Fox Street Village Ltd, Re

An administrator may obtain an order under paragraph 71 of Schedule B1 to the Insolvency Act 1986 to sell property free from security where the sale is likely to promote the purpose of the administration. The court may approve a whole-property sale at market value where independent professional evidence shows that it is the most reasonable and practical route to distribution, even though individual purchaser-creditors prefer a build-out proposal. A creditors’ decision requiring an application to terminate an administration does not dictate the result. Removal under paragraph 88 requires good grounds, ordinarily arising from the administrator’s conduct or matters personal to the office-holder. A potential conflict can be managed without removal where independent advice and safeguards are available.

Fox Street Village Ltd was in administration after its secured creditor appointed administrators out of court. The company’s principal asset was a partly developed residential site. Purchasers had equitable liens over the units or airspace they had contracted to acquire, while the appointing creditor held security over the property as a whole.

The court determined four applications: authorisation to sell the property free from security; directions following creditors’ decisions requiring termination and resignation; termination of the administration; and removal and replacement of the administrators. The purchasers proposed acquiring and completing the development through a build-out plan. The central issues were whether that plan was realistic, whether the proposed sale promoted the statutory purpose, and whether termination or removal was justified.

1. Sale free from security. The court authorised the administrators, under paragraph 71 of Schedule B1 to the Insolvency Act 1986, to dispose of the property as a whole free from security at not less than £1,600,000. The statutory power was available because the proposed disposal was likely to promote the purpose of the administration. Independent valuation evidence supported the conclusion that the recommended transaction was the most reasonable and practical means of realising the property and distributing the proceeds to secured creditors.
2. The purchasers’ equitable liens were limited to the units or airspace they had contracted to buy. They did not extend to the company’s estate as a whole. The proposed build-out plan would sell the property for substantially less than market value, was inadequately supported as to construction costs and funding, and depended on unresolved planning issues. It was therefore reasonable to reject it. The court also accepted the professional apportionment of the sale proceeds, subject to a sensible precaution that an independent valuer should provide a second opinion on the value of Block D and the allocation between purchasers.
3. Termination and resignation. A creditors’ decision requiring an administrator to apply under paragraph 79(2)(c) was mandatory as to the making of the application, but did not require the court to terminate the administration. The court had to consider the circumstances as a whole, including the purposes and operation of the administration. The administration remained capable of achieving the statutory purpose in paragraph 3(1)(c), and there were no substantial grounds for termination. The administrators were not obliged to resign, or to seek permission to resign, merely because creditors so decided.
4. Removal. Paragraph 88 confers a broad jurisdiction, but removal requires good grounds assessed by reference to the purposes of the office and the facts. The appointment was not shown to have been made for an improper purpose. The proposed transaction was not a pre-pack, was not shown to be at an undervalue, and was supported by independent professional advice. Any potential conflict arising from the administrators’ appointment by the secured creditor could be managed through independent valuation and legal advice. Communication difficulties and creditor dissatisfaction, without more, were insufficient.
5. The termination application was refused, the removal application was dismissed, and no further order was made on the directions application. Consequential matters and costs were adjourned.