IP Briefing: Directions: Bomb Shelter or Prudent Resource for Office Holders

Introduction

Lord Clark issued his Opinion in respect of the directions sought by the Administrator of Dawson International Plc, in a judgement delivered on 30th May 2018. The case has a fairly complex factual and legal background. For present purposes it will suffice to say that Dawson arguably took over responsibility for a mill near the Scottish and English border at Berwick-upon-Tweed. Dawson also arguably took responsibility for certain contaminated land over the English border.

In a long running administration the English Environment Agency are now recognised as contingent creditors but have not yet submitted a claim, far less quantified any claim against the administration. On the other hand the Pension Protection Fund are the significant creditors in the administration and wish the administration to be brought to an end and a dividend paid.

Against this backdrop the Administrator sought directions from the court as to how to proceed.

Lord Clark’s Decision

As mentioned above the factual matrix is reasonably complex. The environment agency challenged the Administrator’s ability to seek directions in relation to this matter. The first direction sought by the Administrator was in relation to whether either he or the company was “an appropriate person”, in terms of various pieces of legislation, who would incur liability for remediation costs. The second direction sought related to whether the Administrator could take particular steps to cease certain work that the environment agency contended had to be continued, but which the Administrator understood no longer assisted with remediation. The Environment Agency objections were rejected by Lord Clark. The application as a whole is still to be determined but a number of his observations at this stage are useful in relation to directions applications generally. Lord Clark decided that the scope of the court’s role was broader, in a paragraph 63 directions application than simply “the proper interpretation of the insolvency law governing the administration”. He concluded:

I accept that an Administrator is not entitled to bring every issue which he faces before the court for directions.  In Re T&D Industries Plc [2001] 1 WLR 646 Lord Neuberger commented that commercial and administrative decisions are for the Administrator, and the court is not there to act as some sort of “bomb shelter” for him. Commercial and administrative manners can be distinguished from the factual and legal matters raised by the Noter… Questions of the kind raised, which affect the treatment of claims or potential claims can be suitable issues for directions.”

Lord Clark further decided that although English law may apply to the issue of remediation liability it was open to the Scottish court to give directions to the Administrator – and in this case further delay to the progress of the administration should be avoided.

Advice

This case provides a useful reminder of when directions can and should be sought, and when they ought not to be sought. It is worthwhile reading for all practitioners.

BBM Solicitors specialise in advising IP’s in both contentious and non-contentious matters (including transactional work). Contact: Eric Baijal (emb [AT] bbmsolicitors [DOT] co [DOT] uk).This briefing note is current as at 4th June 2018 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).