AM Holdings Ltd v Batten & Anor

Permission to examine a discharged foreign representative under paragraph 29(2)(c) of Schedule 2 to the Cross Border Insolvency Regulations 2006 primarily depends on whether the proposed claim is reasonably meritorious. Discharge is not, by itself, a ground for refusing permission, although exceptional case-management or procedural factors may be relevant.

Under section 379(4) of the Companies (Guernsey) Law 2008, an administrator’s personal liability concerns liability to third parties for acts carried out as agent for the company. It does not define liability to the company for misfeasance or breach of duty. Following discharge, such company claims therefore fall outside the statutory carve-out in section 385(2), unless preserved by another applicable provision.

AM Holdings Limited brought claims against former joint administrators of Guernsey companies concerning the sale of the companies’ London property portfolio. It alleged that the administrators lacked power to sell, breached their duties by pursuing a sale rather than refinancing, and sold the properties at an undervalue.

The claims were brought under the Cross Border Insolvency Regulations 2006 and in Part 7, and required permission under paragraph 29(2)(c) of Schedule 2. The administrators sought refusal of permission, strike out or summary judgment. The central issue was whether the claims survived the administrators’ discharge under sections 379(4) and 385(2) of the Companies (Guernsey) Law 2008.

1. Permission refused. AMH’s claims did not fall within the personal-liability carve-out in section 385(2) of the Companies (Guernsey) Law 2008. They were therefore claims which did not subsist after the administrators’ discharge.
2. The applicable test under paragraph 29(2)(c) of Schedule 2 to the Cross Border Insolvency Regulations 2006 was whether a reasonably meritorious cause of action had been shown. The fact of discharge was not, in itself, a reason to refuse permission. The court should be slow to refuse permission on procedural or historical grounds where the claim was substantively meritorious.
3. Section 379(4) concerned the administrator’s position as agent of the company. “Personal liability” meant personal liability to third parties for acts performed on the company’s behalf in the exercise of the administrator’s powers. It did not address liability to the company for breaches of duty or misfeasance.
4. That construction was supported by the separate remedy in section 422 for misfeasance or breach of fiduciary duty in relation to the company, and by the complementary operation of sections 385(2) and 385(3). AMH’s wider construction would make section 385(2) substantially meaningless and create inconsistency with section 422.
5. In the alternative, the administrators had power to sell the properties. The administration order, read with section 379 and paragraph 2 of Schedule 1, conferred that power despite not stating the statutory purpose of the administration. The first substantive complaint therefore had no reasonable prospect of success.
6. Had the construction point been decided for AMH, the claims concerning the decision to sell rather than refinance and the alleged undervalue sale would have been permitted to proceed, because they raised factual disputes unsuitable for summary determination. The power-of-sale claim would still have been refused.