houses that could have significantly raised their value, and did not find tenants for the vacant properties

The basic duty of the receiver was to realise value for the floating charge holder, although all preferential debts, or those with priority, would have to be paid.[129] For other unsecured creditors, the possibility of recovering money was remote. The floating owed no duty to other creditors with regard to the timing of the appointment of a receiver, even if it could have an effect on negotiations for refinancing the business.[130] It was accepted that a receiver had a duty to act only for the proper purpose of realising debts, and not for some ulterior motive. In Downsview Nominees Ltd v First City Corp Ltd,[131] a company had given floating charges to two banks (Westpac first, and First City Corp second). The directors, wishing to install a friendly figure in control asked Westpac to assign its floating charge to their friend Mr Russell, who proceeded to run the business with further losses of $500,000, and refused to pass control to First City Corp, even though they offered the company discharge of all the money owed under the first debenture. The Privy Council advised that Mr Russell, as administrative receiver, had acted for an improper purpose by refusing this deal. A further case of breach of duty occurred in Medforth v Blake[132] where the administrative receiver of a pig farm ignored the formers owner's advice on how to get discounts on pig food of £1000 a week. As a result, larger debts were run up, and Sir Richard Scott VC held this was a breach of an equitable duty of exercising due diligence. However, a more general duty to creditors was tightly constrained, and general liability for professional negligence was denied to exist. In Silven Properties Ltd v Royal Bank of Scotland[133] a receiver of a property business failed to apply for planning permission on houses that could have significantly raised their value, and did not find tenants for the vacant properties, before selling them. It was alleged that the sales were at an undervalue, but the Court of Appeal held that the receiver's power of sale was exercisable without incurring any undue expense. Everything was subordinate to the duty to the receiver to realise a good price.[134] In this respect, an administrator is not capable of disregarding other creditors, at least in law. One of the reasons for the partial abolition of administrative receivership was that after the receiver had performed his task of realising assets for the floating charge holder, very little value was left in the company for other creditors. Ordinarily, once the receiver's work was done, the company would go into liquidation.
Liquidation
Main articles: Liquidation and Chapter 7, Title 11, United States Code
Disused assets of a liquidating business require buyers, but ultimately the government bears the cost of cleaning up. Battersea Power Station was decommissioned by the CEGB in 1975, and a series of private buyers since 1986 have abandoned their projects or gone into administration.

Related Products