Neutral Citation Number: [2011] EWHC 1732 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 12 July 2011 

Before :

MR STUART ISAACS QC
(SITTING AS A DEPUTY JUDGE OF THE HIGH COURT)
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Between :

	Stanley International Betting Limited	Applicant	
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	1. Stanleybet UK Investments Limited
2. L Sports Investments Limited
3. The Honourable Jonathan Steinberg
4. The Honourable Lynne Attias
(the 3rd and 4th Respondents as the personal representatives of the estate of Lord Steinberg of Belfast (deceased)	

Respondents	

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Mr Jamie Riley (instructed by DLA Piper) for the Applicant
Ms Lexa Hilliard QC and Ms Tina Kyriakides (instructed by Davis Arnold Cooper) for the Respondents

Hearing date : 24 June 2011
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JUDGMENT

Mr Stuart Isaacs QC: 

Introduction
1.	There are two applications before the court. The first is an application dated 16 June 2011 for an administration order in respect of Stanley UK Investments Limited (formerly known as Stanleybet Holdings Limited) (“SUKI”); and for the appointment as administrators of Ms Kerry Bailey and Mr Matthew Gibson of PKF (UK) LLP (“PKF”). The application is made by Stanley International Betting Limited (“SIB”), for which Mr Jamie Riley appears. The 2nd to 4th respondents, for whom Ms Lexa Hilliard QC and Ms Tina Kyriakides appear, support the application for the administration order. However, they oppose the appointment of Ms Bailey and Mr Gibson as administrators and instead seek the appointment as administrators of Messrs Nick Wood and Kevin Hellard of Grant Thornton LLP (“GT”). 

2.	The 3rd and 4th respondents are the personal representatives (and children) of the late Lord Steinberg of Belfast, who passed away in November 2009. The 2nd respondent (“LS”) is a company wholly owned by the Estate. For convenience, I shall refer to the 2nd to 4th respondents collectively as “the Estate” except where it is necessary to distinguish LS from Lord Steinberg’s estate.

3.	The second application is made by the Estate against Stanleybet Overseas Investments Limited (“SOI”), SIB, SUKI and others by an application notice issued on 23 June 2011 and is for an injunction essentially to restrain the holding of any board or other meeting of SOI at which it might be resolved to place SOI into administration. SOI is wholly owned by SUKI. In the circumstances referred to below, this application fell away and it was unnecessary to make any order on it, except in relation to the costs of the application.

4.	At the conclusion of the hearing of the applications on 24 June 2011, the parties agreed that in view of the urgency of the matter I should give my decision then and provide my written reasons for that decision subsequently.

5.	My decision was that an administration order should be made with effect from 4.15pm that day and that the administrators should be Ms Bailey and Mr Gibson.

6.	I also determined at the conclusion of the hearing, for the reasons given at the time, that the costs of the application for the administration order would be in the administration; and that SIB should pay the costs of the injunction application.

7.	On 28 June 2011, I received by email written submissions from Ms Kyriakides asking that I “clarify” whether it was my intention to make the costs order on the injunction application against SIB alone and, if it was, to reconsider it such that the order should be made not only against SIB but also against two of the other defendants to it, namely Giovanni Garrisi and John Samuel Whittaker, the directors on the SUKI board nominated by SIB pursuant to the shareholders agreement referred to below. SIB made written submissions in response seeking to uphold the costs order originally made. The parties agreed that I should deal with those matters on paper without the need for any further hearing.

8.	I should record at the outset that, prior to the hearing, I indicated to the parties that I was acquainted socially with Ms Bailey and invited them to state whether they objected to my hearing the applications. However, both parties informed me in writing through their counsel that they had no objection to my hearing the applications.

Background
9.	SUKI is a joint venture vehicle of SIB and LS pursuant to a shareholders agreement dated 30 July 2007 between SIB, LS and Lord Steinberg. SUKI was set up to acquire shares in of a Polish gaming company, Star Typ Sport Zaklady Wzajemne Spolka z.o.o (“STS”). There is now a situation of deadlock in SUKI both between the shareholders and at board level.

