Hockin & Ors v Marsden & Ors

The application before the court concerns a company called London & Westcountry Estates Limited (“the Company”), which is now in administration.

The Company is based in Plymouth and carried on business owning and letting commercial property. It did so on a fairly substantial scale: it is said at one time to have been making profits of £50,000 a month and the bank lending which has led to the application amounted to some £55 million. Unfortunately, its financial fortunes went downhill and administrators were appointed in March 2012.

The Company is wholly owned by a holding company called The Hockin Dinamic Group Limited (“HDG”). The shareholders in HDG are Mr. Michael Hockin and Mrs. Diane Hockin, whom without intending any disrespect I shall call Michael and Diane. They, together with their three children, either are or formerly were directors of the Company, and one of the children, Mr Matthew Hockin, was its finance director, whom I shall likewise call Matthew.

It is now claimed by Michael and Diane that the Company’s failure was the fault of the banks responsible for funding its operations. The complaint centres on the Company’s entering into an interest swap agreement in July 2008 and is one of mis- selling. The funding with which I am concerned was extended by RBS acting on behalf of Natwest, Natwest being part of the RBS group. No distinction has been drawn in submissions before me between RBS and Natwest and I refer for convenience simply to the Banks. I deal later with the claims in a little more detail.

The administrators have decided that they do not wish to pursue the claims which it is said that the Company has against the Banks. In consequence, Michael and Diane, putting it loosely, apply for an order to direct the administrators to assign the claims to them under statutory provisions which I shall have to consider in a moment. More precisely, the Applicants when the application was launched last December comprised HDG, Michael and Diane, and Lonwest Limited (“Lonwest”), the last being another company owned by Michael and Diane. HDG, however, has since gone into winding- up and no longer pursues the application, so only the latter three Applicants are now before the court.

The Applicants appeared by Mr. Stephen Auld, Q.C., and Mr. Andrew Thomas; the administrators, the Respondents to the application, appeared by Mr. Lloyd Tamlyn, who vigorously resisted the application on their behalf.

The application is made under paragraph 74 of Schedule B1 to the Insolvency Act 1986, which was inserted by the Enterprise Act 2002. Sub-paragraph (1) reads,

On an application under paragraph 74, the court may, by sub-paragraphs (3) and (4), make any order it thinks fit, including an order requiring an administrator to do or not to do a specified thing. There is no doubt that the court has jurisdiction to direct the assignment of a claim. An administrator himself is empowered to sell or otherwise dispose of a company’s property (under paragraph 60 of Schedule B1 and paragraph 2 of Schedule 1) and the term ‘property’ includes a thing in action (section 436(1)). Assignments by office-holders are not unusual; a liquidator, who has comparable powers, was directed to assign a claim in Hamilton v. Official Receiver [1998] B.P.I.R. 602.

It was not suggested that sub-paragraphs (5) and (6) of paragraph 74 had any relevance to this application.

Before I deal with the evidence, I should refer to points taken by Mr. Tamlyn about the scope of paragraph 74.

First, he drew attention to the fact that an application to the court can be made only by a creditor or a member of the company.

HDG, originally the first Applicant, is a member of the Company and so was entitled to apply but, as I have said, it no longer pursues the application. Michael and Diane, though members of HDG, are not members of the Company. Diane is in fact a creditor but Michael is not. Lonwest is neither a creditor nor a member of the Company. Its appearance in the proceedings is no doubt attributable to the fact that a few days before the appointment of the administrators the Company purported to assign its claims against the Banks to Lonwest for £1. Nothing much was said about that assignment before me, though it is obvious that if it were valid no assignment by the administrators, whether voluntarily or at the direction of the court, could be made, and it was accepted by the Applicants that it was not material to this application. No doubt it is sensible for Lonwest to be bound by the result of this application but it has no standing to make it.

It follows that of the remaining Applicants only Diane is qualified to apply. She is a secured creditor of the company for some £479,000. Her security, however, is postponed to that of the principal creditor, Isobel AssetCo Limited (“Isobel”), and the administrators estimate a shortfall of some £17 million as regards Isobel. (Isobel, which is owned as to 75% by the Banks, is the assignee of the Company’s debt to them.) If Diane were to waive her security she would be entitled to a dividend from the “prescribed part” set aside under section 176A of the 1986 Act. The administrators estimate the prescribed part to be some £410,000 and in any event it cannot exceed £600,000. They also estimate the claims against the prescribed part to total some £14.8 million, so that the dividend from it would amount to around 2.8 pence in the pound. The administrators’ figures necessarily assume no recovery in respect of the claims which the Applicants wish to see pursued, since the administrators have decided not to pursue them.

