Alldey Michael Loveridge v Craig Povey & Ors

This judgment concerned linked applications arising from a family-company dispute over whether the administrators of Breton Park Residential Homes Limited should pursue a rescue of the company as a going concern by means of refinancing, or instead sell the business and assets. The court analysed the administrators’ statutory duty under Paragraph 3 of Schedule B1 to pursue rescue as the primary objective unless it is not reasonably practicable or a better result for creditors would be achieved by another course. The judge considered the standard of review of an administrator’s commercial choice (drawing on Davey v Money and related authority) and the role of members’ interests where a company is balance-sheet solvent (drawing on Re Hat & Mitre).

On the Paragraph 74 jurisdiction, the court held that an applicant must show unfair harm to his or her interests as a member (not merely as a bidder) and that where there is no differential treatment the court will only interfere if the administrator’s decision lacks commercial justification or is perverse. The court dismissed the insolvency application primarily for want of standing because the Family Court had made a debarring order in parallel financial remedy proceedings, and in any event found that the administrators’ decision to pursue the rescue was within the range of reasonable commercial judgment. The interim injunction to restrain the £4 million loan was refused under the American Cyanamid principles because a monetary award (including adjusted buy‑out valuation) would be an adequate remedy and the balance of convenience did not favour an injunction.

Background and procedural posture

• The disputes arise from a long-running family dispute about companies and partnerships operating caravan parks and related trading businesses. Breton Park Residential Homes Limited was put into administration and the administrators proposed to rescue it as a going concern by accepting refinancing advanced through a special purpose vehicle funded by a related family company (Kingsford).
• The principal reliefs sought in the High Court were (i) a direction that the administrators abandon the proposed rescue and instead sell Breton’s business and assets (the "Insolvency Application" under Paragraph 74, Schedule B1, Insolvency Act 1986), and (ii) an interim injunction restraining the payment or onward lending of £4 million advanced by Kingsford to MIAD Group Limited pending resolution of a concurrent unfair‑prejudice petition (the "Injunction Application"). There were ancillary applications for joinder and an extension of the administration period.

Issues framed by the court

• Whether the administrators were mandated to pursue rescue rather than sale, and what standard the court should apply when reviewing the administrators’ choice of statutory objective under Paragraph 3, Schedule B1.
• Whether the applicant (Michael) had standing to bring the Paragraph 74 application given parallel Family Court financial remedy proceedings and a debarring order affecting his ability to contest beneficial ownership of the Breton shares.
• Whether the administrators’ decision caused unfair harm to the applicant as a member under Paragraph 74, Schedule B1.
• Whether an interim injunction should be granted to restrain the £4 million loan on the American Cyanamid principles and whether damages would be an adequate remedy.

Court’s reasoning and disposition

• The court summarised the statutory framework: administrators must pursue rescue under Paragraph 3(1)(a) unless it is not reasonably practicable or Paragraph 3(1)(b) would achieve a better result for creditors. The judge accepted authorities (notably Davey v Money and Re Zinc) that the administrator has a wide commercial margin of appreciation and the court will only intervene if no reasonable administrator could have thought rescue was reasonably practicable (perversity/irrationality standard).
• Where a company is balance‑sheet solvent the interests of members as a whole are relevant; Re Hat & Mitre was considered for the proposition that members’ interests should be considered particularly where creditors’ positions are unaffected. But that does not licence the court to displace a reasonable commercial decision by administrators.
• On Paragraph 74 standing, the court accepted that a bidder does not have standing in that capacity; a member may apply only if the complaint concerns unfair harm to his interests as a member. The Family Court had made directions and a debarring order in the financial remedy proceedings; the judge concluded (on the evidence of repeated non‑engagement by Michael) that Michael lacked standing to pursue the insolvency application concerning his membership rights because he had been debarred from pursuing his case in the parallel Family Court and therefore did not have a legitimate interest as a member.
• Even if standing existed, the judge found Michael could not show the administrators’ decision to pursue the rescue lacked commercial justification or was perverse: Breton was shown to be a viable and profitable concern, the refinancing would pay creditors and provide working capital, and key likely beneficiaries (including the family members and the Family Court claimant) favoured rescue rather than immediate realisation. Accordingly the Insolvency Application was dismissed.
• On the Injunction Application, applying American Cyanamid, the court found a serious issue to be tried but concluded that a monetary remedy would be adequate. The court observed that s.996 Companies Act 2006 and established valuation practice permitted adjustment of a buy‑out figure to reflect hypothetical factual scenarios (for example treating the £4 million as not having been advanced) and the respondent had made an offer to buy the petitioner’s shares on such hypothetical bases. The court therefore refused the interim injunction; it also observed the balance of convenience and risk of irremediable harm to third parties in the Family Court proceedings.

Relief granted

• The Joinder Application to add the Family Court petitioner was granted. The administrators’ application to extend the administration period was granted to 31 May 2024. The Insolvency Application and the Injunction Application were dismissed.

At first instance, the court (Williams J) dismissed the Insolvency Application and the Injunction Application, and granted the Joinder and Extension Applications. The court held that (i) the administrators were entitled to pursue the rescue objective under Paragraph 3 Schedule B1 in the absence of a showing that no reasonable administrator could have thought rescue was reasonably practicable, (ii) Michael lacked standing under Paragraph 74 because of his failure to participate and the debarring order in the parallel family proceedings, and (iii) an interim injunction was unnecessary because monetary relief (including adjustments to a buy‑out valuation under s.996 Companies Act 2006) would be an adequate remedy and the balance of convenience did not favour injunctive relief.