L & N D Development and Design Ltd [2020] EWHC 2803 (Ch) deals with an application under paragraph 74(1)(a) Sch B1 Insolvency Act 1986 by which a Mrs Dixon, the sole shareholder and director of the company, which was put into administration on by Amicus Finance plc as qualifying floating charge holder, was seeking relief against administrators who had declined to assign to her various causes of action that she claimed the company had against Amicus. (Amicus itself was insolvent and in administration.) She contended that the company had good claims against Amicus for damages for delays in advancing tranches of money under a facility which had in turn led to loss and damage resulting from delays in paying contractors; there was also a claim for intimidation and economic duress. An offer had been made to take an assignment for a lump sum and a share of the proceeds of the action, but the administrators had declined it.
Paragraph 74 Sch B1 to the Insolvency Act provides a route to challenge such a decision if it can be shown that the administrators have acted “so as unfairly to harm the interests of the applicant,” and gives the court wide powers as to the order it may make.
Drawing on Hockin v Marsden, ICC Judge Mullen noted that in that case, Mr Nicholas Le Poidevin QC, sitting as a deputy High Court Judge, had considered similar facts: a company in administration had had two potential claims against a bank which the administrators had declined to assign. He had noted that an applicant under paragraph 74 did not have to show, as in other contexts, that the administrator’s decision was perverse, only that it caused “unfair harm”. This would, as Norris J held in In re Coniston Hotel (Kent) LLP usually take the form of: “unequal or differential treatment to the disadvantage of the applicant (or applicant class),” but the paragraph in the schedule was not limited to such cases: “a lack of commercial justification for a decision causing harm to the creditors as a whole could be unfair in the sense that the harm is not one which they should be expected to suffer.” But the harm had to be “unfair”, so a creditor could not complain of harm to his interests when it was justifiable by reference to the interests of the creditors as a whole.
Judge Mullen considered a number of other well known authorities on assignment by office-holders, notably LF2 Ltd v Supperstone, but also had cited to him a less well known Australian case, Citicorp Australia v Official Trustee in Bankruptcy [1996] FCA 1115, remarking that the reason for its not being better known could be because it was often cited as Re the Bankrupt Estate of Serillo but that “Serillo” was a misspelling of the name “Cirillo”.