10.	On the same date, SIB and SUKI entered into a services agreement under which SIB agreed to provide accounting and general management services to SUKI in return for the payment of a fee. Clause 4.3 of the services agreement gave either party the right to terminate it forthwith in any of the circumstances set out in those provisions.

11.	The shareholders agreement was supplemented by a letter agreement dated 2 August 2007.
 
12.	SUKI and SOI each have a one-third direct shareholding in STS. (SOI was used to acquire the additional one-third shareholding because Polish gaming laws prevented SUKI holding more than a one-third direct shareholding in STS). The remaining shares in STS are owned as to 32.33% by individual shareholders in Poland and as to 1% by Stanleybet STS Investments Ltd, itself a wholly owned subsidiary of SUKI.

13.	Under a facility agreement made on 2 August 2007 between Barclays Bank plc (“Barclays”) and SUKI, SUKI borrowed €25 million in order to acquire shares in STS. The loan was guaranteed by Lord Steinberg under a deed of charge of the same date, in return for a fee payable to Lord Steinberg which represented two-thirds of the differential between the cost to SUKI of borrowing from Barclays on an unsecured as opposed to a secured basis. 

14.	My attention was drawn to a number of the provisions of the shareholders agreement of which the Estate now alleges that SIB is in breach. In particular, clause 8.3.4 required one-half of any excess outstanding to Barclays over the maximum amount outstanding at each anniversary date of the loan stated in clause 8.3.3 to be paid or provided by SIB to SUKI in order to reduce the loan; and clause 8.5 made provision for the payment of Lord Steinberg’s fee referred to above.

15.	On 26 October 2009, SIB and STS entered into an agreement whereby SIB granted STS a software licence to use certain technology which would allow it to receive and use the results of various virtual sporting events. By clause 4.2.4 of the agreement, SIB is entitled to terminate it at any time on giving notice to STS if amongst other things STS has a petition presented for the appointment of an administrator, administrative receiver, receiver or liquidator or such person is appointed over all or any of STS’ assets.

16.	From about late 2009 or early 2010, discussions took place between the shareholders about the future of SUKI which focused on SIB taking over the business of SUKI but with the Estate having an ongoing involvement in SUKI. The sticking point appears to have been the Estate’s reluctance to provide funding for working capital against a background of concern about the worsening performance of STS, which provided SUKI’s income by way of dividends on its shareholding in STS. Discussions continued over the summer of 2010 but no agreement was reached

17.	On 10 May 2011, SIB issued a claim form against the Estate in claim no. HC11C01475 with accompanying Particulars of Claim seeking amongst other things a declaration that SIB is not liable to make payments to the Estate. The Estate served a Defence and Part 20 Claim for amongst other things damages for breach of the shareholders agreement. On 16 June 2011, SIB served its Reply and Defence to the Part 20 Claim. That action is proceeding in the Chancery Division of the High Court. It is noteworthy that the allegations made by the Estate in the action do not include a number of serious allegations previously made in correspondence from its solicitors.

18.	On 17 June 2011, the application for an administration order came before Henderson J, who amongst other things adjourned the application to be heard as an application by order and who, in the face of opposition from the Estate, appointed Ms Bailey and Mr Gibson as interim managers to manage the affairs, business and property of SUKI pending the determination of the application. There was a short further hearing before Henderson J on 21 June 2011 to clarify his order made on 17 June.

19.	It was clear from the report of Ms Bailey and Mr Gibson dated 16 June 2011 in support of the application for the administration order that SUKI was bound to go into administration. It was clear, for the reasons set out in the report, that SUKI was unable to pay its debts as they fell due and that the making of an administration order would be likely amongst other things either to achieve SUKI’s rescue as a going concern or else achieve a better result for the creditors as a whole than would be likely on a winding up. In paragraph 4.1 of the report, the proposed administrators stated their belief that it might be possible to achieve SUKI’s rescue as a going concern by brokering a compromise between the shareholders or else to achieve a better result for the creditors as a whole. Paragraph 5 of the report set out the proposed administration strategy which included the sale of SUKI’s shareholding in STS following a period of marketing and consideration being given to placing SOI into administration in order to recover for SUKI an inter-company receivable due from SOI.

