Application by administrators to sell fixed charge asset fails

Published on
2 min read

This case considered an application by administrators pursuant to paragraph 71 of Schedule B1 to the Insolvency Act 1986. This paragraph permits administrators to sell a fixed charge asset without the consent of the fixed chargeholder subject to various requirements being fulfilled, including in effect that the secured creditor receives market value with such amount being determined by the court.

In the instant case the court held that the valuation evidence was deficient:

  • It was not sufficient to say that the property had been marketed, there were some issues which made it less attractive than other properties and, therefore, one should simply take the best offer that had been received. That approach did not address questions including: how was the market developing, what was the best time, within a reasonable timescale, to sell, how should the sale price be calculated, what the nature and scope of the market was and the extent to which that market had been trawled.
  • Furthermore the report had failed to take into account the latest offer from a bidder. The administrators had criticised that offer including on the ground of lack of proof of funds but had not evidenced that they had addressed questions to the bidder seeking answers to these issues.

The court adjourned the application to give the valuer an opportunity to provide a supplementary report (i) to address the new offer including any due diligence that should be carried out on it; and (ii) to satisfy the court that the market had been fully tested. This would require him to set out what process he had undertaken to formulate his view that the market value had been achieved.

One Islington Plaza Ltd v Route Finance Ltd [2021] EWHC 3504 (Ch) Insolvency and Companies Court Judge Mullen 10 November 2021

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