This is the third in a series of articles concerning the case of PJSC Uralkali v Rowley & Baker as Former Administrators of Force India Formula One Team Limited (in Liquidation).
Liability of jointly appointed administrators
The December 2020 case of PJSC Uralkali v Rowley & Baker as Former Administrators of Force India Formula One Team Limited (in Liquidation) is an interesting case concerning, primarily, the duty of care owed by administrators in company sales. It also deals with some interesting points concerning the duty of confidence, and the liability of jointly appointed administrators.
Firstly, it is useful to set out the background facts. The company, Force India, entered into administration, with a number of parties interested in purchasing the team and/or the business and assets of the company. The administrators decided, after some to-ing and fro-ing, to require interested parties to submit a plan A (a rescue plan) and a plan B (an asset purchase).
One of the interested parties was PJSC Uralkali, who submitted a bid that was ultimately unsuccessful. They then brought this claim against the administrators alleging amongst other things:
The administrators had been negligent in the sale process (specifically that they had made representations they knew to be false which had a detrimental effect on PJSC Uralkali).
The administrators had breached confidence.
The administrators were both liable individually.
In this series of articles, I look at each claim in turn. The first article can be found here and the second here. This third and final article is about the individual liability of the administrators.
PJSC Uralkali argued one of the joint administrators, Mr Baker, who had played an absolutely minimal role, should be liable for what it said (and had failed in such allegations) were the wrongs committed by Mr Rowley.
PJSC Uralkali’s purported authority for that proposition was that it is “wrong as a matter of policy for one joint administrator to be entitled to stand back and look the other way when serious failures took place on his watch”. In respect of its negligence claim, PJSC Uralkali said that any representations made by Mr Rowley were made jointly on behalf of both Mr Rowley and Mr Baker. In respect of its breach of confidence claim, PJSC Uralkali said that the breach by Mr Rowley was made when he was acting as joint administrator, and as such Mr Baker was jointly liable.
Whilst the court had already found against PJSC Uralkali on both of its claims, and as such Mr Rowley was not liable, the court thought it important to go on to say how it would have dealt with the liability of Mr Baker if indeed it had found in favour of PJSC Uralkali.
Dealing firstly with the negligence claim, the court reminded itself that such claims are founded on an assumption of responsibility by the defendant. The case of Fraser Turner, discussed in the first article in this series, specifically states that an administrator does not owe a tortious duty to third parties who may be adversely affected by his actions. Something more would be needed to impose such a duty. In the case of Mr Baker, he had no involvement whatsoever in any of the circumstances that gave rise to the negligence claim, and the court found that he also had no reason to suspect that Mr Rowley was acting improperly. The court was keen to stress the licensing of insolvency practitioners as prima facie evidence of their good standing. The court therefore held that:
Mr Baker was not liable prima facie in the negligence claims because he himself had never made any representations – negligent or otherwise.
Mr Baker was not liable for the actions of Mr Rowley because he had no reason to suspect Mr Rowley had acted negligently and thus no duty to do something about such negligence.
As for the breach of confidence claim, because Mr Baker himself did not see or disclose the alleged confidential information to anyone, there was no basis for his personal liability. Again, as with the reasoning above, Mr Baker was also not to be held liable for the actions of Mr Rowley because he had no reason to suspect Mr Rowley had acted in breach of confidence.
Once again, this final part of the court’s decision will be welcomed by officeholders who are often appointed jointly with their colleagues, even though only one of them takes primary responsibility for the day to day running of matters. The court was clear that there is no basis in law for holding one officeholder liable for breaches by the other.
For more information or to discuss such cases, please do not hesitate to get in touch.