CR-2024-MAN-000540 - [2025] EWHC 2159 (Ch)

As I have identified, the principal issue between the parties is as to whether the Property should be sold with conduct being given to Milltom following the making of an order for sale on the final hearing of the Order for Sale Proceedings that Milltom seeks permission pursuant to paragraph 43 of Schedule B1 IA 1986 to continue, or whether the Property should be sold by Mr Faik as administrator after the court has made an order pursuant to paragraph 71 of Schedule B1 IA 1986.

Clearly, I must pay due regard to the principle that the administration procedure should not, so far as possible, be used to prejudice those who were secured creditors at the commencement of the administration order. In this respect, one can see why, in a case such as Re UK Housing Alliance (North West) Limited (supra), the court should allow the secured creditor to get on with enforcing security itself.

However, a significant feature of the latter case was that the relevant secured creditor seeking to enforce its security was the only party likely to receive any gain from the sale of the relevant properties. In the present case, if the Property is worth in the region of £205,000, then both Milltom and Supahome stand to benefit from the proceeds of sale thereof, and there might conceivably be a return for unsecured creditors if the indebtedness to Milltom is less than it contends. Consequently, there is a wider interest for the purposes of the administration in the realisation of the Property other than that of the interests solely of Milltom.

Although Supahome was not represented before me, I was informed in the course of submissions that it supports the position of Mr Faik so far as the appropriate relief for the court to grant is concerned.

The application for relief pursuant to paragraph 71 of Schedule B1 IA 1986 made by the Faik Application is somewhat oddly worded in seeking a direction that Mr Faik has “power to sell”. Nevertheless, I consider that I can be satisfied that the requirements for granting relief pursuant to paragraph 71 are made out.

So far as relevant, paragraph 71 of Schedule B1 IA 1986 provides as follows:

An order made under paragraph 71 would therefore enable Mr Faik, as administrator, to sell the Property as if it were not subject to the either Milltom’s ICO/FCO, or the charges held by Supahome. However, the effect of paragraph 71(3) is that the Property would need to be sold for market value, which I do not understand to be an issue, and the effect of paragraph 71(4) is that Mr Faik would be obliged to ensure the net proceeds of sale (i.e. after deducting the costs of sale) were in the order of priority of securities relating to the Property. Subject to any subsequent challenge by Supahome in respect of the order of priorities and the declaration that I propose to make in respect thereof, this will require Millom to be paid first out of the net proceeds of sale whatever sum is due to it.

So far as the conditions in paragraph 71(2) are concerned, the application is being made by Mr Faik as administrator of the Company. Further, I consider that I can be satisfied that the disposal of the Property would be likely to promote the purpose of administration in respect of the Company. As to the latter, notwithstanding how matters were initially expressed in Mr Faik’s Proposals, we are now concerned with the third of the hierarchies of purposes specified in paragraph 3(1) of Schedule B1 IA 1986, namely “realising property in order to make a distribution to one or more secured or preferential creditors.” The making of an order under paragraph 71 would, as I see it, assist in achieving this purpose, albeit that the purpose could be achieved in an alternative way through an order for sale made in the Order for Sale Proceedings.

In the circumstances, I am satisfied that the appropriate course is to make an order under paragraph 71 of Schedule B1 IA 1986 as sought by the Faik Application, rather than acceding to Milltom’s request to grant permission pursuant to paragraph 43 of Schedule B1 IA 1986 to continue the Order for Sale Proceedings.

I reach this conclusion for, essentially, the following reasons:

I consider that these reasons alone suffice for the purposes of deciding that the appropriate course is to make an order pursuant to paragraph 71 of Schedule B1, thereby enabling Mr Faik, as administrator of the Company, to proceed with the sale of the Property.

This conclusion is, I consider, reinforced by the fact that such a process would, as I see it, provide a more effective and speedy way of resolving outstanding issues as to Milltom’s priority (if such remains an issue) and entitlement in respect of the net proceeds of sale.

As to resolving issues and the true state of account as between Milltom and the Company, whilst it might be possible to resolve the same at the final hearing of the Order for Sale Proceedings, there would be no clear framework for doing so thereat, and I consider that it would be undesirable for a sale of the Property to proceed up with Milltom having conduct unless and until it has been determined how it ought to apply the proceeds of sale. The court could order that the whole or part of the proceeds of sale be paid into court pending resolution of any disputes in relation thereto, but that would lead to further delay.

On the other hand, a sale following the making of an order pursuant to paragraph 71 of Schedule B1 IA 1986 would maintain priorities in the net proceeds of sale, and the court could, in the order made pursuant to paragraph 71, give directions as to how outstanding issues in respect of the entitlement of Milltom to the net proceeds of sale might be resolved, whether they relate to the specific points taken by Mr Faik regarding Mr Craig’s remuneration etc., or following on from any sale of 6 Gezzerts Rise at an undervalue.