In the matter of Aartee Steel Group Limited
[2023] EWHC 1701 (Ch)
Speciality Steel UK Limited v FGI Worldwide LLC & Ors
16 March 2023
[2023] EWHC 606 (Ch)
High Court
A company was put into administration by a creditor. Another creditor tried to stop the administration, saying the first creditor did it for the wrong reasons. The judge said there wasn't enough proof of wrongdoing and that a rescue plan could happen even with the administration continuing, so the administration wasn't stopped.
Key Facts
- •Aartee Bright Bar Limited (the Company) was placed into administration on February 6, 2023.
- •Speciality Steel UK Ltd (applicant) sought an order under paragraph 81 of Schedule B1 to the Insolvency Act 1986 to cease the administrators' appointment.
- •The appointment was made by FGI Worldwide LLC (first respondent), a secured creditor.
- •The administrators (second, third, and fourth respondents) were neutral but supported continuation of the administration.
- •The applicant argued improper motive on the part of FGI, claiming the appointment aimed to avoid adverse publicity related to repayment.
- •FGI contended the appointment was to secure repayment and manage the company's affairs.
- •A rescue plan proposed by Aartee Steel Group Limited (holding company) was presented as an alternative, but it depended on the administration's cessation.
- •The administrators were pursuing a preferred purchase agreement for the company's assets.
- •Approximately 250 employees' jobs were dependent on the outcome.
Legal Principles
A creditor can apply under paragraph 81 of Schedule B1 to the Insolvency Act 1986 to cease administrators' appointment, alleging improper motive by the appointing person.
Insolvency Act 1986, Schedule B1, paragraph 81
The court considers whether the appointor acted with improper motive and whether the administration achieves its statutory purpose (better result for creditors than winding up).
Case law interpretation of paragraph 81
For a paragraph 81 application, the applicant must allege improper motive honestly and on reasonable grounds; proving it on the balance of probabilities at the substantive hearing is not a threshold requirement.
Koon v Bowes and others [2019] EWHC 3455 (Ch)
Improper motive includes fraud, dishonesty, bad faith, or pursuing a collateral purpose to other creditors' disadvantage.
Koon v Bowes and others [2019] EWHC 3455 (Ch), Thomas v Frogmore Real Estate GP1 Ltd [2017] EWHC 25
Appointing an administrator solely for repayment is not the only proper purpose for a qualified floating charge holder; a desire to improve creditors' positions or investigate misconduct is also valid.
Case law interpretation of paragraph 81
Outcomes
The application to cease the administrators' appointment was dismissed.
The court found insufficient evidence of improper motive by FGI. The administration was deemed likely to achieve its statutory purpose, and the alternative rescue plan could be pursued within the administration.