Duty Owned by Former Administrators

Duty Owned by Former Administrators

Brief Facts

W.J.B. Chilterns Trust Company (Jersey) Limited (‘Chilterns’) administered a company called Alliance Aviation Limited (‘Alliance’). The ultimate shareholder of Alliance was Sovereign Trust International Ltd. (‘Sovereign’). The administration of Alliance was transferred to a new administrator. In December 2003, after the administration had been transferred, Sovereign advised Chilterns that there were gaps in the information held by the new administrator, and requested information about the period of Chilterns’ administration. Sovereign, confirmed to Chilterns’ that it would meet Chilterns’ reasonable costs in providing the information.

Chilterns advised Sovereign that they could have access to the minute book and bank files but not the correspondence files. Chilterns advised Sovereign that “[s]hould you wish to have sight of [the administration files] then please file an appropriate representation setting out the orders that you seek.” Following further correspondence, Sovereign’s lawyer wrote to Chilterns on 29 January 2004 demanding the information and advising that a representation would be presented on 30 January 2004. The hearing was set for March 2004. Two days before that hearing Chilterns made a written offer to Sovereign to allow access to the files without charge and confirming that Chilterns would respond to reasonable questions asked within a certain time period, again without charge. This offer was not accepted by Sovereign and the March hearing went ahead. At that hearing Chilterns was ordered to disclose information. There was then a further hearing in April and the matter came back before the Court in this hearing to resolve the issue of costs and the need for Chilterns to answer further queries.

Held

• An administrator owes a duty to a company to assist it in establishing what occurred during the period of administration. This applies after the administrator ceases to administer that company and it is not relevant whether the request for information is made by the company or the shareholder.
• The administrator is entitled to be paid for its time and expense in providing this information.
• The correspondence files relating to a company’s administration are just as much a part of the company records as other documents. Whilst the files may belong to the administrator, the company is entitled to have access to them. Therefore, Chilterns should not have declined access to the correspondence files but instead should have provided access to them in the same way as the minute book and bank files.
  
• The Court criticised the conduct of both parties in this matter although it held that ultimately the proceedings arose out of Chilterns’ failure to provide information and ordered it to pay two thirds of Sovereign’s costs.

Comment

This case makes it clear that an administrator or former administrator must assist with the provision of information for the continuing administration of a company but that the administrator is entitled to be paid for doing so.

The more significant point concerns the decision by the Court that correspondence files are documents to which the company should be allowed access. This case contrasts with the previous English case of Tiger v Barclays Bank in which it was held that only the documents necessary for the continuing administration of the company needed to be handed over to the new administrators. However, this previous case was not considered during Sovereign v Chilterns and indeed, it should be noted that no authorities are listed as having been considered by the Court. We therefore believe that it may still be argued that only those documents necessary for the on-going administration of the company need be handed over, notwithstanding the decision in this most recent case. However, given this latest case, administrators should give thought to this issue each time a request is received and consider whether they have any objection to providing access to the correspondence files in order to avoid a dispute on this point.

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This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

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