![CR-2024-MAN-000540 - [2025] EWHC 2159 (Ch)](https://backend.juristeca.com/files/emisores/logo_O3rEzCI.png){kind=logo}
The parties’ submissions
The parties’ submissions
Milltom’s case
Mr Cochran makes the point that there is authority to the effect that secured creditors should not be disadvantaged by the administration procedure. He refers to what was said by Sir Nicholas Browne Wilkinson V.-C. in Bristol Airport Plc v Powdrill (C.A) [1990]Ch 744, at 767E:
“In my judgment, whilst the administration procedure should not be used so far as possible to prejudice those who were secured creditors at the time when the administration order was made in lieu of a winding up order, nor should it be used so as to give the unsecured creditors at that time security which they would not have enjoyed had it not been for the administration.”
Mr Cochran identifies that these remarks were echoed by the Court of Appeal in ReAtlantic Computer Systems [1992] Ch 505 (see per Nicholls LJ at 542G), and he refers to Re UK Housing Alliance (North West) Limited [2013] EWHC 2553 (Ch), [2013] BCC 752, where the court allowed enforcement of security over properties which were not being used for the purposes of the administration and in which the applicant creditor was the only party likely to receive any advantage from the sale of the properties.
As Mr Cochran further pointed out, the Court possesses an inherent power to regulate the conduct of administrations, and there is authority that a secured creditor may apply for directions in that respect Re Mirror Group Holdings Ltd [1993] B.C.L.C. 538.
Mr Cochran submits that giving effect to the principles concerning the effect of administration on secured creditors is best achieved by giving Milltom permission, pursuant to paragraph 43 of Schedule B1 IA 1986, to further proceed with the Order for Sale Proceedings already on foot. This would require a further hearing in order to determine whether an order for sale should be made, and whether conduct of the sale should be given to Milltom, but Mr Cochran says that that is the proper venue for determining the method of sale. Further, Mr Cochran submits that this is the proper venue to determine any outstanding issues that arise with regard to the indebtedness of the Company to Milltom.
As to the question of Milltom’s priority, Mr Cochran submits that the position is clear and determined by the fact that Milltom’s security was first in time on the making of the ICO on 26 or 31 January 2023, and its subsequent registration, which was all before the grant on 22 February 2023 of the charge to PF2L. As I understand it, Milltom is asking the court to determine this question of priority now.
So far as outstanding indebtedness is concerned, Milltom’s position in respect thereof is as follows:
As to the allegation that 6 Gezzerts Rise was sold at an undervalue, it is denied that there was a sale at an undervalue, or anything else untoward with regard to the sale thereof to Milltom. Reliance is placed on the fact that Mr Craig sold to Milltom based on the valuation that he had obtained, that properly took into account the fact that this property was subject to the 10 year lease at a low rent. In any event, Milltom submits that as LPA receiver, Mr Craig sold the Property as agent for the mortgagor, i.e. the Company, and not the mortgagee, Milltom – see s. 109(2) of the Law of Property Act 1925 (“LPA 1925”). Consequently, Milltom cannot be responsible for his actions. Further, Devon Commercial Property Ltd v Barrett [2019] EWHC 700 (Ch) provides authority for the proposition that a sale by an LPA receiver to the mortgagee is not, unlike a sale by a mortgagee to itself, open to challenge as such as involving self-dealing.
Further, it is Milltom’s case that even if the sale to Milltom were open to challenge, which would be a matter as between Milltom, as mortgagee, and Mr Martin, as mortgagor, but would not affect the state of account as between the Company and Milltom. Mr Cochran points to the fact that no reasoned case has been advanced as to how or why the Company might have some claim as against Milltom in respect of the sale of 6 Gezzerts Rise, and that all Mr Couser was able to say on behalf of Mr Faik was that there may be some unjust enrichment claim, without developing any submissions or reasoned argument in that respect. The point is made that all that Mr Faik has done is to say that the sale “may be open to challenge”, but has yet to challenge the same, or set out any proper basis for doing so.
As to the remuneration charged by Mr Craig as LPA receiver, and the suggestion that this is subject to a cap of 5% of realisations imposed by s.109(6) LPA 1925, the point is taken on behalf of Milltom that this is a new point not advanced until very recently, and it is challenged that this provision applies in the circumstances of the present case.
As to the rate of interest charged on the outstanding balance of 8%, Milltom contends that it is entitled to recover interest at this rate as it has the benefit of a judgment and is therefore entitled to continuing interest at the judgment rate and to add it to its security.
As to Mr Faik’s challenge to legal fees charged as against realisations, it is submitted on behalf of Milltom that these are all reasonable, and perfectly justified, and that there has been no proper challenge thereto.
In short, therefore, it is contended that the issues between the parties in respect of the above matters could and should be dealt with at the final hearing of the Order for Sale Proceedings, when the court could determine what Milltom was entitled to out of the proceeds of sale, if it were given conduct of the sale.
A number of objections are advanced on behalf of Milltom in relation to the relief sought by Mr Faik, which would necessarily involve Mr Faik having conduct of the sale, and, according at least to the terms of the relief sought by the Faik Application, would involve Mr Faik then determining the entitlement, if any, of Milltom to be paid out of the proceeds of sale.
The particular objections are the following:
Firstly, insofar as Mr Faik is seeking to unilaterally determine, following the sale of the Property, the priority of Milltom as against Supahome, and how much might be due to Milltom, it is submitted that this cannot be the correct approach. This is because, so it is said, there needs to be a proper process for determining these issues involving, not least, independent adjudication by the court should Milltom have good grounds for not agreeing with a determination as to priorities or amount due to Milltom by Mr Faik.
Secondly, it is Milltom’s case that Mr Faik is not a disinterested office holder trying to weigh competing claims, but, rather, a partisan with an axe to grind. As I have already mentioned, complaint is made that RHF act for Mr Faik, and also for the directors of the Company, which is said to give rise to a conflict of interest. In support of this contention, reliance is placed upon the fact that Mr Faik’s Proposals, relying upon what Mr Faik was told by the directors, only placed a value of £1 on Milltom’s security, and failed to accord Milltom priority based upon the date of the ICO, reference only being made to the FCO made after the charge in favour of PF2L. Indeed, complaint is made that Mr Faik still does not recognise the priority conferred by the ICO despite, so it is contended, the position being absolutely clear in respect thereof. An additional point that is made is that there is no apparent evidential basis for the suggestion made by the “Adjudication Account” produced by Mr Faik referred to in paragraph 36 above that had suggested that 5 Gezzerts Rise had been sold at an undervalue.
In the circumstances, it is submitted that it would be quite wrong to accede to the Faik Application, not least out of a concern that Mr Faik would not act fairly, independently and objectively in relation to the sale of the Property, and the subsequent distribution of the proceeds of sale in accordance with the security held by Milltom and Supahome thereover.
In these circumstances, so it is submitted on behalf of Milltom, the proper course should be to accede to Milltom’s application under paragraph 43 of Schedule B1 to IA 1986 and permit it to continue to pursue the Order for Sale Proceedings.