Field Fisher Waterhouse High Court win sees administrators bear significant legal costs in film company insolvency case
09 December 2010
Field Fisher Waterhouse LLP has successfully acted for Allied
Irish Banks plc (AIB) and Aramid Entertainment Fund (Aramid) in a
High Court case against the administrators of Capitol Films Limited
(Capitol Films). The court found the administrators, David Rubin
and Henry Lan, personally liable for creditors’ costs after the
administrators made an application to the court to sell assets of
the company subject to fixed charges.
AIB and Aramid were among the creditors of Capitol Films which
funded the production of feature films including The Edge of Love
starring Keira Knightley and Sienna Miller. In January 2010,
Capitol Films went into administration and David Rubin and Henry
Lan of David Rubin & Partners were appointed joint
administrators. The administrators applied to the court for
permission to sell the company’s interests in over 40 films,
including The Edge of Love. Those assets were subject to fixed
charges. The sale was successfully contested by AIB and Aramid
after the judge, Richard Snowden QC, rejected the administrators’
application on the grounds that, amongst other things, they had not
ascertained a fair value for the assets before the proposed sale
and had failed to investigate a prior assignment of over 80 other
film titles to a company connected to the director, David
Bergstein.
AIB was also successful in its application for permission to
appoint a receiver over the company’s rights in respect of The Edge
of Love, after the administrators had withdrawn their consent to
such appointment.
Total legal costs in the case are estimated to run to several
hundreds of thousands of pounds. Field Fisher Waterhouse
successfully argued that the administrators should pay its clients’
legal costs personally and on an indemnity basis and that the
administrators should not be able to recoup themselves in respect
of that liability or in respect of their own costs, from assets of
the company as an expense of the administration.
Field Fisher Waterhouse’s Michael Mulligan, one of the firm's
Dispute
Resolution partners advised AIB and Aramid on the case,
assisted by solicitor Henry Marshall. Field Fisher Waterhouse
instructed Marcus Haywood of 3-4 South Square as Counsel.
Michael Mulligan commented: “This judgment serves as a warning
to insolvency practitioners that they could incur significant
financial penalties if they bring misconceived applications to
court which affect the security of creditors and if they fail to
investigate the conduct of directors and antecedent transactions in
an insolvency. In normal circumstances the administrators
would expect to recover their own legal costs from the assets of
the insolvent company in priority to floating charge holders and
unsecured creditors. In this case, however, the judge
considered that the conduct of the administrators was unreasonable
to the extent that they should only recover their costs and
expenses after both fixed and floating chargeholders and unsecured
creditors are paid from any realisations in the estate. In effect,
the administrators will have to pay significant sums of money to
creditors personally.”
Field Fisher Waterhouse’s Business
Recovery and Insolvency Group advises a range of clients on
contentious and non-contentious insolvency issues, including
insolvency practitioners. The firm has a leading multi-disciplinary
media group which includes a media asset finance and feature film
practice that acts for a variety of financiers and production
companies.
Wallace LLP advised David Rubin and Henry Lan.
For further press information, please
contact:
Louise Eckersley, PR Manager,
Field Fisher Waterhouse LLP on +44 (0)20 7861 4120
Amie Ryalls, PR Executive, Field
Fisher Waterhouse LLP on +44 (0)20 7861 4995