Paul Allen v Sines Parks Holdings Limited

For an interim injunction, the applicant must show a serious issue to be tried and satisfy the court that interim protection is justified in the circumstances. Under s 238 of the Insolvency Act 1986, consideration includes contractual benefits provided to the company, not merely an immediate monetary payment. Rights granted by agreement may cease to bind successors following enforcement and sale by a prior chargee, particularly where later tenancies derive from the purchaser’s title. A creditor may not circumvent the statutory administration moratorium by self-help enforcement. The court may restrain interference with the administration pending a permission application or final determination, while allowing narrowly defined inspection necessary to preserve the parties’ positions.

The applicants, joint administrators of six companies operating mobile-home sites, sought interim relief against the respondent. The relief was intended to prevent entry to the sites, development of plots, placement and sale of mobile homes, and purported licensing under a transfer agreement.

The principal application alleged that the transfer agreement was a transaction at an undervalue under s 238 of the Insolvency Act 1986. A second ground relied on the companies’ temporary tenancies following enforcement and sale by a prior chargee. The court considered whether there was a serious issue to be tried concerning the survival and enforceability of the respondent’s contractual rights, and whether interim protection was justified.

1. The s 238 claim, as pleaded, disclosed no serious issue to be tried. Although the £8 million payment reduced a debt owed by a third party, the transfer agreement provided the companies with further contractual benefits, including the retransfer of plots after development and entitlement to income generated from the works and subsequent sales. The application was therefore liable to be struck out for disclosing no reasonable grounds, subject to any application to amend.

2. Alternatively, if the payment and wider group arrangements were considered, there was a serious issue as to whether the companies received consideration within s 238(2). That issue would require trial. Any potential compensation claim based on the later sale proceeds was, however, too remote to establish an adequate basis for the proposed injunction.

3. There was a serious issue to be tried concerning whether the respondent’s rights under the transfer agreement and settlement deed survived the prior chargee’s possession and sale of the sites. The rights appeared to have been subject to the registered security. The companies’ later tenancies derived from the purchasers’ title, which was not shown to remain encumbered by those rights.

4. There was also a serious issue as to whether the respondent could interfere with the administrators’ statutory functions by enforcing contractual rights without consent or permission to lift the statutory moratorium. A party cannot avoid that requirement by forcing entry or relying on proceedings brought to restrain it. Any application for permission would require consideration of the principles in Re Atlantic Computer Systems plc [1992] Ch 505.

5. Applying the flexible interim-injunction approach, damages were inadequate because the proposed conduct would interfere with the administration and arguably constitute trespass. The balance of convenience favoured protecting the companies’ position and maintaining the plots in their existing form. An interim injunction was granted pending an expedited hearing, subject to permitting the respondent and up to two surveyors to inspect and survey the plots, and subject to the undertakings given.

Not stated in the judgment.