Debussy Dtc Plc & Ors v Solutus Advisors & Ors

Permission to introduce a late ground into an administration application depends on the justice of the case in its procedural context. The court considers the explanation for delay, the clarity of the amendment, prejudice to the opposing parties, disruption to the trial timetable and any alternative means of advancing the point.

Where the company’s insolvency is contingent on a genuinely arguable dispute, the court should not determine the administration application summarily. It may require the underlying dispute to be resolved first, particularly where parallel proceedings provide the appropriate forum and the issues are interconnected. An amendment will ordinarily be refused where it would cause substantial prejudice, duplicate proceedings or risk pre-empting issues reserved for trial.

The claimants sought permission to amend an application for the appointment of administrators over Toys “R” Us Properties (UK) Ltd. The existing application relied on a challenge to certain transactions under the fair dealing rule. The proposed amendment introduced a second ground, namely that a standstill arrangement had terminated.

The amendment was sought so that the second ground could be heard in May 2019, rather than in the Financial List proceedings anticipated for January 2020. The defendants resisted the amendment on grounds of lateness, prejudice, lack of pleading and the existence of a suitable alternative proceeding. The central issues were whether the amendment should be permitted and whether the administration application could properly proceed while the underlying disputes remained unresolved.

1. The Amendment Application was refused. The second ground could be advanced in the existing Financial List proceedings, so refusal did not prevent the claimants from pursuing it.
2. The court adopted the approach to late amendments summarised in CIP Properties AIPT Limited v Galliford Try Infrastructure Limited [2015] EWHC 1345 (TCC). Lateness is relative. Relevant considerations include the explanation for delay, the precision of the amendment, prejudice to the resisting party, disruption to completed procedural steps and prejudice to the amending party. The approach had to be applied in the particular context of parallel Financial List proceedings.
3. The proposed ground had only been expressed in broad terms and had not been properly pleaded or answered. An expedited hearing involving a significant issue, cross-examination and expert evidence would prejudice the defendants. The claimants identified no sufficiently concrete prejudice from having the issue determined in the Financial List proceedings.
4. The company was only contingently insolvent. Neither of the competing grounds was suitable for summary determination. The court therefore considered that an attempt to wind up the company would be an abuse of process, and could not be confident that an administration purpose was reasonably likely to be achieved while the validity of the disputed realisation process remained unresolved.
5. The court applied the guidance in Hammonds (a firm) v Pro-Fit USA Ltd [2007] EWHC 1998 (Ch) that a disputed debt or cross-claim may need to be determined before an administration order is made. The second ground was not suitable as a preliminary issue because it might be rendered academic by determination of the first ground and the two grounds were likely to be interconnected.
6. Making an administration order before trial might predetermine disputes concerning the receivership, control of the company and access to privileged documents. The second ground remained capable of being heard during or after the Financial List trial. Costs of the unresolved applications were ordered to be costs in that trial.

First-instance decision. No appellate history is stated in the judgment.