Insolvency – Administrator – Remuneration – Company claiming sum from first defendant bank as redress for potential mis-selling of interest rate swaps – Claimant former administrators of company applying for unpaid balance of remuneration out of redress payment – Whether redress payment constituting asset of company – Whether court having jurisdiction to order payment – Application dismissed
Sunnyside Holiday Park Ltd (the company) was incorporated in 1992 and ran a holiday park in Newquay. In 2003 it entered into two straightforward interest rate swaps with the first defendant bank in support of its borrowing. When the swaps were terminated in November 2004, the company had paid net amounts totalling £36,662.86 under them and in addition incurred bank charges of £1,030 as a result of those payments.
The claimants, who were the former administrators of the company, applied for an order that the unpaid balance of their remuneration and expenses was, by paragraph 99(3) of Schedule B1 to the Insolvency Act 1986, charged on and payable out of a sum of £62,646.06 said to be payable by the first defendant to the company as redress in respect of potential mis-selling of certain interest rate swaps. Since they said more than that amount was due to them, they sought a consequential order that the first defendant should pay the whole redress payment direct to them.
When the company was dissolved in 2013, any remaining assets were vested in the Crown as bona vacantia. The second defendant was joined as the government department responsible for administration of bona vacantia on behalf of the Crown. The claimants originally sought an alternative order that the redress payment be made to the second defendant and paid on to them. That claim was abandoned but the second defendant continued to participate because similar suggestions had been made in many cases and it was concerned to establish its position. Both defendants argued that the company should be restored to the register and wound up so that any redress payment can be made to a liquidator and administered by him.
Held: The application was dismissed.
(1) The first defendant was not at present under any obligation to pay the anticipated redress amount to anyone. The court had no jurisdiction to order the first defendant to make any payment unless and until either some right was successfully asserted against it by or on behalf of the company or a binding settlement was agreed between it and some person entitled to represent the company or enforce its rights. The redress payment was not therefore an asset, and could not be subject to the paragraph 99 charge.
(2) If there were an asset, it would be payable to the Crown as bona vacantia. The Crown would be entitled to deal with it or not as it chose, and, save for the possibility of judicial review, to follow the policy maintained by the second defendant of requiring that the company be restored so that the asset could be paid to it. Insofar as the company had, at the date of dissolution any rights that might have led to the recovery of a redress payment, those might be assets to which the paragraph 99 charge attached, but the administrators would have no power or right themselves to exercise such rights (e.g. by pursuing a claim or accepting an offer of redress). Such rights, to the extent they amounted to assets, would have vested in the Crown as bona vacantia, but the Crown would not be obliged to exercise them and would be entitled to require the company to be restored so that it could do so. The Crown could not therefore be directed by the court to exercise such rights, or to obtain and pay the proceeds direct to a creditor of the company.
(3) Even if power existed to make the order for direct payment sought, there would be good reason in this case (and probably in most cases) not to do so. The functions of pursuing and agreeing the amount and terms of any offer of redress, compromising claims the company might bring and considering the nature and priority of claims to entitlement on distribution, were required to be exercised on behalf of the company. That might be done by its directors, or a liquidator if it was in liquidation, or perhaps by a receiver appointed by the court on the application of the administrators to enforce their charge. It could not be done by the administrators directly, or by the Treasury Solicitor. Nor was it appropriate that it should be done by the court, save to the extent that it responded to proper applications for directions: Re Barleycorn Enterprises Ltd [1970] Ch 465, Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207, Bland v Ingram Estates Ltd [2001] 2 WLR 1638, Re MK Airlines Ltd [2012] EWHC 1018 (Ch), Buchler v Talbot [2004] 2 AC 298 and Re Hotel Company 42 The Calls Ltd [2013] EWHC3926 (Ch) considered.
(4) The appropriate course was an application for the company to be restored and wound up so that a liquidator might pursue the redress payment and make a distribution having considered all the associated issues. Given the potential for conflict, it was unlikely to be appropriate that the administrators themselves should act as liquidators.
Per Curiam: It must have been apparent that the present application would never achieve the stated object of distributing the redress payment more quickly or cheaply than restoration of the company. It could not, even if successful, have resulted in establishing a quick and efficient procedure for such distribution in future cases. In any future case, it would always be necessary to apply to the court and provide all the information necessary for it to determine what the company itself was entitled to and what potential competing claims there might be to the funds if they had gone through the company. Potential interested parties such as creditors would probably have to be given notice. In those circumstances, it was surprising the present application had been pursued so far.
Simon Passfield (instructed by TLT LLP, of Bristol) appeared for the claimants; Rebecca Loveridge (instructed by Matthew Arnold & Baldwin LLP, of Watford) appeared for the first defendant; Tiran Nersessian (instructed by the Government Legal Department) appeared for the second defendant.
Eileen O’Grady, barrister
Click here to read transcript: Walker and another v National Westminster Bank plc and another