20.	On 17 June 2011, the board of SOI sought to convene a meeting for the purpose of determining whether to place SOI into administration. That led to the application for an injunction made by the Estate referred to next and the postponement of the board meeting until the afternoon of 20 June 2011.

21.	Before the time fixed for the board meeting, a without notice on notice telephone application for an injunction was made on 20 June 2011 to HH Judge Pelling QC (sitting as a Deputy Judge of the Chancery Division) in the Manchester District Registry to restrain the holding of any board or other meeting of SOI at which it might be resolved to place SOI into administration. The judge granted the application effectively until after the hearing of the application which has come before me for the administration order in respect of SUKI. He directed that the Estate should issue and serve the application which was in fact issued on 23 June 2011 to come on for hearing at the same time as the application for the administration order. He reserved the costs of the application before him.

Costs of the injunction application
22.	Having considered the parties’ written submissions of 28 June 2011, I saw no reason to depart from the costs order originally made that SIB should pay the costs of the injunction application. I so informed the parties by email on that day.

23.	Ms Kyriakides correctly pointed out that, at the time of the hearing, my attention (and that of Ms Hilliard) was not drawn to the order made by HH Judge Pelling QC, from which it could be seen that an injunction was granted against the three defendants mentioned above and not just SIB.

24.	Mr Riley pointed out amongst other things that the Estate was fully aware of the parties against whom it was proceeding and had, before me, only sought a costs order against SIB with which SIB would comply.

25.	I have a broad discretion in relation to the making of a costs order. In the present case, I acceded to Ms Hilliard’s submission that SIB should be ordered to pay the costs of the injunction application. There is nothing to “clarify” in this respect. Any application that the costs of the injunction application be awarded against SIB and the other two defendants could have been made at the hearing, where the Estate was represented not only by Ms Hilliard but by Ms Kyriakides and its solicitors. Had any such application been made, it would have been necessary to consider whether, in the absence of the other two defendants, such an order would have been appropriate. It is now too late for the Estate to seek any different costs order from that which was made. Even if it remains open to the Estate to seek a different costs order, for the reasons just given I decline to do so.

The application for an administration order
26.	The application for an administration order in respect of SUKI  was supported by two witness statements of Mr Whittaker, SIB’s chief executive. In addition to SIB’s nominees on SUKI’s board, LS also has two nominated directors on the board pursuant to the shareholders’ agreement.

27.	It is clear from Mr Whittaker’s evidence on this aspect, which I accept, that the making of an administration order is entirely appropriate. SUKI is unable to pay its debts as they fall due and the making of the order is likely to achieve its rescue as a going concern or at least a better result for creditors as a whole than would be likely on a winding up. That conclusion is also arrived at by the administrators proposed by the Estate in their report made on or about 20 June 2011. Also, as I have said, the making of an administration order is supported by the Estate. 

Who should be the administrators?
28.	The real question before the court, as Mr Whittaker observed in his second witness statement, is not whether administrators should be appointed but rather who should be appointed. Should the administrators be Ms Bailey and Mr Gibson, as SIB proposed; or should they be Messrs Wood and Hellard, as the Estate proposed, supported by the witness statement of the 3rd respondent, The Honourable Lynne Attias?

29.	I approach the answer to that question on the basis that the administrators proposed by SIB and by the Estate are equally competent to perform the role of administrators; and that my decision is uninfluenced by the fact that Ms Bailey and Mr Gibson are the incumbent interim managers: it is clear that Henderson J, when appointing the interim managers, was expressing no preference as to who would be the appropriate administrators on the making of an administration order.

30.	In support of the appointment of Messrs Wood and Hellard, Mrs Attias made the following points in her statement:

(1)	The Estate is SUKI’s largest creditor.

(2)	SIB’s conduct in managing STS’ business pursuant to the services agreement requires investigation. STS’ value has decreased dramatically since STS was acquired and it has recently been discovered that SIB has used its management position to procure for itself substantial contracts for the supply of products and services.

