Goals Soccer Centres PLC [2023] CSOH 79

This recent decision by Lord Braid involved the exercise by the court of a relatively rarely-used power to remove existing Administrators, and appoint a replacement. In some respects, this is a decision which largely turns on its own facts and is therefore a difficult one from which to draw wider lessons. However, some of Lord Braid’s criticism of the nature and content of the administrators’ intervention in the action are worth deeper scrutiny.

The Note was lodged by Sportsdirect.com Retail Limited, a creditor of Goals Soccer Centres PLC (the “Company”). During the course of the administration, the Company’s assets and business (including its books and records) were sold as part of a pre-packaged sale. In addition, certain claims which the Company may have had against its auditors due to failings pre-administration were assigned to the Noter. However, in order for the Noter to pursue its assigned claims, it needed access to the Company’s pre-administration books, which the existing Administrators no longer held, and to carry out further investigations. The existing Administrators sought to bring the Administration to an end and to dissolve the company, as a result of which the Noters sought to replace them. Ultimately, the order was granted as, in the circumstances, there was no risk of prejudice to other creditors and the circumstances were sufficiently unusual as to present little risk of “opening the floodgates” to other applications to remove Administrators.

As suggested above, the decision as to whether to replace the Administrators turned largely on those facts, rather than any novel legal principle. What is perhaps of more general interest, however, is the Administrators’ actions in response to the Note and Lord Braid’s comments thereon. On the face of matters, the Administrators chose to remain neutral in the face of the Note. They were perfectly happy to be removed from office should the Court choose to do so and, for that reason, chose not to lodge answers. In principle, this is perfectly proper and many appointment-takers will have made similar decisions in the face of actions arising from administration or winding-up proceedings. However, the Administrators also chose to write a letter to the court, through their solicitors, setting out their position on the Note. In this letter, despite the Administrators’ purported neutrality, it was suggested that there was no good reason for their removal and the Note was in fact a way of circumventing the high thresholds of a challenge to their conduct under para. 74 of Schedule B1, or a claim of misfeasance under para. 75. In so doing, the Administrators also called into question the motives of the Noters in raising proceedings.

In his judgment, Lord Braid was expressly critical of the Administrators’ decision to, in effect, attempt to challenge the Noters’ position without formally lodging answers – something which he described as “apparently a back-door attempt to be heard in opposition to the application.” His view was that, if the Administrators wished to advance an argument against their removal, and to cite authority in support of this argument, the proper method was to instruct counsel and be represented at the hearing. Administrators are officers of the court and are perfectly capable of engaging with proceedings in the normal way. In addition, there was a practical difficulty in that the letter was only brought to His Lordship’s attention on the day of the hearing, rather than in advance as would have been the case with answers. Ultimately, the Court opted to place no weight on any of the submissions advanced in the letter.

This case shows clearly that office-holders should be careful as to how they engage with the Court. It is no good to profess neutrality but to attempt nevertheless to be heard by way of letter, or other methods. If the office-holder wishes to present an alternative position, they should engage properly with the Court and instruct agents to participate in proceedings in the proper manner, rather than risk criticism by appearing to object under the cloak of neutrality.

BBM Solicitors specialise in advising IP’s in both contentious and non-contentious matters (including transactional work). Contact: Eric Baijal (emb@bbmsolicitors.co.uk).This briefing note is current as at 22 November 2023 and is our understanding of the position described at that date. Legal advice ought to be taken before relying on its terms (particularly to ensure the law has not changed).