Re WW Realisation 1 Ltd (in administration) 2010 EWHC 3604 (ch)
The High Court exercised its power pursuant to Paragraph 63 of Schedule B1 of the Insolvency Act 1986 to give directions to the administrators which permits them to make a final distribution to creditors without making financial provision for contingent expense claims where such claims have not been lodged by a certain long stop date.
This is the first case in which the Court has given such directions in respect of administration expenses although the jurisdiction is well founded in relation to claims in liquidations following Re Armstrong Whitworth Securities Company Limited [1947] CH 673
The Facts
The administrators of WW Realisation 1 Ltd (formerly Woolworths plc) had realised all the assets of the company, investigated potential claims and made a number of distributions to creditors. The company was in a position to proceed to liquidation, subject to distributing its remaining assets to a secured creditor.
However, given the decision in Goldacre (offices) Ltd v Nortel Networks UK Ltd (in administration) [2009] EWHC 3389 (Ch) (please see our previous article on this) a number of landlords who had potential claims for rent for the trading period of some of the stores in 2008 and some local authorities who had potential claims for rates for that same period, had not as yet submitted those claims as administration expenses. The administrators wrote to those landlords and local authorities informing them of their potential claims but had not received a response. The administrators therefore applied for directions that the company be wound up and that they could distribute the remaining assets without providing for further expense claims by these landlords.
The Ruling
The Court indicated that the interests of expense claimants must be properly protected but equally there must be a limit to the time in which the proper working out of administration and liquidation is delayed while those claimants decide whether to lodge claims. Accordingly, the Court permitted the administrators to impose a cut-off date for further claims, and to make a final distribution to creditors following this cut-off date. The Court conditioned these directions on the cut-off date being at least 28 days after a further letter to the potential landlord and local authority claimants was sent, notifying them of the Court Order.
Conclusion
Whereas this seems a perfectly reasonable decision, the Court noted that the potential claimants in this case were commercial landlords or local authorities who could be expected to protect their own commercial interests and understand insolvency procedures. Accordingly administrators must take into account the nature of the company's creditors (or expense claimants) when assessing the likelihood of the Court granting an order that may potentially prejudice such claimants.
Healys can offer a full range of advice and assistance on applications for directions under Paragraph 63 or on insolvency law in general. Should you have any queries regarding the contents of this item, please contact Melanie Badain on melanie.badain@healys.com or on 01273 685888.
