Court considers whether administrator appointment valid

The court considered the validity of appointment of administrators in a “loan to own” situation whereby an entity wanted to buy another and chose to buy the debt, enforce the security, and then look to buy the business and assets out of administration.  

The plan was foiled, however, as shareholders raised sufficient funds to pay off the secured debt and halt the enforcement.

The company, through the shareholders, then challenged the validity of the appointment of the administrators, arguing that the assignment was invalid, alternatively that there was no assignment of the right to enforce or appoint and that the secured creditor acted improperly in enforcing. The administrators applied to strike out the claim on the basis it had no merit, but also arguing that the claimant was estopped from disputing the appointment.

The Deputy High Court judge agreed with the administrators that the claims based on the assignment and the allegation that there was no event of default had no reasonable prospect of succeeding.

The judge then considered the question of motive and recited the established position that a lender should act with proper purpose in respect of its security. The claimants also argued that the lender should act honestly and in good faith, as implied by the Braganza case.

The judge rejected that proposition and held that the lender had acted properly in its enforcement and appointment of administrators and struck the claimants’ claims out.

The administrators also argued that even if the claims had merit, which the judge found they did not, the claimants were estopped from challenging the appointment of administrators, having previously accepted it through conduct.

The judge considered the point and did not necessarily agree with the argument, but the point was superfluous to the decision already reached.

Glint Pay Limited and other v Baker and Rowley [2025] EWHC 2166 (Ch)