made?

A. No, not at all. I was supportive. If you look at my RAMs …. I was supportive of carrying on the existing, if only as a proving exercise to ensure that people could feel that there was an increased certainty here, that if someone bought this, they could go in and get the optimum planning for it.

All the way through in my memos to RMRC, if we go through them now I will show you, I am very supportive of the existing planning, because wrongly so or rightly so, money out the door, albeit not paid, was better than starting anew, in my mind, at that time. There was very -- there were other voices that would have different opinions, but I was very much of the opinion that, listen, if this is started, why not finish it. But that wouldn't have got me to the 20 million. That would have got me to a position where planning had been proved that this site is -- can take on planning. But then if someone went in to get the optimum planning, that is where the optimum value on the site would have been, if you did the with planning exercise.

….

Q. It just seems odd that you [and Mr. Hamilton] both came to the same view…

A. But the outcome of [my view] was extraordinarily different … to what [Mr. Hamilton] was saying: [he was saying] do not proceed with this planning because -- for other reasons as well -- it is an outline planning as opposed to a detailed planning, the site next door was sold without planning, there were other sites in there that had been sold without planning.

My view on the planning was it was not the optimum planning but let's progress it anyway because we are a considerable amount of way down the road with it."

757. If, as Ms. Davey contends, Mr. Stenson was party to a conspiracy to terminate the 2012 planning application and that "there was no real or genuine effort either to obtain planning permission or to keep the planning application alive pending sale", then Mr. Stenson's continued efforts to promote the existing planning application within Dunbar, the various documents he produced, and his attitude to Mr. Hamilton's contrary views were all part of an elaborate charade designed to lay a false trail. In my judgment, that is a completely fanciful proposition. I find that Mr. Stenson was, as his evidence describes, a genuine advocate for a long time that Dunbar should fund the continuation of the existing planning application, and he was only persuaded to change his mind for genuine commercial reasons in about late June 2013.

Funding a revised planning application

758. That leads to the next key element of the alleged conspiracy - namely the suggestion that having decided not to fund the continued pursuit of the 2012 planning application, Dunbar had no genuine intention of funding a revised planning application.
759. Although Ms. Davey alleges that Dunbar's intentions in this respect were misrepresented to the Administrators by Mr. Connolly and Mr. Stenson in July 2013, there is no allegation, still less any evidence to support a suggestion, that the RMRC, whose decision it was, did not genuinely decide to commit funding of up to £500,000 to support the development of an alternative planning proposal.
760. Moreover, I have set out above the steps that were taken by Mr. Stenson and APAM after the RMRC had decided to support the development of a revised planning application to re-engage CgMS from the existing planning team and to obtain from them and send out a new planning brief to potential architects for the revised planning application. During that process, there was, for example, a debate as to whether CgMS should be retained or not. For example, on 16 August 2013, Mr. Powell emailed Mr. Stenson and Mr. Sandall in relation to CgMS's fees proposals for the new work. Mr. Stenson responded,

"Committee are not going to deliberate on this appointment tomorrow.

They want to know is this value for money, why should we [be] paying [CgMS] full recovery (albeit 50% success related), the feeling is no one ever get 100% recovery.

Also does this set a precedent to the other administration creditors. Not everyone is bought in about keeping these planners on board and don't see why a fresh broom wouldn't be seen as much as a new healthy start for this site.

Did they give a price for the work required for the next couple of weeks only, i.e. if we manage to sell this prior to re-engaging with the planners?"

761. Mr. Powell then responded on 2 September 2013 advocating the merits of CgMS and reiterating his view that they should be retained. Mr. Powell's arguments were then incorporated by Mr. Stenson into a RAM dated 13 September 2013 which sought approval from the RMRC for the retention and payment of CgMS's fees.
762. Mr. Stenson was only very briefly referred to this exchange of emails, but it was not suggested to him or any of the other witnesses that these documents or the process of which they were part were anything other than genuine. At the risk of repetition, if the decision by the RMRC to fund a revised planning application was a false pretence, these steps and documents were all part of an elaborate charade. I find that suggestion incredible, and I reject it.