Mr. Tamlyn submitted, correctly in my view, that because paragraph 74 could be invoked only by a creditor or a member, the reference in it to unfair harm was a reference to unfair harm to an applicant as a creditor or member. It was not intended to provide a facility for someone who merely wished to purchase a claim as an investment.

Mr. Tamlyn went on to submit that it was open to the court to interfere with the administrators’ decision not to pursue the claims only if the decision was perverse. The submission derives from such decisions as Re Edennote Ltd [1996] 2 B.C.L.C. 389, in which the Court of Appeal, relying on earlier authority, held that the court should not interfere with the act of a liquidator (fraud and bad faith apart) unless he had done something so unreasonable and absurd that no reasonable person would have done it – a test conveniently summarised as one of perversity. Edennote was concerned with sections 167 and 168 of the 1986 Act and those sections give the court powers to interfere expressed in entirely general terms. The same is true of section 303, which is applicable to trustees in bankruptcy.

I do not accept Mr. Tamlyn’s submission. Sensible though it might be to have a single test applicable to all office-holders, I consider that the wording of paragraph 74 precludes it. Unlike sections 167, 168 and 303, it lays down its own test for interference, a test of unfair harm. That is evidently not the same thing as a test of perversity. To adopt a test of perversity in place of the statutory test would plainly be impermissible and to adopt it in addition to the statutory test would lack any legislative warrant. Mr. Tamlyn did not cite any authority applicable to administrators and the point, so far as I am aware, has not been raised before, whether in connexion with paragraph 74 or with the provision it replaced, section 27 of the 1986 Act (which referred to unfair prejudice). I am conscious also that paragraph 74 caters not merely for a challenge to an individual decision of an administrator but also for a challenge to a course of conduct, which might lead (under paragraph 74(4)(d)) to the discharge of the administrator. It is not easy to see how a test of perversity would be suitable for a challenge to a course of conduct. In my view, the statutory test applies without further gloss.

Mr. Tamlyn also submitted that paragraph 74 could not be invoked unless the applicant was complaining of some discrimination between one creditor and another or between one member and another. Unfairness within the paragraph meant, he said, unequal or differential treatment given to Diane (or a class to which she belonged). He accepted that his submission would have the consequence that an idiotic decision by an administrator which affected all creditors equally was incapable of challenge under paragraph 74.

The submission has to get over the express wording of paragraph 74(1), which twice refers to harming “the interests of the applicant (whether alone or in common with some or all other members or creditors)”. In support of it Mr. Tamlyn cites Re Coniston Hotel (Kent) LLP [2013] EWHC 93 (Ch), in which Norris J. said (at [36]),

“Paragraph 74 does not exist to enable individually disgruntled creditors to pursue administrators for compensation. Its focus is “unfair harm”: and that, I think, will ordinarily mean unequal or differential treatment to the disadvantage of the applicant (or applicant class) which cannot be justified by reference to the interests of the creditors as a whole or to achieving the objective of the administration. (The reference to an administrator acting unfairly to harm the interests of “all other members or creditors”, so that unequal or differential treatment had not occurred, would (I think) only arise in relation to issues concerning the expenses of the administration, or where the administrator was also an office holder in another insolvency and acted unfairly prejudicially as regards the stakeholders in Company A in promoting the interests the stakeholders in Company B).”

That passage was taken literally in a decision in Northern Ireland, Curistan v. Keenan [2013] NICh 13, where an application under the Northern Ireland equivalent of paragraph 74 was rejected because the decision challenged did not discriminate against the applicant.

Paragraph 74 requires unfair harm, not merely harm, and the requirement of unfairness certainly prevents a creditor complaining of a disadvantage to his own interests when the disadvantage is justifiable by reference to the interests of the creditors as a whole. But I do not myself see why the requisite unfairness must necessarily be found in an unjustifiable discrimination. A lack of commercial justification for a decision causing harm to the creditors as a whole may be unfair in the sense that the harm is not one which they should be expected to suffer. I am not sure that Norris J. had such a case in mind in the passage quoted from Coniston. In Coniston, the applicants (who appear to have been acting in person earlier in the proceedings) had muddled claims for professional negligence against the administrators for acts before the administration commenced with claims for harm suffered by them as members or creditors and the decision, given on a striking-out application, was one of case management.

