Property development company St John Spencer Estates & Development Ltd has been placed into administration by the high court.
Deputy Judge Robert Ham QC appointed administrators sought by the AIB Group, which claims to be owed £11,459,211 and a further £1,951,223 in interest by the company, whose directors are Alan Deville and Nigel Lewis, and which entered into a CVA in January 2011.
The judge said that the company’s relationship with the bank began in 2005 when it was looking for a “risk funder” who would provide investment in connection with its portfolio of properties in return for a profit share.
The bank sought to appoint administrators as the holder of a floating charge created by a November 2005 mortgage debenture granted by St John Spencer in return for an initial loan of £9.25m, later increased to £15.91m.
However, he said that the company complained that the bank’s failure to make facilities available on a risk funding basis, which made it unable to expand its development programme, had lead to it being unable to commit to the purchase of 300 plots and costing it losses of up to £23m.
St John Spencer argued that administrators should not be appointed because the bank is not a current creditor of the company as the bank released its debt in a facility letter in July 2009 in return for a profit share agreement relating to the sale of properties.
It claimed that the bank later repudiated that agreement, it accepted the repudiation, and so the company was discharged from any liability to the bank.
However, the judge ruled: “I find nothing in the letter to release the debt owed to the bank, either expressly or by implication. On the contrary, it is plain from the facility letter that the bank’s debt is maintained.”
He rejected cross-claims by the company that the bank was in breach of contract by failing to make an additional advance of £800,000, and that the head of the bank’s specialist property finance team, John McConvey made negligent misrepresentations to it in 2005.
Apponting administrators, he added: “I can see no countervailing considerations in the present case. The alleged cross-claims are weak and the company appears to be insolvent on both cash-flow and balance sheet bases.
“It is a commercial judgment for the bank whether enforcement of its security will produce a better outcome for it, but in all the circumstances that appears to me to be a reasonable view for it to take. There is no reason for me to second-guess the bank in this regard.”
In the Matter of St John Spencer Estates & Development Ltd Chancery (Deputy Judge Robert Ham QC) 7 August 2012
Adam Al-Attar (instructed by Kennedys Law LLP) for the applicant (AIB Group (UK) plc)
Lexa Hillard QC (instructed by Harris Cartier LLP) for the respondent (St John Spencer)
