On 23 March 2021, the 2011 sale of the One Blackfriars development site in London by administrators was cleared of misfeasance by the High Court, in Re One Blackfriars Ltd [2021] EWHC 684 (Ch).
In a £250 million claim, the company's liquidators had alleged that the former administrators had breached their duties by failing to act independently of the banking syndicate which appointed them, failing to properly assess the value of the site, and selling the site at an undervalue.
Here, we recap the facts of the case and outline the key takeaways to consider.
Case overview
The administration had been agreed as a "light touch administration", a term which meant something different then to what it does now (where administrators authorise directors to continue to exercise management powers). As an Objective 3 administration (to make a distribution to secured or preferential creditors), the administrators were entitled to put the interests of a secured creditor above the interests of other creditors, subject to a duty to avoid unnecessary harm.
The liquidators alleged the administrators effectively surrendered their discretion and control to the banking syndicate. However, the High Court accepted that the administrators acted properly and independently, and the reference to "light touch" related only to the level of day to day management (and therefore fees) expected.
In dismissing all the liquidators' wide-ranging allegations, the High Court also found that:
- the administrators properly marketed the development site
- they were entitled to instruct and rely on the advice of CBRE and DP9 as agents and planning consultants, and
- it was reasonable for them to not pursue a revised planning application, and to rely on proper marketing rather than obtaining a further valuation.
Key takeaways
The court followed the principles laid down in Davey v Money in holding that:
- the administrators' duty to obtain the best reasonably obtainable price is not absolute – it is only to take reasonable care to do so
- the administrators' duty upon sale was not "non-delegable" (in contrast to mortgagees) in that administrators can reasonably rely on advice from agents which appeared to be competent
- in selecting the statutory objective to follow, the standard of review is good faith and rationality.
It's also worth noting that the five-week trial was conducted fully remotely, as a result of the COVID-19 pandemic. This followed the judge's refusal of the liquidators' application in April 2020 (at the outset of the pandemic) for the trial listed for June 2020 to be adjourned (which we previously covered here).
The court remarked on the success of the remote trial, and some of its clear advantages – for example, the trial bundle was displayed on screen to everyone attending the hearing. The judge was able to see witnesses clearer than possible in a physical court room, and did not consider the inability to view witnesses' full body language or demeanour as a significant disadvantage.
The trial was made available to the public by livestream, and was watched by 60 people a day on average, with a peak of 428 viewers. It will be interesting to see the extent to which the developments (and many advantages) in remote trials and hearings are retained and adapted once there is a physical return to court rooms.
Find out more
To discuss the issues raised in this article in more detail, please reach out to a member of our Restructuring & Insolvency or Disputes & Investigations teams.