(3)	PKF has, or appears to have, aligned itself too closely with SIB’s interests in that (a) it proposes to maintain SIB’s position in STS during the course of the administration, (b) will thereby have to rely on information provided by SIB in circumstances where SIB has not been forthcoming in the provision of information to the Estate, (c) has aligned itself with SIB’s “tactic” to procure that it is appointed as administrator of SOI prior to the present hearing; (d) is proposing to act as brokers in the shareholders’ dispute; and (e) has instructed the same solicitors as SIB.

31.	Mrs Attias also gave evidence that Messrs Wood and Hellard are better placed than Ms Bailey and Mr Gibson in terms of practicalities and expertise to act as administrators, for the reasons summarised in paragraph 3.4 of her statement. Mr Gibson, in his witness statement dated 21 June 2011, counters those considerations. As I have already indicated, I approach this matter on the basis that the administrators proposed by SIB and by the Estate are equally competent to perform the role of administrators. I do not accept that the matters relied on here by Mrs Attias should lead to the conclusion that Ms Bailey and Mr Gibson ought not to be appointed in preference to Messrs Wood and Hellard.

32.	At one point in the argument, it occurred to me that the sensible course might be to appoint as administrators one of the PKF partners and one of the GT partners. However, Ms Hilliard stated that such a course would not be practicable and did not urge it on me. Mr Riley did not adopt any different position.

33.	The Estate’s concerns about the appointment of Ms Bailey and Mr Gibson were further amplified in paragraphs 20 to 23 of its skeleton argument dated 23 June 2011 and by Ms Hilliard in her very lucid oral submissions.

34.	Before addressing those concerns, it is convenient to consider the guidance provided by the authorities with regard to the choice of administrators.

35.	In Fielding v Seery [2004] BCC 315, HH Judge Maddocks, sitting as a Deputy Judge of the Chancery Division in the Manchester District Registry, summarised, at paragraph 33 of the judgment, the principles which emerged from the previous authorities with regard to the appointment of a liquidator. The judgment was given in the context of an application for the removal of a liquidator of a company under section 108 of the Insolvency Act 1986 and his replacement by an independent liquidator appointed by the court. The principles identified by the judge include:

(1)	The test in relation to the appointment of a liquidator is whether it will be conducive to both the proper operation of the process of liquidation an to justice as between all those interested in the liquidation.

(2)	Although the majority vote of the creditors will in the normal course prevail, creditors holding the majority vote do not have an absolute right to the choice of liquidator.

(3)	A liquidator should not be a person nor be the choice of a person who has a duty or purpose which conflicts with the duties of the liquidator. He should in particular not be the nominee of a person against whom the company has hostile or conflicting claims or whose conduct in relation to the affairs of the company is under investigation.

(4)	By contrast, it is not an objection to a liquidator that he is allied to or the choice of a person who is concerned to pursue the claims of the company through the liquidator.
36.	In Re Med-Gourmet Restaurants Ltd, an unreported judgment of Lewison J on 15 October 2010 of which I was provided by counsel with a note, the judge, after considering Fielding v Seery, stated that the same broad principles apply in both liquidation and administration. In both cases, the appointment of the office-holder has to achieve justice between all the interested parties; and the office-holder needs to both act and be seen to act in the best interests of creditors and to properly investigate all claims.

37.	Ms Hilliard submitted that in the present case the dispute is between two groups of creditors and shareholders; that SIB’s position is more akin to directors seeking an appointment because SIB, through the services agreement, controls SUKI’s business, namely its investment in STS; that the Estate is a substantial creditor and its position is supported by LS; and that the Estate’s concerns about Ms Bailey and Mr Gibson merit very serious attention. She drew attention to the demands dated 22 June 2011 made by Barclays on SUKI for repayment of the €25 million and a further sum of €79,805.55, together with interest, and submitted that the Estate should be treated as in practice an actual rather than a contingent creditor of SUKI. She further submitted that SIB was not be in a position to pay to the Estate €12.5 million, being one-half of the €25 million borrowed by SUKI and guaranteed by Lord Steinberg, and thus, in reliance on Re Fitness Centre (South East) Limited [1986] BCLC 518, ought not to be treated as having a contingent debt worthy of consideration in these proceedings. SIB also ought not to be able to rely on that contingent liability when it is claiming in the Chancery Division action that it is not liable to do so. She accepted, however, that SIB is a creditor of SUKI and that the views of the majority creditor do not automatically prevail.

