The Money case: a judicial overview of the administration of a property company

​On 11 April 2018, the High Court gave judgment in Davey v Money and Stewart-Koster (as joint administrators of Angel House Developments Limited) [2018] EWHC 766 (Ch). The judgment is useful because it gives guidance on the duties which an administrator owes when realising property in order to make a distribution to secured creditors.


Angel House Developments Limited (AHDL) obtained facilities of approximately £16m from Dunbar Assets plc (Dunbar). AHDL granted Dunbar a qualifying floating charge and a mortgage over Angel House, which was a commercial property in Docklands and was the sole asset of the company. The obligations of AHDL were guaranteed by another company in the group and by Mrs Davey who was the shareholder in AHDL. The guarantee given by Mrs Davey was limited to a monetary amount of £1.6 million plus interest and costs.

AHDL defaulted. Dunbar appointed administrators. In the statement in which they set out their proposals, the administrators stated that the purpose of the administration was to realise property in order to make a distribution to Dunbar as the secured creditor; the third statutory objective referred to in paragraph 3(1) of schedule B1 of the Insolvency Act 1986 (IA 1986).

The administrators appointed a firm of property agents to manage and market the property that were recommended to them by Dunbar. During the sale process, Mrs Davey tried to refinance the debt owed to Dunbar but failed. The administrators also pursued various development options for Angel House. Ultimately, however, Angel House was sold. The sale proceeds were insufficient to repay the debt owed by AHDL and Dunbar sought to enforce the personal guarantee given by Mrs Davey.


Mrs Davey brought a claim pursuant to paragraph 75(1) of schedule B1 of the IA 1986 in which she alleged misfeasance by the administrators. In particular, Mrs Davey alleged that the administrators had:

  • acted in breach of duty by failing to exercise independent judgment and paying excessive regard to the interests of Dunbar
  • failed to take steps to involve her in the administration that could have resulted in the debt to Dunbar being refinanced, and
  • sold Angel House at a significant undervalue and in reliance on unsuitable agents chosen by Dunbar.


The court dismissed the claim made by Mrs Davey but, in the course of his judgment, Snowden J made a number of observations about the conduct of the administration:

Choice of objective

A decision by an administrator about which statutory objective to pursue under paragraph 3(1) of schedule B1 of the IA 1986 will generally require a substantial amount of commercial judgment, often under significant time pressures. Snowden J saw no reason to adopt a more interventionist standard of review in the choice of objective by the administrators than that which is applied by the courts to the decision of whether to interfere with specific business decisions taken by administrators. (Paragraph 255 of the judgment).

Statement of proposals

An administrator is required to make a statement setting out proposals for achieving the purpose of the administration (paragraph 49(1) of schedule B1 of the IA 1986). If the purpose is to realise property in order to make a distribution to secured creditor(s), the statement must explain why the administrator thinks that the objectives mentioned in paragraphs 3(1)(a) or 3(1)(b) of schedule B1 of the IA 1986 cannot be achieved (see, paragraph 49(2)(b) of schedule B1 of the IA 1986).

In this case, the statement was defective because it did not explain why the administrators thought the proposed sale would be unlikely to achieve the objectives stated in those two paragraphs. The court, however, found that such a failure did not invalidate the actions of the administrators. (Paragraphs 316-324 of the judgment).

Appointment of agents recommended by Dunbar

There is no hard and fast rule requiring a selection process to be held or prohibiting the administrators from appointing agents who have been appointed by the secured creditor(s). The essential question in all cases is whether the agents are competent and able to discharge their fiduciary duties to the company. This will depend on the precise nature of the duties in question and all the circumstances of the individual case. (Paragraph 341 of the judgment).

Mrs Davey claimed that the administrators had carelessly failed to engage an appropriate (in other words, sufficiently expert) selling agent to advise on the marketing and sale of Angel House but Snowden J said that “it seems to me that as a matter of principle, it cannot be the case that the established ‘big boys’ have a monopoly on competence or relevant local knowledge so that it is necessarily negligent not to instruct them.” (Paragraph 434 of the judgment).

Standard of care

Administrators are given the status of agents and specific statutory duties by schedule B1 of the IA 1986. They owe a duty to act in good faith, loyally and for proper purposes and they owe a duty to exercise reasonable skill and care. In terms of the price at which property is to be sold, they must take reasonable steps to obtain a proper price (i.e. the standard set out in the leading case of Cuckmere Brick).

Administrators are not under the wider and more onerous duties in relation to sale of property imposed on trustees. An administrator has less freedom than that possessed by an administrative receiver and must have regard to the interests of a wider group of stakeholders than simply the holder of the qualifying floating charge. (Paragraphs 381-392 of the judgment).

Breach of duty

In this case, the administrators had breached their duties by assisting Dunbar in enforcing the personal guarantee (by, for example, passing on to Dunbar information contained in a director’s questionnaire compiled as part of the administration). However, the court decided that Dunbar’s conduct was not such as to cause a significant loss to AHDL that could have resulted in compensation being awarded to it under paragraph 75(4) of schedule B1 of the IA 1986. (Paragraph 627 of the judgment).


There is no special rule requiring advertisement by administrators or other insolvency office-holders. It is a question of fact in each case, depending on the nature of the asset and the relevant market, as to whether, and if so, what type of marketing is required to discharge an administrator’s duty to take reasonable care to obtain the best price that circumstances permit. (Paragraph 455 of the judgment). Snowden J found that the targeted list of potential buyers prepared by the selling agent was sufficiently wide. (Paragraph 477 of the judgment).

Independent judgment

An administrator must exercise independent judgment and must not allow another person to dictate how his or her powers are to be exercised. An administrator cannot act with unquestioning obedience to an appointor but he or she is entirely at liberty to consult with the relevant creditors whose interests are likely to be affected by a decision. The administrator is not, however, bound to follow their wishes. When an administrator seeks to sell an asset subject to a fixed charge, the holder of the charge must consent to any disposal and, failing the granting of consent, the administrator will need to apply to court. (Paragraphs 590-593 of the judgment).

Discharge of guarantor

There is no general principle that irregular conduct by a creditor, even if prejudicial to the interests of a guarantor, will discharge the guarantor. But a guarantor might be discharged if the creditor were to act in bad faith or cause, or connive at, default by the principal debtor. (Paragraph 774 of the judgment)

Practical relevance

The judgment is over 200 pages long and deals with a multitude of factual issues. Nevertheless, it is useful because it gives a judicial overview of an administration of a property owning company from start to finish which may provide useful guidance to the legal issues which administrators may face in that situation.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.