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Davey vs Money (2018)

The case of Davey v Money (2018) was brought against administrators regarding their involvement with a secured creditor. Whilst the administrators were exonerated the case has served as a reminder to administrators about working relationships and to secured creditors to be aware of the level of their involvement in the administration of a customer.

Cowgills Business Recovery explains the details of the case and what can be learned.


Ms Davey was the sole shareholder of Angel House Developments Limited (AHDL), a property development company whose sole asset was a property, Angel House in Tower Hamlets.

AHDL borrowed £16 million from Dunbar Assets Plc (Dunbar) in order to fund the purchase and redevelopment of Angel House. Dunbar took security for the loan in the form of a debenture and Ms Davey also gave a personal guarantee to Dunbar up to the value of £1.6m.

After failing to obtain planning permission for the property, AHDL failed to keep up with payments to Dunbar. This was in spite of extensive discussions, amendments and extensions to the facility. Therefore, in accordance with the terms of its debenture, Dunbar appointed James Money and Jim Stewart-Koster as joint administrators and also sought to enforce Ms Davey’s personal guarantee.

The administrators sold Angel House. After payment of the relevant fees, the remainder of the proceeds of sale (£15.98m) were paid to Dunbar in partial discharge of its debt.

Ms Davey’s claims

Ms Davey brought a claim against the administrators under the Insolvency Act 1986, alleging that they had failed in their duties as administrators by favouring the interests of Dunbar over those of AHDL and its other creditors.
She made several arguments, most of which concerned the sale of Angel House by the administrators, in particular that they had:

  1. conducted the administration with excessive regard to the wishes and position of Dunbar;
  2. undertaken a ‘light touch’ administration and in doing so failed to exercise independent judgment;
  3. failed to take sufficient steps to involve Ms Davey in the administration and review the possibility of a funded rescue;
  4. appointed unsuitable agents, having been influenced by Dunbar, and that as a consequence sold Angel House, the sole asset of AHDL at an undervalue. She alleged that the agents appointed for the sale of Angel House had not been independently selected by the administrators but instead had been hand-picked by Dunbar.

Ms Davey also brought a claim against Dunbar alleging that, by their conduct and involvement with the administration of AHDL, they had made the administrator their agent and therefore be liable for the breaches of the administrator.

The law

Under the Insolvency Act 1986 an insolvency administration of a limited company can only take place if there exists one of three possible outcomes of the administration. These are:

  1. rescuing the company as a going concern;
  2. achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration);
  3. realising property in order to make a distribution to one or more secured or preferential creditors.

An administrator can only opt for outcome 3 if 1 and 2 are not reasonably practicable and it will not unnecessarily harm the interests of the creditors as a whole.

In Davey v Money, the administrators determined that objective 3 was the appropriate objective for the administration. It was on this basis the administrators sold Angel House and AHDL moved from administration to creditors voluntary liquidation.

The judgement

The judge discounted Ms Money’s claim that the property had been sold at an undervalue. One of the reasons he gave was that the evidence which had been presented to the Court demonstrated that the property had been sold at market value.

So, whist there was no dispute that the agents were initially instructed by Dunbar, it was irrelevant because the value received had still been accurate.

In fact, all of Ms Davey’s claims were dismissed and the judge actually ruled that Dunbar were entitled to recovery of their costs in respect of seeking to enforce Ms Davey’s personal guarantee.

In the event that the administrator had been found to have committed a breach of their duties, they would have been liable to pay compensation into the administration of AHDL for distribution to creditors.

Potential liability of secured creditors for breach by administrator

Whilst Ms Davey’s claims were unsuccessful, the judge did actually consider the potential implications for secured creditors by briefly outlining the circumstances in which a secured creditor could be liable for claims such as those brought by Ms Davey.

In summary, the judge found that a secured creditor could be liable for breaches by an administrator by making them their agent if they ‘gave directions which the administrator unquestioningly followed; misled the administrators or exerted sufficient pressure on them so as to defeat their free will.’

Essentially, in order for a Court to find that a secured creditor has procured breaches of duty by the administrators, there would need to be proof that a relevant person at the secured creditor for example a director had the requisite knowledge and intention to cause the administrators to act in breach of duty.

What can be learned?

The outcome of this case was reliant on the facts and evidence presented to the Court and it is clear from the transcript that the Court relied heavily on records kept by the parties before, during and after the administration of AHDL.

Whilst the case does not hold much in the way of ground breaking developments, it should serve as a gentle reminder to secured creditors that whist they can liaise with the administrators and express views, they must avoid being seen to influence the administrators in a way that compromises the administrators’ independence.
The judgment is also a cautionary reminder to administrators to always have regard to their statutory duties and ensure they can justify their methods independently to avoid criticism.  Administrators, creditors and companies should keep clear and full records of all decisions taken and discussions had throughout an administration should their conduct need to be justified at a later date.


The information was correct at time of publishing but may now be out of date.

Business Recovery
Posted by Jason Elliott
25th March, 2019
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