38.	Mr Riley submitted that the overriding factor is whether the appointment of particular administrator is going to be of greater benefit than that of another. He submitted that the Estate is only a contingent creditor for €25 million under the guarantee given by Lord Steinberg, the actual creditor for that amount being Barclays, and that the Estate is an actual creditor for a much smaller sum. In any event, €12.5 million of that liability would have to be met by SIB, which he disputed would not be in a position to pay that amount as submitted by Ms Hilliard. In contrast, SIB is a creditor for €3.308 million and the SIB group as a whole a creditor for €4.2 million.

39.	It is convenient here to mention the position of Barclays. It is undoubtedly a substantial actual creditor of SUKI. It was given notice of the present proceedings but has chosen to take no part in them. Its stance towards the choice of administrators is, as Mr Riley told me, therefore a neutral one.

40.	I accept Ms Hilliard’s submissions that the Estate is a substantial creditor and that its concerns about Mr Bailey and Mr Gibson must be taken into account and merit careful consideration. It is not possible on the available information to resolve whether or not SIB would be in a position to pay to the Estate the €12.5 million by which SUKI’s indebtedness to the Estate would fall to be reduced if it were paid and it would in my judgment not be right to ignore that contingent debt. In particular, I do not consider that it can be ignored on the basis that SIB is disputing liability for it in the Chancery Division action since unless and until SIB succeeds in those proceedings it remains a contingent liability. I also do not accept that SIB should be treated as being in the position of a director rather than a creditor. As is common ground, SIB is a creditor and it is entitled to be treated as such. In the result both SIB and the Estate are substantial creditors of SUKI. It is not possible to resolve whether the Estate is the majority creditor because that turns on whether SIB would be in a position to pay to the Estate the €12.5 million. The views of both the Estate and SIB in my judgment merit careful consideration.

41.	Ms Hilliard submitted that there are various matters requiring investigation with regard to SIB’s conduct in managing STS’ business pursuant to the services agreement, as summarised in Mrs Attias’ statement and in paragraph 20 of the Estate’s skeleton argument. Those matters are disputed by SIB and Ms Hilliard accepted that it is not possible for those matters to be resolved now. She submitted that Ms Bailey and Mr Gibson are “inevitably tainted by being too close to those that the Estate considers may well have contributed to the serious deterioration of the STS business” (see paragraph 22 of the Estate’s skeleton argument). 

42.	In this context, Ms Hilliard relied on passages from two authorities. First, she relied on the statement of Lewison J in Re Med-Gourmet Restaurants Limited at paragraph 12 of the note of the judgment that:

“There are a number of aspects here which require serious investigation. The creditors must have confidence that they will be investigated with appropriate vigour. If the only concern was a commercial issue then the views of the majority of creditors in value would have to prevail. Where there is a question of the need for investigations to be carried out with due vigour, there is a public interest issue in ensuring that the investigations take place properly. In my judgment the principles set out by His Honour Judge Maddocks apply to administration and Mr Andonikou’s reliance on Mr Farhi and his continued confidence in him even when he discovered he had not been given the full picture means that creditors cannot be satisfied that Mr Andronikou would deal with this matter appropriately.”

43.	Second, she referred to Re Gordon & Breach Science Publishers Limited [1995] BCC 261, which concerned a petition for the compulsory winding up of a company that was already in creditors’ voluntary liquidation. The petitioning creditor was the company’s landlord, which complained that those controlling the company had extracted its assets for the satisfaction of those other creditors on whom the goodwill of the business depended. Ms Hilliard relied in particular the passage at 269C-E in the judgment of Robert Walker J that: 

“Fairness and commercial morality may require that a substantial independent creditor, which feels itself to have been prejudiced by what it regards as sharp practice, should be able to insist on the company’s affairs being scrutinised by the process which follows a compulsory order. Such a creditor is entitled to an investigation which is not only independent, but can be seen to be independent. This may be so even where the voluntary liquidation is already well advanced and a compulsory order may cause further expense and delay….”

