Introduction
The decision of ICC Judge Barber in the case of Stephen Hunt & System Building Services Group Limited -v- Brian Michie & System Building Services Group Limited [2020] EWHC 54 (Ch) was recently handed down and it is an interesting decision about directors’ duties post the appointment of an administrator or liquidator.
Facts
The facts are quite involved and matter specific, and gave rise to a number of issues, but for present purposes the key issues are as follows.
Following on from our blog: Does e-filing give you a headache? Does the recent guidance issued by the Chancellor help ease the pain?
The recent English judgment of System Building Services Group Limited¹ is an important decision for directors of offshore companies in 'soft touch' provisional liquidation, and highlights the importance of conducting a thorough analysis of the order appointing provisional liquidators for the purposes of ascertaining the scope of directors’ duties that apply during the course of their post-appointment restructuring efforts.
Representatives of a lender on a board will not automatically impose directors' duties on the lender, but they may apply where a director's specific instructions have led directly to a breach of fiduciary duty. The High Court recently explored this issue in an appeal in the case of Standish v Royal Bank of Scotland plc.(1)
Facts
In the Matter of System Building Services Group Limited (In Liquidation) [2020] EWHC 54 (Ch), the court confirmed that a director’s fiduciary duties continued after the appointment of an administrator or liquidator and that the subsequent purchase from the administrator/liquidator of a property at an undervalue was in breach of those duties. As a result, the property was declared to be held by the director on a constructive trust for the company.
This article was first published in The Commercial Litigation Journal.
The Chancellor of the High Court has published guidance on how the courts will deal with the e-filing of a “notice of appointment of an administrator” when the court is closed.
The creditor, Tall Trade Limited, claimed the first two quarterly repayments due under a loan facility agreement made in 2019 concluded with the debtor, Capital WW Investment Limited. The loan was for €17 million over a two year term. Both companies were incorporated in the BVI.
A winding up petition is a legal document that can be served by a company’s creditors when they are owed money by the company. If the debt amounts to £750 or more, then a creditor has the right to go to court and ask for a winding up petition to be issued, although courts view this remedy as something that should be reserved for when a company is genuinely believed to be insolvent, and not simply used as a means of debt collection.
Restructuring & Insolvency analysis: In Re C A & T Developments Ltd, the court found that the appointment of administrators had been motivated by an improper purpose and the purpose of the administration could not be achieved. In an application under Paragraph 81 of Schedule B1 to the Insolvency Act 1986 (IA 1986), the court therefore ordered the administration to end and the company to be wound up compulsorily.