Bank not estopped from appointing administrators

25/10/13

In Closegate Hotel Development (Durham) Limited v Barclays Bank, the Court had to consider whether or not the bank’s appointment of administrators was valid.  The question arose as to whether the bank was estopped from appointing administrators, without giving reasonable notice to the debtor companies of its intention to do so, in circumstances where the bank had been engaged with settlement discussions with the companies over a 12 month period and those settlement discussions had reached a point where the bank had indicated that the discussions were now “commercial, not litigation”.

The Court held that the bank was not estopped from appointing administrators in those circumstances.  In particular the Court held that the requirement that an estoppel be clear and unequivocal has the effect that, if ambiguous words are used which can reasonably be interpreted in several ways (one of which will not support the alleged estoppel), then those words will not found an estoppel unless the promisee seeks and obtains clarification of the statement from the promisor.

The Court also held that the alleged mutual understanding for which the companies contended, that settlement talks would only be terminated upon reasonable notice being given sufficient to allow discussions with potential funders to be concluded, was inconsistent with the formal stays in the underlying litigation which had been agreed between the parties (which were for specific periods; were terminable on just 3 days notice; and had expired some 6 months before the bank took steps to appoint): and that the estoppel argument must fail on this ground also.

The Court therefore summarily dismissed the companies’ challenge to the appointment of the administrators, holding that it stood no reasonable prospects of success.

The judgment is here.