My view is that a differential treatment is not the only form of unfairness capable of satisfying paragraph 74 and so I do not accept Mr. Tamlyn’s submission.

Lastly, it was common ground that the court should not direct the assignment of a claim if it was frivolous or vexatious. There is a point of public policy here, since it would be unjust to direct an assignment if the consequence was to submit a third party, the proposed defendant, to being harassed with a claim having no serious prospect of success. There may also be a point of jurisdiction, since it is difficult to see that a decision on the part of the administrators neither to assign nor to pursue a claim having no serious prospect of success could give rise to unfair harm within paragraph 74.

Mr. Tamlyn drew attention to Re Papaloizou [1999] B.P.I.R. 106, which concerned an application to set aside an assignment of a claim by a trustee in bankruptcy. Browne- Wilkinson J. said (at 112),

“It must not be forgotten that by so doing they [sc. trustees in bankruptcy] are enabling the bankrupt to conduct possibly vexatious litigation against third parties who will have no effective remedy in costs against him, since all his assets have been vested in the trustee. ... My present view is that it should not be done unless clear and certain benefits are obtained for the creditors.”

The point as to costs is primarily material to bankruptcy but the point as to the undesirability of permitting vexatious litigation is general. In Cummings v. Official Receiver [2002] EWHC 2894 (Ch), where the bankrupt was seeking to compel an assignment of claims, Blackburne J. cited Papaloizou (amongst other authorities) and said,

“But if Mr. Cummings can make information available about these two causes of action which demonstrate that they are not frivolous or vexatious, or at any rate that one of them is not, then either the Official Receiver should pursue those claims or, if he is not willing to do that himself, I cannot for my part see any reason why he should not assign the benefit of them (or of the cause of action which has merit) back to Mr. Cummings.”

So it is necessary for the Applicants, more particularly for Diane, to establish that one or more of the claims they assert is not frivolous or vexatious. The Applicants suggested in their skeleton argument that the assignment should proceed simply because they were successful business people, had had experienced legal advice and would not be seeking to pursue hopeless claims. That is not in my view the right approach. I accept that the court should not engage in a mini-trial but it is required to scrutinise the proposed claims. Mr. Tamlyn was right to take me through what the administrators consider to be their weaknesses.

I therefore turn to the evidence.

I take the following summary largely but not entirely from the Applicants’ skeleton argument.

By July 2008, when the interest swap agreement was made, the Banks had already lent some £55 million to the Company. The Company had also entered into previous ten-year swap agreements with the Banks. Funding of £15 million was due for renewal in September 2008 and in the first half of 2008 there was a proposal to re- schedule the entire borrowing for a three-year term.

From April 2008 there were negotiations between the Company and the Banks, mostly by telephone, though there were two face-to-face meetings. On the company’s side, the negotiations were conducted by Matthew, the finance director. On the Banks’ side were Mr. Craig Scott and Mr. Charles Berwick. According to the Applicants, Mr. Scott approached the Company several times during the period April to June 2008, saying that he was sure that interest rates were due to increase and that the Company needed to move quickly to avoid increased rates. There was a meeting between Mr. Scott and Matthew in Bristol on 12th May 2008, where they were joined by Mr. Berwick, and swaps were discussed. On 9th June 2008, the three of them discussed the proposed re-financing by telephone. The next day Mr. Berwick e- mailed to Matthew, attaching a revised copy of a written presentation he had given at the meeting in Bristol. On 30th June 2008 Mr. Scott telephoned Matthew, suggesting that the company should opt for a ten-year swap period but include three-year break options which would link with the intended maturity of the new loan facility. Matthew, according to the Applicants, discussed the proposed break with Mr. Scott, who assured him that no costs or expenses would be charged to the Company if the break option were exercised. A week later, on 7th July 2008, Mr. Berwick sent Matthew an e-mail with a brief outline of the proposed structure, mentioning the credit break.

In the event, the facility agreement was signed on behalf of the Banks on 10th July 2008 and on behalf of the Company on the following day. The swap agreement was concluded, it is common ground, in a short telephone call on the former day between Matthew and Mr Berwick. On the former day too the banks faxed an acknowledgment to the Company referring to the swap and repeating the reference to a mutual credit break every three years. The full terms of the swap agreement are to be found in a “confirmation” from the Banks dated 10th July 2008 but seemingly received by the Company only on 29th July 2008. Matthew signed it for the Company and faxed back a copy the next day. The confirmation ran to eight pages but incorporated the rather lengthier definitions of the International Swaps and Derivatives Association, Inc. (“ISDA”) of 2006.

