AMCD (Property Holdings Ltd.), Re

MR JUSTICE LEWISON: This is an application for the making of an administration order in respect of a company called AMCD (Property Holdings Limited). That company is a special purpose vehicle whose object in life is to manage a building project being carried out for another company called Toha Properties Limited, which is an offshore company based in Jersey. The current phase of the building project is almost complete. I am told that it is in fact 95 per cent complete and the contractors are carrying out various snagging works which include painting, grouting, exterior terracing and landscaping. The properties comprised in the building project are now on the market.

There has been interest in the properties, although no offers have yet been made. If the properties are sold at their current asking prices, they will fetch something in the region of £2.45 million which, after paying off Toha's borrowing, will leave a very healthy surplus.

The company employed as a consultant a Mr Gower who claims that the company owes him a large amount by way of fee. The amount claimed is in the region of £100,000. On 10 November 2003, he served a statutory demand on the company requiring payment of that amount, and since no payment was made, on 24 February 2004 he presented a winding up petition in the Cheltenham County Court. That petition was served on the company a couple of days later and in the following month it was advertised in the London Gazette.

The petition has been making its way through the Cheltenham County Court and was listed for hearing although that has now been adjourned. On 7 June 2004, Mr Mustoe, who is the sole director of the company -- although in his witness statement he describes himself as “a” director of the company -- applied for an administration order. The administration application filed in accordance with Rule 2.2 of the Insolvency Rules does not specify any object of the administration. In paragraph 2.2 of his witness statement, Mr Mustoe says:

That was the only evidence which was said to have identified the purpose of the administration. In the light of that evidence, I find it extremely surprising that Mr Dwenner was able to say in paragraph 3 of his statement in form 2.2 B made on 2 June 2004:

Mr Mustoe has also exhibited to his witness statement what is said to be an estimated statement of affairs as at 1 June 2004. The company's assets are said to be a debt due from Toha Properties Limited in the sum of £750,000. Its liabilities are said to be, firstly, the directors' loan account of £650,000 and, secondly, the disputed debt which Mr Gower claims of £100,000, thus showing that the company's liabilities exact matching its assets.

Since the debt to Mr Gower is disputed -- and I am told disputed on substantial grounds which will be advanced on the hearing of the winding up petition -- does not seem to me that it lies in Mr Mustoe's mouth to say that the company is balance sheet insolvent. However, Mr Wheater said that the company was insolvent in cash-flow terms because it could not pay its debts as they fell due. There is, however, no evidence of when the directors' loan are due, if they are due at all. I am not, therefore, satisfied that the company is likely to become unable to pay its debts. Therefore, there is in my judgment no jurisdiction to make an administration order.

The second condition which must be satisfied before I can make an administration order is that I must be satisfied that the administration order is reasonably likely to achieve the purpose of administration. The only purpose of administration appears to be to recover the debt due from Tohar Properties in the light of the fact that AMCD (Property Holdings Limited) is not the building contractor, but is only managing the contract and, in view of the fact that the contract is now 95 per cent complete, I fail to see why there is any better prospect of recovering the debt due from Toha Properties Limited via an administrator than through a liquidator if it turns out that a liquidator is appointed on the petition. I find it hard to resist the inference that this is simply a last minute attempt to avoid the consequences of the winding up petition. If AMCD (Properties Holdings Limited) has substantial grounds for disputing the debt claimed by Mr Gower, that will result in a dismissal of the winding up petition. If it has no such grounds than the petition will go ahead. I refuse the application.