And also the passage at 270A-C that:

“the fact that the associated creditors have gone to such lengths to install and maintain Mr Moses in office is itself enough to disqualify him in the eyes of Rainbow [the landlord]; and in view of all that has happened Rainbow’s attitude cannot be dismissed as irrational. Nor can it be characterised as a ‘witch hunt’; the matters that call for investigation will be investigated impartially, on behalf of the general body or creditors, during the process of compulsory liquidation.”

44.	Mr Riley reminded me by reference to paragraphs 103 et seq  in the judgment of Warren J in SISU Capital Fund Ltd v Tucker [2006] BCC 463 that licensed insolvency practitioners are professional men and women well accustomed to dealing with conflicts and that in general it is in creditors’ interests, at least in the first instance, to appoint a single office-holder and leave any conflicts to be managed if and when necessary to do so.

45.	I accept that there are matters identified by the Estate in respect of STS which require investigation. However, the Estate has not established to my satisfaction that the creditors at large cannot have confidence in Ms Bailey and Mr Gibson’s ability to conduct a thorough and vigorous investigation to the extent necessary to do so. Ms Hilliard properly accepted that the integrity and professional skill of those persons is not in doubt. I am also not satisfied that Ms Bailey and Mr Gibson are inevitably tainted by being too close to those that the Estate considers may well have contributed to the serious deterioration of the STS business, such that justice would not be seen to be done by their appointment as administrators.

46.	The factual situations in the cases relied on by Ms Hilliard are very different from that of the present case. In Re Med-Gourmet Restaurants Limited, Mr Farhi was one of the directors who applied for the company to be put into administration; Mr Andronikou was the administrator proposed by Mr Farhi whom the judge concluded that creditors could not be satisfied would deal with the matter appropriately. I have already indicated that it would not in my judgment be right to treat SIB as in the position of a director rather than as a creditor in this case. In Re Gordon & Breach Science Publishers Limited, it is clear on the somewhat extreme facts there that there were genuine grounds on the part of the petitioning creditor, which was wholly independent of the company, for a lack of confidence in the existing liquidator, who was appointed by the creditors associated with the company.

47.	Such grounds do not, in my judgment, exist in the present case. According to the report of the interim managers exhibited to Mr Gibson’s statement, there is no ongoing professional relationship between PKF or the interim managers and SIB other than that PKF was engaged on 14 June 2011 solely for the purpose of considering the insolvency options available to SUKI.
48.	Ms Hilliard submitted that Ms Bailey and Mr Gibson have too readily taken at face value what they have been told by SIB and have not considered matters with a critical eye. However, the information provided by the SIB directors will always be the primary source of information for the administrators, whoever they are, and there is no sufficient basis for concluding that Ms Bailey and Ms Gibson have not viewed or will not view matters critically. Any investigations needed to be carried out will not be concluded overnight and, if the Estate considers that the administrators are not carrying out their role properly, it will be open to it to come back to court. There is, in my judgment, no reason to suppose that Ms Bailey and Mr Gibson will not be seen to be carrying out “a rigorous and independent professional analysis of what is in the best interests of the creditors”, see GP Noble Trustees Limited (Trustee of Berry Birch & Noble Staff Pension Fund) v Directors of Berkeley Berry Birch Plc [2006] EWHC 982 (Ch) per Etherton J at paragraph 12. 

49.	Ms Hilliard also drew attention, by reference to a number of documents and inter-solicitor correspondence, to the Estate’s ongoing concern about the lack of information and cooperation being provided to it by SIB and about how the STS business is going to be run. It may be that the Estate has not always been given all of the information requested by it but, assuming that to be so, it does not taint Ms Bailey and Mr Gibson as administrators.

