Blue Co International LLP, Re

Applications by administrators for directions under paragraph 63 of Schedule B1 to the Insolvency Act 1986 should be approached by analogy with applications by trustees for directions. Where proposed litigation concerns the company’s affairs, business or property in administration, and is necessary or expedient for their management, it falls within the administrators’ powers. The court may give its blessing to a properly considered course of action within those powers, although it is not a rubber stamp. Acts or omissions occurring before appointment do not prevent proceedings from arising directly out of the administration where the complaint substantively attacks the administration’s transactions. Administrators may also be indemnified from the estate for reasonable costs properly incurred in pursuing the authorised application.

The administrators of Blue Co London LLP applied for directions under paragraph 63 of Schedule B1 to the Insolvency Act 1986. They sought liberty to apply to the Judicial Court of Nanterre for a stay or dismissal of claims brought against them by former members of Blue Co International LLP, and an indemnity from the estate for the costs of that application.

The respondents did not attend the hearing. They accepted that an application to the French court was necessary, but disputed that it properly concerned the administrators’ functions and opposed the indemnity. The central issues were whether the proposed French application was within the administrators’ powers and whether the court should give its blessing to it.

1. Outcome. The court granted the administrators liberty to apply to the Judicial Court of Nanterre for a stay or dismissal of the respondents’ claims on jurisdictional grounds. It ordered that their reasonable costs and expenses be paid from the estate of Blue Co London LLP, subject to a cap of £100,000 plus VAT, with liberty to apply to increase the cap on further evidence. Their costs of pursuing the relevant relief were payable as an expense of the administration.
2. Nature of the application. Applications by administrators for directions under paragraph 63 of Schedule B1 should be approached by analogy with applications by trustees for directions. The categories identified in Public Trustee v Cooper were relevant. This was a category 2 case: the administrators had resolved upon a course of action within their powers and sought the court’s blessing for a significant decision.
3. Administrators’ powers. The proposed application concerned the administration because the respondents’ claims directly attacked the pre-pack sales and alleged that the administrators should have obtained a higher price and required repayment of all professional practice loans. The claims would not exist in their present form without the administrators’ appointments. Under paragraphs 59(1), 60(1) and Schedule 1 of the Insolvency Act 1986, the proposed litigation was necessary or expedient for management of the LLPs’ affairs, business and property. The fact that some relevant acts or omissions occurred before appointment was not determinative: Clydesdale Financial Services Ltd v Smailes was applied.
4. Blessing and indemnity. There was a clear jurisdictional issue which had to be raised with the French court. The court should therefore give the administrators its blessing, while recognising that it was not a rubber stamp, as emphasised in Re Nortel Networks UK Ltd. The administrators were entitled to an indemnity for the reasonable costs of pursuing the authorised application, irrespective of the merits of the respondents’ underlying allegations.