The swap agreement was based on a notional sum of £55 million. Under its terms, the company paid a fixed rate of interest for the first three years (5.52%). On the third anniversary, however, and quarterly thereafter, the Banks had the right to flip the rate so that the Company would be switched to a floating rate, Natwest’s base rate. As I understand it, the Applicants make no complaint about this provision in itself. The complaint is rather that the Company had understood that it was matched by a cost- free credit break, so that the Company could have terminated the agreement on the third anniversary and hence have avoided the effect of the flip. In fact, although there was a provision for early termination, it was not cost-free. In the confirmation, “Optional Early Termination”, a defined term, is stated to be applicable and reference to the ISDA definitions (article 18) shows that a payment would then fall due in the only circumstances in which the Banks would have wished to exercise the right to flip. At no point during the life of the agreement could the Company have paid less than the fixed rate.

It is now said by the Applicants, though the allegation is unparticularised, that the Company became unable to continue trading as a result of its obligations under the swap agreement. The administrators’ statement of proposals, in section 1.1, notes that “by early 2012, we understand that the company was not sufficiently cash generative to cover the interest costs on its loan facilities”. According to the Applicants, there have been further consequences, in that the administrators have made forced sales of some of the properties, and the administration is itself expensive.

The claims which the Applicants wish to be able to pursue were helpfully analysed by Mr. Tamlyn as falling into three, namely breach of a duty of care said to have been owed by the Banks and two alleged misrepresentations.

It is said first that the Banks owed a positive duty to advise the Company as to its exposure under the swap agreement before the company was committed.

Little was said about this head of claim in submissions and I shall take it shortly. It is well established, and the Applicants acknowledged, that a bank negotiating a transaction with another party “owes in the first instance no duty of care to explain the nature or effect of the proposed arrangement to that other party”, a quotation from Mance J.’s judgment in Bankers Trust International plc v. Sejahtera [1996] C.L.C. 518 at 533. Mance J. went on to qualify the general proposition by saying that if a bank does give an explanation or tender advice, it owes a duty to do so fully accurately and properly. No doubt too a bank may on particular facts be held to have assumed a general advisory role in respect of the transaction.

As to the former qualification, it seems to add nothing to the claims for misrepresentation.

As to the latter, elaborate obligations said to have been owed by the Banks are canvassed in the main witness statement of Mr. Ian Mendelsohn, the solicitor having the conduct of the application for the Applicants (paragraphs 71 and 72). I was not shown any material justifying the conclusion that the Banks were assuming a general duty to advise. The Banks no doubt expressed views in the course of negotiation but that would plainly not be good enough. In his submissions, Mr. Auld from time to time referred in an expansive way to such-and-such being matters for trial but it ought to be possible for the Applicants to put before the court now the material on which they rely if it exists. They have not done so.

The first of the representations relied on, though Mr. Mendelsohn puts them the other way round, is that the Banks stated that interest rates “were likely to rise in the longer term” (paragraph 73). Mr. Mendelsohn, conveying Matthew’s evidence, says that on several occasions in April, May and June 2008 Mr. Scott stated that he was certain that interest rates were due to increase substantially and that Mr. Berwick told him in the telephone conversation of 9th June 2008 that interest rates were going to rise (paragraphs 46 and 48). In reliance on that representation, it is said, the Company entered the swap agreement.

There is more than one difficulty with this claim. Even if the statement was made, it was not a representation as to an existing fact. It was a prediction. Such a statement cannot be said to be either true or false when made. Nor can it be understood as a warranty that future events will conform to the prediction. It is true that even a prediction carries with it an implied representation that it genuinely represents the speaker’s actual opinion and may also carry with it an implied representation that the speaker has reasonable grounds for making it. The latter but not the former is relied on by the Applicants, Mr Mendelsohn asserting that the Banks had no reasonable grounds for making such a representation (paragraph 75). The particulars he gives (paragraph 77) are (i) that interest rates during the period of the proposed swap were unpredictable and (ii) that the market expectation, as revealed in gilt projections and press coverage, was that rates would fall. In my view, the nature of the representation alleged is not such that it could have been supported by reasonable grounds in the sense of facts capable of being proved or disproved. It is not like, say, a valuation of a property, which is a matter of opinion but can be supported by facts, such as comparable transactions.

