Legacy Education Alliance Interational Ltd v Progression Ltd & Ors

When the statutory conditions for administration are satisfied, the court retains a broad discretion whether to make an administration order or adjourn the application. The court must assess all relevant circumstances, compare the realistic consequences of the available alternatives, and weigh the interests of creditors and other affected groups. Predictions about future events are unavoidable, but the court must assess the potential advantages and risks on the evidence available. An adjournment should be refused where the prospects of the proposed alternative are insufficiently strong and delay would impose a substantial risk of harm, particularly to creditors.

Legacy Education Alliance International Limited was the subject of an application for an administration order brought by creditors. The statutory conditions in paragraph 11 of Schedule B1 to the Insolvency Act 1986 were accepted to be satisfied, and the proposed purpose was achieving a better result for creditors as a whole than an immediate winding up.

The company opposed the order and sought a further adjournment to formulate and propose a company voluntary arrangement. The court considered competing financial forecasts, the position of trade creditors, prepaid students, shareholders, the proposed purchaser of the company’s goodwill, and the risks associated with delay. The central issue was whether to make the administration order immediately or adjourn the hearing.

1. The administration order was made. The court had already adjourned the application twice and concluded that an adjournment created a clear and substantial risk of harm to creditors.

2. Paragraph 11 of Schedule B1 to the Insolvency Act 1986 was accepted to be satisfied: the company was or was likely to become unable to pay its debts, and it was reasonably likely that the purpose of the administration would be achieved. The relevant purpose was that in paragraph 3(1)(b), namely achieving a better result for creditors as a whole than winding up without prior administration. The court therefore had the discretion in paragraph 13 to make the order or adjourn the hearing.

3. The discretion was wide and required consideration of all the circumstances, consistently with Rowntree Ventures Limited v Oak Property Partners Limited [2017] EWCA Civ 1944. The court had to compare the alternatives, identify who would benefit or suffer under each, and assess the potential advantages and risks while recognising that future events could not be predicted with certainty.

4. The interests of unsecured creditors carried substantial weight. The interests of shareholders were relevant but attracted comparatively little weight given the company’s heavy insolvency. The interests of students who had prepaid approximately £10 million for undelivered courses also had to be considered.

5. The evidence did not permit complete confidence in the competing financial computations. Nevertheless, the court was entitled to conclude that creditors were likely to receive a better outcome through administration. The prospects of a successful CVA were not particularly high, and delay risked the loss of the proposed purchaser, the withdrawal of trainers, disruption to new enrolments, and further jeopardy to the delivery of courses.