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On 2nd March 2023, Mr Justice Miles handed down judgment by which he gave a direction for the administrators of Sova Capital Limited to complete the sale of £274m worth of Russian securities to a creditor, Dominanta, which was represented by William Buck. The application arose in unusual circumstances, caused by the invasion of Ukraine, which had severely limited the administrators ability to sell the securities due to both western sanctions and restrictions within Russia as to such sales. The proposed transaction with Dominanta involved it waiving its claim as a creditor in exchange for the securities, in what was called a ‘credit bid’. This was opposed by another creditor, who wished to pursue his own proposed transaction and who made various allegations, including that the administrators had no power to enter into the transaction and that it amounted to a distribution which was contrary to the pari passu rule.
In his judgment, Mr Justice Miles addressed the “novel issues which have not previously been decided by the courts”, holding that a creditor could purchase assets from a company in administration by usings its creditor claim as consideration, and that such a transaction was not properly characterised as a distribution of assets, as the creditor was acting qua purchaser and not qua creditor. This is an important judgment in that it identifies a potential route by which administrators can realise value to the benefit of the body of creditors where a cash sale to third parties is problematic or offers poor value.
William Buck, leading Nicholas Wright, acted for Dominanta, instructed by Michael Barnett and Laurence Crees of Quillon Law.