Dunbar's attitude to rival bids and Ms. Davey's funded rescue proposal

763. Finally, I turn to the decision to accept the LBS/Cubitt bid. As indicated above, Ms. Davey's pleaded case is that LBS was (from an unidentified date) Dunbar's "Preferred Bidder", that the sales process was conducted by Dunbar through APAM with the covert aim of ensuring that Angel House was not sold to anyone else for its full value, and that Ms. Davey's funded rescue proposal was frustrated by the setting of an unreasonably tight timetable.
764. Although LBS was described in the pleading as Dunbar's "Preferred Bidder", and reference was made to the fact that APAM were subsequently installed as property managers of Angel House by LBS (something that seems to make obvious commercial sense given their familiarity with the property) it was never suggested to any witness, and there was no evidence to suggest, that LBS was anything other than a genuine third-party purchaser. Moreover, in my judgment there was no evidence to suggest that LBS were "preferred" as the buyer for Angel House for any reason other than the legitimate commercial considerations that APAM identified in its advice to the Administrators relating to LBS's proven track record and its readiness and ability to exchange and complete a purchase.
765. There is also no evidence to suggest that Mr. Stenson or anyone else at Dunbar actively sought to discourage bids higher than the LBS bid, or to frustrate the prospect of a funded rescue. There is, for example, no evidence to suggest that anyone at Dunbar ever took any steps to dissuade the Administrators from the view that they independently formed and expressed to APAM that both the offer from Olympian Homes of £19.2 million and Ms. Davey's rescue proposal would be materially better than the LBS offer.
766. Indeed, I think that Mr. Stenson's reaction to news of the Olympian Homes' offer when communicating it to Mr. Connolly ("I hope you are sitting down …") suggests that he was genuinely surprised and positive about it. There is also no suggestion that Mr. Stenson sought to dissuade Mr. Money from the view that he then expressed that he would be happy to upset LBS "but only if we can be sure that we will do better." Further, when the offer from Olympian Homes fell away because L&R took the view that it was "madness", Mr. Stenson's response to Mr. Money's email report on 26 November 2013 was to encourage an early meeting with Ms. Davey, and to express the hope that Guildmore were still "also in the loop in some way", even though they were not the "preferred bidder".
767. It seems to me that these documents all show an entirely genuine reaction on the part of Mr. Stenson to increased offers which would have exceeded the LBS offer or seen Dunbar paid in full. There is, moreover, no evidence to suggest that Mr. Stenson or APAM took any steps to interfere with or influence the Administrators in their subsequent pursuit of such offers.
768. As to Dunbar's attitude to a funded rescue, at the time of final bids on 22 November 2013, although Mr. Stenson's recommendation to the RMRC was to follow the advice of APAM and accept the LBS offer for Angel House, he also fairly summarised the progress with Ms. Davey's proposal, and concluded that,

"if the Administrators are satisfied that the [funded rescue] proposal is properly funded and credible then it would be an appropriate culmination of the process"

769. On that basis the RMRC agreed with Mr. Stenson's recommendation and resolved,

"Accept LBS bid for £17.05 million on condition that the corporate bid cannot be credibly substantiated by exchange."

770. It was never suggested to Mr. Stenson that his recommendation to the RMRC that the LBS bid should only be accepted on condition that Ms. Davey had not credibly substantiated her rescue proposal by the time that contracts were exchanged was not his genuine view of the matter. Mr. Connolly was cross-examined on this point, and in my view his evidence was entirely clear and credible,

"Q. You see, what I am putting to you, Mr Connolly, is that the timeline that we see on that page was introduced entirely to please you, Dunbar, the bank, because you wanted a quick sale, didn't you?

A. No, my Lord.

Q. The reason that you were happy for LBS, the special purchaser, only to be told how much they should bid in order to be accepted is because you had the guarantee to fall back on and you were happy to get the quick sale in, in the knowledge that the guarantee was there as well.

A. Absolutely not, my Lord.

Q. That is all that was going on in this exercise here, and nothing else, in the sense that had you not had the guarantee, I am putting to you there is no way that you would have agreed, first, that timeline; do you agree?

A. My Lord, there is a RAM where this was signed off, or a structuring action memo, whereby it was signed off to accept the LBS deal as the secured lender to consent to the release of our charge. Our committee actually said not to accept that unless the funded rescue could [not] come off. So this is just -- there is -- I just don't follow how this conclusion is -- has arisen, based on the documentation actually on the files.

Q. If you hadn't had the guarantee, it is obvious, isn't it, that Dunbar would have required, at the very least, the special purchaser to be brought up to at least £19 million, so he --

A. The special purchaser were spoken to a number of times. They improved their offer. Dunbar consented to the sale at that level. However -- and nobody asked us to do this -- we said it is not to be accepted if the funded rescue comes off. So Ms Davey and the funded rescue was provided with an opportunity to buy the company back, and if Ms Davey didn't buy the company back, it was to the best offer, the most credible offer, which could be funded, was to be accepted. That was Dunbar's view. And it is documented."

771. I accordingly conclude that there was no conspiracy between Dunbar and APAM as alleged by Ms. Davey. Mr. Stenson and Mr. Connolly had no incentive other than to bring about the best result for their employer as the secured creditor of AHDL, and I reject the allegations of unlawful or improper conduct against them.

Issue 11: Has Dunbar acted in bad faith towards Ms. Davey or so as to prejudice Ms. Davey in such a way as to cause her personal guarantee to be discharged?

772. Ms. Davey's pleading in relation to Issue 11 was as follows,

"…the enforcement of the Guarantee has been and is in bad faith in that Dunbar and APAM deliberately connived in and/or orchestrated the sale of Angel House at an undervalue at a level calculated to ensure that [Ms. Davey] remained liable in full under the Guarantee/Judgment such that it would be unconscionable and unnecessarily prejudicial to [Ms. Davey] to allow Dunbar to receive any benefits under the Guarantee and/or the Judgment.

Ms. Davey sought an order that "in so far as necessary, the Judgment should be set aside".

