In considering whether an administrator had acted properly and independently in connection with the sale of a valuable development site in central London, the High Court determined the scope of an administrator’s duties.
Re One Blackfriars Ltd; Hyde and another v Nygate and another  concerned a development plot in central London owned by a company over which administrators were appointed in October 2010. Following a period of marketing and bidding, the site was sold to St George Group Plc for £77.4m, which went on to develop the One Blackfriars building known as ‘The Vase’. The directors of the company in administration had also made attempts to secure funding or purchasers for the site, but did not manage to achieve this for any higher purchase price.
Liquidators of the company obtained their own expert valuation, which valued the site at the time of sale at £120m. The liquidators alleged that the administrators had sold the site at an undervalue, amended to allege that the breach of duty meant that the company could not be sold as a going concern, and brought a claim against them in respect of failures to:
The High Court found that the administrators had acted appropriately, concluding that the site was sold for its true market value.
The administrators were required to take reasonable care to obtain the best price for the site, and they acted appropriately in relying on the competent agents they had engaged to provide planning and marketing advice. By concluding that the liquidators’ arguments in respect of the marketing of the site were not upheld, the administrators had therefore sold the site at market value.
Expert evidence was fully considered, the court finding that the liquidators’ expert did not enjoy sufficient experience in the valuation, marketing and sale of a site such as that at One Blackfriars. The valuation evidence presented by the liquidators was found to be ‘confused, contradictory and unreliable’.
The court considered this case by reference to Schedule B1 of the Insolvency Act 1986, which sets out three possible outcomes, or objectives, of an administration which are stated in order of priority:
The High Court in Re One Blackfriars Ltd found that, where an administrator chooses not to follow the first objective, this may only be challenged where the decision was made in bad faith or where a reasonable administrator could have found it reasonably practicable to rescue the company as a going concern. The administrators in this case had chosen not to follow the first objective appropriately, and they had acted reasonably in placing reliance on proper marketing by competent experts, by not pursuing any planning application and by giving preference to bids which were not conditional on planning permission.
Advice and action
This case is a helpful authority on the appropriate approaches to be taken by administrators on the sale of development property. Where competent agents are engaged, administrators are entitled to rely on their advice in relation to valuation, marketing and sale processes to ensure the property achieves its true market value. By acting reasonably and independently, the administrators’ decision not to follow the first objective but to pursue the third, was also held to be reasonable.
The experience of the experts engaged by the parties was considered and given notable relevance in the High Court’s decision, finding that the administrators’ experts were competent in their roles whilst concluding that experts engaged by the liquidators were not similarly experienced to give adequate weight to their evidence.
The High Court found that the administrators had acted appropriately, concluding that the site was sold for its true market value. The administrators had chosen not to follow the first objective appropriately, and acted reasonably in placing reliance on marketing by competent experts.