Racing to sell? PJSC Uralkali v Rowley & Anor [2020] EWHC 3442 (Ch)
Key Contact: Hugh Hitchcock
Author: Tom Geen
Summary
The High Court has handed down a judgment following a trial relating to the administration of Force India Formula One Team Ltd, where a bidder for the company’s business and assets tried to hold the company’s Administrators personally liable for negligence in relation to the sale. Mr Justice Miles ruled that the joint Administrators did not owe a duty of care to the bidder and that the Administrators undertook a fair and proper sales process.
Background
Force India was an established Formula 1 racing team that faced financial distress in summer 2018. In July 2018, the company went into administration. As a result, the Administrators, Mr Rowley and Mr Baker undertook a sales process. Two potential buyers were found. The first was the claimant, PJSC Uralkali. The second was Racing Point UK Limited.
The Administrators accepted a share sale offer from Racing Point that would become an asset and business purchase if the proposed share sale was not viable. Racing Point eventually purchased the business and certain assets of the company for £90 million.
Uralkali had put forward an offer to purchase the business and assets of the company for £101.5 million. The offer was made on the understanding that a higher bid from a third party would be matched by Uralkali, up to the sum of £122 million. Whilst Uralkali’s offer was higher than Racing Point’s, the Administrators had accepted Racing Point’s offer, as this would have led to the rescue of the company as a going concern.
Uralkali issued proceedings against the Administrators following the rejection of its bid.
Claim
The crux of the Uralkali’s claim was that the Administrators had failed to conduct a fair and proper sales process and misrepresented the criteria that they would follow in assessing the bids. The following claims were made:
- The Administrators negligently misrepresented that they would select the successful bidder on the basis of the most favourable offer for the business and assets of the company;
- The Administrators negligently misrepresented that the bidding process would be operated on a level playing field;
- The Administrators conducted the bid process negligently; and
- The Administrators breached an equitable duty of confidence by disclosing confidential information relating to the claimant’s bid to Racing Point.
Judgment
In giving his judgment on the Administrators’ duty of care in tort personally, Mr Justice Miles noted that if such a duty of care applied it would have allowed bidders to apply leverage and threaten Administrators with personal liability. He also commented that the court ought to be slow to impose restrictions that might unfairly fetter the Administrators’ discretion to make decision on issues relevant to the nature of their duties.
Ultimately, the court held that the Administrators did not have a duty of care to a potential purchaser that had made a higher bid. Indeed, when considering an offer to purchase the company, an Administrator has the primary objective of selling the company as a going concern, and therefore preferencing a share sale.
Commentary
The judgment showcases the court appearing to affirm that the Administrators of a company have to prioritise their overriding statutory duty to creditors and fiduciary duty as agents to the company over any duty to potential purchasers.
The decision highlighted that the principles of Hedley Byrne v Heller, where individuals owe a duty of care in the event that they assume responsibility to the purchaser, were not present in this case as the Administrators did not make any representations that the court interpreted as assuming responsibility for Uralkali.
Finally, this decision is further evidence that the courts are reluctant to interfere with the Administrator decision process where an Administrator is acting in accordance with their duties.