773. In his closing submissions, Mr. Davies submitted that as the giver of a personal guarantee, Ms. Davey was entitled to expect that the assets pledged as security for the guaranteed debt would be realised by an independent administrator acting properly and that any agents acting for such administrators should not be conspiring with or taking instructions from Dunbar. He further submitted that the summary judgment granted against Ms. Davey on the Guarantee had been obtained under a mistaken impression on the part of the court, induced by Dunbar's evidence, that the Administrators were acting independently and that Dunbar was not responsible for decisions relating to the realisation of the security.
774. In Bank of India v Trans Continental Commodity Merchants Ltd [1983] 2 Lloyd's Rep 298, Robert Goff LJ referred to and affirmed the dictum of Bingham J at first instance [1982] 1 Lloyds Rep 506 to the effect that there was no general principle that "irregular" conduct on the part of the creditor, even if prejudicial to the interests of the surety, discharges the surety. Bingham J did, however, indicate that a surety might be discharged if a creditor acted in bad faith towards him or caused or connived at the default by the principal debtor.
775. In the instant case, I have found that there was no conspiracy of the type alleged by Ms. Davey, that the Administrators acted independently, and that to the extent that Dunbar was involved in the decisions relating to Angel House and its realisation, Dunbar did no more than it was entitled to do as secured creditor, whose interests were at stake and whose consent was required for the sale of the property.
776. I also reject the suggestion that Dunbar "went in hard" in any illegitimate way when seeking to enforce its rights against Ms. Davey under her personal Guarantee. Throughout the cross-examination of Mr. Stenson and in particular Mr. Connolly, there was a clear suggestion that there was something "unfair" about the way in which Dunbar sought, from a relatively early stage, to seek payment from Ms. Davey under the personal Guarantee and when none was forthcoming, took proceedings to obtain a judgment which it then sought to register and execute in jurisdictions in which Ms. Davey might have assets.
777. The true position was that there was nothing improper in what Dunbar sought to do. Ms. Davey gave a personal guarantee which Dunbar was entitled to call and enforce according to its terms. Whatever Ms. Davey might have thought at the time about whether Dunbar should have waited until after the sale of Angel House before seeking to enforce the Guarantee, it is perfectly plain as a matter of law that it was not obliged to wait, and Ms. Davey ultimately accepted as much in her cross-examination. There was also nothing irregular in the judgment that Dunbar obtained and certainly nothing remotely resembling fraud that would be required to have the judgment set aside. Nor were any of the steps taken by Dunbar to register and enforce the judgment matters that could possibly justify holding that the Guarantee was not still enforceable.
778. Accordingly, on no basis could the principle alluded to by Bingham J in Bank of India apply. Ms. Davey's defence to enforcement of the Guarantee against her must necessarily fail. So too must any suggestion that the judgment against her should be set aside.

Issue 12: If the Guarantee is not discharged under Issue 11, for what sum is Ms. Davey liable?

779. There only remains Dunbar's original claim against Ms. Davey for the costs of enforcing the Guarantee. Ms. Davey defended the proceedings only on the basis of her counterclaim, which has failed. Dunbar is therefore entitled to its costs of enforcement as a matter of contract under clause 2 of the Guarantee which gives rise to an entitlement to recover costs and disbursements on the indemnity basis: Deutsche Bank (Suisse) SA v Gulzar Ahmed Khan [2013] EWHC 1020 (Comm) at [23], per Hamblen J.
780. The costs incurred by Dunbar as a consequence of Ms Davey's refusal to honour her obligations under the Guarantee are alleged to be substantial and were itemised in the written evidence of Mr. Stenson. I was, however, not taken to those costs in evidence and did not hear argument about them.
781. Accordingly, I will simply adopt the proposal made by Dunbar to declare as a matter of principle that Dunbar is entitled to recover from Ms. Davey its costs of enforcing the Guarantee from 24 July 2013 (excluding for the avoidance of doubt the costs of these proceedings). Those costs will have to be the subject of an inquiry and determination by the court if not agreed.

G. CONCLUSIONS

782. For the reasons that I have endeavoured to explain, I conclude that there was no conspiracy between Dunbar and APAM, and that the Administrators acted independently and generally in accordance with the statutory objectives for the administration.
783. I have also found that the Administrators acted with appropriate care to obtain the best price reasonably obtainable in the circumstances for Angel House and that they were reasonably entitled to rely upon APAM's advice in that regard.
784. Further, far from seeking to frustrate Ms. Davey's attempts to mount a funded rescue of AHDL, the Administrators did all that could reasonably have been expected of them to facilitate such an outcome without risking loss of the sale of Angel House.
785. I have also found that Angel House was in fact sold for its true market value in December 2013, and that accordingly AHDL suffered no loss for which the Administrators or Dunbar could in any event be liable.
786. In these circumstances Ms. Davey's claim against the Administrators under paragraph 75 of Schedule B1 is dismissed, as is her counterclaim against Dunbar. There shall be judgment for Dunbar on its claim to recover the costs of enforcing its Guarantee against Ms. Davey in the terms that I have indicated.