Company—Administrator—Costs of administration

Chancery Division, Judge Purle QC sitting as a judge of the High Court, 27 May 2010

In considering whether to treat pre-appointment administration costs as an administration expense in respect of pre-pack administrations, the court has to compare whether the advantage to the purchasing directors in retaining a business shorn of debt was clearly outweighed by the advantage derived by creditors from the pre-pack administration.

Stephen Eyre and Angus Burden (instructed by The Wilkes Partnership) for the applicants.

Two cases before the court raised the issue of whether it was appropriate to order that the pre–appointment costs of an insolvency practitioner in the case of a “pre–pack” administration be treated as an administration expense. In each case a company controlled by or connected with the existing directors and owners was to purchase the existing business and assets from the administrator immediately following his appointment.

Judge Purle QC:

The legitimacy of pre–packs and the jurisdiction