Moreover, the administrators are able to point to evidence which contradicts the allegation. The written presentation given by Mr. Berwick in Bristol in May 2008 included a sheet headed “... and yet the market (economic consensus) is that rates will be cut by the end of this year”. A transcript has been supplied of the telephone conversation on 9th June 2008, which was quite lengthy, and I consider that a fair summary is that the representatives of the Banks referred to increases in rates as having already happened but that the only reasonably clear prediction as to the future was that Mr. Berwick said that the house view had been that rates would be “on hold for the rest of the year” and that “probably early next year we’ll see a cut”.

Accordingly, on the present evidence I regard this as a claim which it would be vexatious to make.

The other representation said to have been made by the Banks is that the Company had the right under the swap agreement to terminate it without cost on its third anniversary. The representation is said to have been made by Mr. Scott in the telephone call on 30th June 2008 and again when Matthew telephoned him on 7th July 2008 (Mr Mendelsohn’s main witness statement, paragraphs 53 and 54).

Matthew evidently spoke also to Mr. Berwick on the latter date, since Mr. Berwick then sent him an e-mail referring to a conversation. The e-mail included the sentence,

“Note, within the hedge on the third anniversary and every three years thereafter there is a mutual credit break (rationale being to coincide with the maturity date of the funding)”.

The credit break was also mentioned in the conversation on 10th July 2008 with Mr. Berwick in which Matthew committed the Company to the swap agreement (that conversation also having been transcribed) and it appears in the acknowledgment sent by the Banks to the Company on the same day.

The credit break is not expressed in those documents to be without cost. Nonetheless, the notion of a break conveys the idea of protection for the party invoking the break option. In the e-mail, a link is explicitly made with the maturity of the funding, which I read as calling attention to a benefit for the Company. Establishing an express statement that the break option would be without cost will be dependent on Matthew’s evidence but I regard it as supported by the documents and by the telephone conversation.

Mr. Tamlyn drew my attention to the manuscript asterisks which now appear on copies of the e-mail and the acknowledgment next to the statements about the credit break. Matthew has said that they were added by Mr. Scott or Mr. Berwick but Mr. Tamlyn has satisfied me that it is at any rate difficult to see how that that can be so. At most, however, the point goes to Matthew’s credibility and the fact remains that both documents contain the statements.

Mr. Tamlyn submitted that even if the allegation were made good the company faced the difficulty that the confirmation made clear, by reference to the 2006 ISDA definitions, that the Company had no right to terminate at no cost. He also relied on various clauses in the confirmation by which the Company agreed that it had relied on its own judgment, that it had not relied on any communication from the Banks as a recommendation to enter into the swap agreement, that it could understand the terms of the transaction and that the Banks were not acting as adviser to it.

Those terms have, in my view, to be read in the context of the rest of the documentation. The confirmation is only eight pages long but it relies throughout on the terms used in the 2006 ISDA definitions and is meaningless without them. Those definitions are dense, occupy over 150 pages and require a ten-page index of their own. I would not treat the mere fact that they contain a given provision as making anything clear. A misrepresentation as to a credit break is not in my view corrected by such a document.

It is, of course, perfectly possible to contract on terms that the parties will treat each other as having made no representations, whether or not contrary to the fact: see Springwell Navigation Corp. v. JP Morgan Chase Bank [2010] EWCA Civ 1221. That is the thrust of the clauses in the confirmation which I have paraphrased. But I do not consider that any of those clauses are obviously apt to refer to a misrepresentation as to the terms of the transaction itself, or more accurately the definitions incorporated in it. If they do, however, then the Company would have a case for saying that they should be treated as exclusion clauses and so within the purview of section 3(3) of the Misrepresentation Act 1967, the Banks then having the obligation of establishing that they meet the requirement of reasonableness stated in the Unfair contract Terms Act 1977.

I therefore regard the Company as having a viable claim based on a misrepresentation as to the credit break.

I then come to the consequences for the application of paragraph 74 of the 1986 Act, which turns on whether the administrators are acting or propose to act or have acted so as unfairly to harm the interests of Diane, the only eligible Applicant, with or without other creditors.

I am not in the least surprised that the administrators have declined to pursue the claims themselves. The claims could be made good only by reliance on evidence from directors of the Company, primarily Matthew. The directors would have nothing to lose and the administrators would be spending creditors’ money on the costs. The decision against pursuing them is plainly reasonable.

