Stephen Louis Nardelli & Ors v Daniel Richardson & Anor

The Applicants sought removal of the joint administrators of three companies in administration under paragraphs 74, 88 and 95 of Schedule B1 to the Insolvency Act 1986, alleging breaches of their duties and that their conduct caused unfair harm to a member. The court analysed the administrators' statutory objectives under paragraph 3 of Schedule B1 and their duties to act in the interests of creditors as a whole while having regard to members where a return to shareholders was likely. The court reviewed allegations under three heads: attempted refinancing and determination of the secured creditor's redemption, shortcomings in the marketing and sales process (including choice of buyer), and the administrators' agreement to increase the secured lender's profit-share on later-phase land.

Having examined contemporaneous documents, modelling and oral evidence, the judge found the administrators had engaged actively with refinance proposals, sought redemption statements, obtained legal and professional advice and followed Savills' marketing advice. The administrators also took commercial decisions, backed by advisers, to prefer a transaction which preserved value and offered the best prospect of creditor repayment and a return to members, even though that reduced short‑term shareholder returns. The court rejected allegations of bad faith, delegation of duties to the secured creditor, and unfair harm sufficient for removal. The Removal Application was dismissed.

Background and parties. The application concerned the administrations of CFJL Property Partners Limited, Portfolio Property Partners Limited and P3ECO (Bicester) Himley Limited, which held inter-linked land and development rights at Himley Village, Bicester. The joint administrators (respondents) were appointed by Desiman as qualifying floating charge holder. The applicants were three former directors/shareholders; by trial two were bankrupt and the third pursued the removal application.

Nature of the claim and relief sought. The application (Removal Application) was made under paragraphs 74, 88 and 95 of Schedule B1 to the Insolvency Act 1986. The applicant alleged that the administrators breached their duties, acted to the advantage of the secured lender Desiman (including agreeing increased profit shares), caused unfair harm to members and thus should be removed and replaced.

Issues for decision.

• Whether the administrators failed properly to engage with refinance proposals and to determine/reduce the secured creditor’s redemption figure.
• Whether the administrators’ marketing and disposal process (including selection of Cala and not accepting other bids) was flawed or improperly favoured the secured creditor.
• Whether the administrators acted improperly in agreeing increases in the secured lender’s profit share for Phase 2/3 land (from 20% to 65% and later to 75%), or should have litigated or otherwise challenged those arrangements.
• Whether any conduct gave good cause for removal under paragraph 88 or unfair harm under paragraph 74.

Court’s reasoning and findings. The judge reviewed statutory principles: administrators' objectives under paragraph 3 Schedule B1, duty to act in creditors' interests while having regard to members where a surplus is likely, the scope of paragraph 74 (unfair harm) and paragraph 88 (removal). On the evidence the administrators had: engaged with refinance approaches (including Arrow), sought and obtained redemption statements from Desiman, obtained and acted upon Savills' marketing advice, modelled estimated outcomes comparing bids (St Congar, Cala, others), taken legal advice (Brechers) on proposed profit‑share changes and on their duties, and made commercial judgments aimed at maximising returns overall. The court found no cogent evidence of dishonesty, bad faith or impermissible delegation to Desiman. The contractual construction and commercial context meant the 20% Phase 2/3 sale fee in the earlier facility was a contingent secured liability and not plainly open to a simple legal attack; the administrators had considered possible challenges and taken advice, but reasonably decided not to litigate given uncertainties, cost and risk to creditor recovery. The choice to proceed with the Cala-related package, and the negotiated increases in profit share in return for further lending and cooperation, were commercially justified choices aimed at achieving the best prospect of creditor repayment and some return to members. The judge rejected the contention that these matters gave good cause for removal or that unfair harm was shown such as to justify the relief sought.

Procedural posture. This was a first-instance determination of a removal application heard over multiple trial days. The judge made detailed factual findings and dismissed the Removal Application.

The Removal Application is dismissed. The court held that the joint administrators had acted within their statutory duties: they engaged with refinance proposals, sought redemption statements, took professional and legal advice, participated in and followed a reasoned marketing process and made commercially justified decisions (including accepting revised commercial terms with the secured lender) aimed at achieving the best result for creditors and a likely return to members. There was no cogent evidence of bad faith, impermissible delegation to the secured lender or unfair harm to members requiring removal under Schedule B1.