50.	Ms Hilliard relied on SIB’s attempt to put SOI into administration by an out of court appointment of Ms Bailey and Mr Gibson which, she submitted “had no other objective than to produce a head of steam to propel the PKF Partners into a position whereby this Court would be faced with a fait accompli when it came to consider whom to appoint” (see paragraph 23c. of the Estate’s skeleton argument). I do not accept, particularly in the light of paragraph 5.10 of the report by Ms Bailey and Mr Gibson in support of the application for an administration order, that this was SIB’s objective. Even if it were, the court would have remained free to appoint whoever it considered appropriate as administrators of SUKI. Also, it does not lead to the conclusion that Ms Bailey and Mr Gibson were in some way complicit in SIB’s actions in a way which would compromise or be seen to compromise their independence and ability to act in the interests of SUKI’s creditors as a whole. As I have already stated, the facts of the present case are very different from those in Re Gordon & Breach Science Publishers Limited, on which Ms Hilliard relied in this context.

51.	Ms Hilliard criticised the administration strategy of Ms Bailey and Mr Gibson. In particular, she submitted that the proposal to act as broker between the shareholders is not a proper role for an administrator to take and that the Estate had no wish anyway to engage with them in that role. In response, Mr Riley submitted that it would be wrong to dismiss out of hand a possible resolution of the shareholders’ dispute by the administrators but that, in any event, if that strategy failed then a wider marketing exercise would have to take place and, in the meantime, the business would continue to trade: see paragraph 5 of the report by Ms Bailey and Mr Gibson in support of the application for an administration order. I can see nothing objectionable in Ms Bailey and Mr Gibson attempting to broker a resolution of the dispute between the shareholders and certainly nothing which would thereby render them inappropriate persons to be appointed as administrators. 

52.	Significantly, while Messrs Wood and Hellard consider that there is little realistic prospect of a compromise between the Estate and SIB (paragraph 5.1 of their report in support of an application for administration) they accept that “[t]here is nothing flawed in the PKF strategy” and that the strategies only differ with regard to the information being supplied by SIB and the prospective purchasers of STS introduced by SIB which, as they recognise, “is something that is a matter for the Court” (ibid, paragraph 5.9).

53.	Mr Riley stated that SIB’s concern in relation to the appointment of Messrs Wood and Hellard is that their administration strategy is to replace the STS board which, he submitted, would be a destructive and, in the light of advice received from Linklaters in Poland, a far-from straightforward strategy. Ms Hilliard submitted that it was not the intention of Messrs Wood and Hellard to remove STS’s board. However, Mrs Attias’ statement clearly states in paragraph 3.4.7 that this is their intention. In the light of that evidence, I was not satisfied that Ms Hilliard’s submission was well grounded on the facts. The report of Messrs Wood and Hellard in support of an application for administration is silent on this issue. 

54.	Mr Riley also relied on the fact that it would be hard to see how the administration would be viable without the continued provision by SIB of services and software to STS, which SIB had indicated would be unlikely to happen if Messrs Wood and Hellard were appointed. He submitted that it was unrealistic to suppose that they would be able to acquire alternative software within the relatively short time scale needed to try to sell STS’ business. Ms Hilliard’s position was that SIB was effectively putting a gun to the court’s head, making it inevitable that Ms Bailey and Mr Gibson would be appointed as administrators so as to ensure that SIB continued to be involved with STS.

55.	In my judgment, the strategy proposed by Ms Bailey and Mr Gibson is a coherent one which has the prospect of achieving one of the statutory purposes. That is not to say that the strategy proposed by Messrs Wood and Hellard is not a viable one also. However, I am concerned about the proposed removal of the STS board and, even if that is not or not now intended, about the prospect of SIB terminating its involvement with STS. The threat to do so if Messrs Wood and Hellard are appointed may in the event have turned out to be an empty one but it cannot be discounted on that basis.

56.	For all these reasons, and having taken fully into account the concerns expressed by the Estate, Ms Bailey and Mr Gibson should be appointed as the administrators of SUKI.