Administrative receivers appointed by principal creditor under debenture - receivers obtaining company's documents for creditor's action against third party without considering company's interests - receivers exceeding powers

GE Capital Commercial Finance Ltd v Sutton; Anglo Petroleum Ltd v GE Capital Commercial Finance Ltd: CA (Lords Justice Chadwick and Rix):19 March 2004

The company entered into a debt-factoring agreement with the principal creditor secured by an all assets debenture.

After the company defaulted, and a compromise with guarantees failed, evidence emerged of financial irregularities within the company.

The principal creditor, acting under the debenture, appointed administrative receivers, brought an action against the guarantor, and requested documents from the receivers concerning the company's indebtedness and the guarantees.

The receivers obtained all the documents from the company's solicitors and passed them directly to the principal creditor without considering whether that was in the company's interests.

The company by its director brought an action against the principal creditor.

Both the company and the guarantor sought the return of the documents, claiming privilege.

Their applications were refused.

They appealed.

Geraldine Andrews QC and Nigel Dougherty (instructed by Stockler Brunton) for the guarantor and the company; Catherine Newman QC (instructed by DLA) for the principal creditor.

Held, allowing the appeals, that the powers conferred on an administrative receiver under the terms of his appointment or by statute were to enable him to perform his functions of getting in, protecting and realising the assets for the benefit of the company and its creditors, not to assist the principal creditor in litigation against a third party; that it was outside the powers of administrative receivers appointed under a debenture to demand from the company's solicitors at the principal creditor's request all documents concerning the company's indebtedness to the principal creditor, and to send them directly to the principal creditor's solicitors without first considering whether disclosure served the company's interests; that the company was entitled to return of the documents; and that if the receivers wished to disclose any of them to the creditor they should apply to the court.

Winding up - petition to wind up company on grounds of public interest - court slow to accept undertakings in preference to making winding-up order

In re Supporting Link Alliance Ltd: ChD (Sir Andrew Morritt Vice-Chancellor): 19 March 2004

The Secretary of State for Trade and Industry presented a petition to wind up a company on public interest grounds.

The principal director contended that since the company had ceased to carry on business in the manner of which complaint was made by the secretary of state, the petition could be disposed of by way of undertakings given to the court.

Robert Hildyard QC and Sarah Harman (instructed by the Treasury Solicitor) for the secretary of state; Anthony Elleray QC (instructed by Paul Ross & Co, Manchester) for the company.

Held, granting the petition, that, although the court had power to accept undertakings and (on that basis) to dismiss a petition to wind up presented by the secretary of state on public interest grounds, the court should be very slow to accept undertakings in preference to making a winding-up order unless the secretary of state were content that the petition be disposed of in that way; that, if the court were satisfied that the offending business had ceased and it were prepared to trust existing management, then it might be prepared to dismiss the petition altogether; but that, if it were not so satisfied or did not trust the existing management, it was hard to envisage a case in which it would be appropriate to dismiss the petition on undertakings as to the future conduct of the company's business; and that, in the circumstances, it was appropriate to wind up the company.