Administration order - Administrator - Appointment of administrator

Stanley International Betting Ltd v Stanleybet UK Investments Ltd and Others: Chancery Division: 12 July 2011Stanley International Betting Ltd v Stanleybet UK Investments Ltd and Others: Chancery Division (Stuart Isaacs QC (sitting as a deputy judge of the High Court)): 12 July 2011

The applicant was a betting company. LS, the second respondent, was a company wholly owned by the estate of S, an individual who died in 2009. S’s representatives were the third and fourth respondents (collectively, the estate).

In July 2010, the applicant and LS set up SUKI, the first respondent, a joint venture created to acquire shares in STS, a Polish gaming company. The applicant and SUKI subsequently entered into a services agreement, under which the applicant was to provide accounting and management services to SUKI in return for a fee.

Around the end of 2009, discussions occurred between the shareholders as to the future of SUKI. It was suggested that the applicant should take over the business of SUKI but without the estate having an ongoing involvement in SUKI. The estate was reluctant to provide funding for working capital against a background of concern about the worsening performance of STS, which provided SUKI’s income by way of dividends on its shareholding in STS. In due course, the applicant applied for an administration order in respect of SUKI.

The issue before the court was who ought to be appointed as administrators. Although the parties agreed that administrators ought to be appointed, the applicant submitted that B and G, two individuals from PFK LLP, ought to be appointed, whereas the estate contended that W and H, two individuals from a firm of chartered accountants, ought to be appointed.

The estate contended that: (i) it was SUKI’s largest creditor; (ii) Stanley International Betting’s (SIB) conduct in managing STS’s business pursuant to the services agreement needed investigation; (iii) PKF LLP had, or appeared to have, aligned itself too closely with SIB's interests in that, inter alia: first, it proposed to maintain the applicant’s position in STS during the administration; second, it would have to rely on information provided by the applicant in circumstances where it had not been forthcoming in the provision of information to the estate; third, it was proposing to act as brokers in the shareholders’ dispute; and fourth, it had instructed the same solicitors as the applicant.

The court ruled: On the authorities, the test in relation to the appointment of a liquidator would be whether it would be conducive to both the proper operation of the process of liquidation and to justice as between all those interested in the liquidation.

Although the majority vote of the creditors would in the normal course prevail, creditors holding the majority vote would not have an absolute right to the choice of liquidator. A liquidator ought not to be a person, nor be the choice of a person, who had a duty or purpose which conflicted with the duties of the liquidator.

He ought in particular not to be the nominee of a person against whom the company had hostile or conflicting claims, or whose conduct in relation to the affairs of the company was under investigation. By contrast, it was not an objection to a liquidator that he was allied to or the choice of a person who was concerned to pursue the claims of the company through the liquidator (see [35] of the judgment).

In the instant case, it was appropriate to approach the issue on the basis that the proposed administrators were all equally competent to perform the role of administrator. Although there were matters regarding STS that required investigation, the estate had not established that the creditors at large could not have confidence in B and G’s ability to conduct a thorough and vigorous investigation to the extent necessary to do so.

Their integrity and professional skill were not in doubt, nor had they been tainted by being too close to those whom the estate considered to have contributed to the deterioration of the STS business so that justice would not be seen to be done by their appointment. There was no basis for concluding that B and G had not viewed or would not view matters critically.

Any investigations would take some time and, if the estate considered that the administrators were not carrying out their role properly, it would be open for the matter to return to court.

Although it might be the case that the estate had not always been given all of the information requested by it, such information would not taint B and G as administrators. There was no reason to suppose that B and G would not be seen to be carrying out a rigorous and independent professional analysis of what was in the best interest of the creditors.

There would be nothing objectionable in B and G brokering a resolution of the dispute between the shareholders or anything that would render them inappropriate people to be appointed as administrators.

The strategy proposed by B and G was a coherent one which had the prospect of achieving one of the statutory purposes (see [31], [45]-[55]). B and W would be appointed as the administrators of SUKI (see [56] of the judgment).

Jamie Riley (instructed by DLA Piper) for the claimant; Lexa Hilliard QC and Tina Kyriakides (instructed by Davies Arnold Cooper) for the defendants.