The question, however, is not whether it is justifiable to decline to pursue any of the claims but whether it is justifiable also to decline to assign them, so that they will be lost. The limitation period will soon begin to operate. I have already construed paragraph 74 as not requiring a differential treatment between one creditor and another. Since it is proposed that an assignment should be on terms that the administrators would receive a percentage of any recoveries, any success if the Applicants pursued the claims would be a benefit to the creditors; conversely, if the claims failed, the creditors would have suffered no prejudice. The administrators have criticised the proposed percentage, which is 10% (coupled with a nominal lump sum of £5,000), as derisory. I take the point to be that it is so small as to be illusory but in that sense I do not consider it to be derisory. In those circumstances, and in common with Laddie J. in Hamilton v. Official Receiver and Blackburne J. in Cummings v. Official Receiver, I can see no sense in refusing an assignment. (The former decision was mentioned, with approval or at any rate without dissent, by the Court of Appeal in Mahomed v. Morris [2000] All ER (D) 193 at [25].) I consider that it would unfairly harm the creditors if all the claims were simply lost.

The largest beneficiary of any recoveries passed back to the administrators would be Isobel. Isobel, as I have mentioned, is owned as to 75% by the Banks and the Banks would undoubtedly prefer the claims to be abandoned; but it is harm to the creditors as such which is material for paragraph 74 and in that sense it is in Isobel’s interests for the claims to be pursued.

Accordingly, I propose to direct the administrators to effect an assignment.

I turn to consider the terms of the assignment.

The first question is which claims should be assigned. I have held that only one of the proposed claims passes what I may call the vexatiousness test. Should the assignment be limited to that claim?

I have no doubt that if there were entirely distinct claims of which one or more was vexatious and one or more was not, the assignment should exclude any vexatious claim. In this case, however, the proposed claims are closely bound up with each other. That is clearly so in the case of the alleged duty of care to advise and the alleged misrepresentation as to the credit break but it is also true of the alleged misrepresentation as to interest rates. It seems to me that to try to specify in advance precisely what claims the Applicants as claimants could and could not pursue would be a difficult exercise, likely to be productive of argument and expense without corresponding benefit. The draft deed prepared by the Applicants refers generally to claims arising out of what they call mis-selling and my view is that I should adopt that provision.

Mr. Tamlyn submitted that if I were minded to direct an assignment in principle, I was not limited to the consideration proposed by the Applicants. He pointed out that however poorly the administrators thought of the proposed claims, they still had a negotiating position in that they could refuse an assignment. He accepted my analogy of a ransom strip, which has no practical use to the owner except for the ability it gives him to extract a price from someone for whom it does have a use.

The court is acting in the interests of the creditors and so in principle it should see that the consideration is the best that can be obtained. Unlike the owner of the ransom strip, however, the administrators are constrained by the fact that their veto may be overruled by the court and by this stage the court has expressed itself in favour of an assignment. There are no other potential assignees in prospect and in the nature of things it is very unlikely that there would be. If I were to stand the application over for negotiation between the Applicants and the administrators, it is difficult to see what negotiating position the administrators would have. If I were to fix a higher consideration at a higher figure, I could not compel the Applicants to accept it and I would have no idea whether they would accept it, so that the benefit to the creditors might be lost. Practically speaking, therefore, I see no alternative to accepting the Applicants’ proposal as to the consideration they will provide.

The administrators have expressed concern that if the claims are litigated and fail, they or the Company may be exposed to a third party costs order. The risk that such an order will be made seems to me very remote. The administrators will not have controlled or funded the litigation and will in fact have done their best to ensure that it did not take place. But I accept that they should be protected.

The Applicants have apparently received encouragement to think that they may be able to obtain after-the-event insurance but understandably the insurers will make no proposal until they know that they are dealing with people having the right to sue. I cannot assume that insurance will be forthcoming.

It is part of the terms proposed by the Applicants that they should indemnify the Company against any third party costs order. The proposed indemnity does not extend to the administrators personally but I cannot at present see why it should not do so. I consider that the administrators and the Company are entitled to be satisfied that the indemnity is worth something, that is, that the Applicants between them have the means to meet any liability under it should that become necessary. Evidence as to the Applicants’ means appears to have been provided only in a witness statement dated 10th March 2014, a few days before the hearing, and then in such general terms as to be of little value. Greater detail has since been given and I shall if necessary hear brief submissions on it.

A draft assignment exists in terms prepared by the Applicants. Again, I shall if necessary hear brief submissions on it.