# Oldham v Kyrris

Oldham v Kyrris [2003] EWCA Civ 1506 is a UK insolvency law case concerning the administration procedure when a company is unable to repay its debts.

## Facts

Mr Michael Oldham was appointed by the court as administrator of Mr Jack Kyrris’ partnership. Kyrris had operated 13 Burger King restaurants, including two on Angel Row and Upper Parliament Street, Nottingham. Mr Mario Royle was an employee who sought a secured equitable charge, granted by Kyrris, for work he had done, but had not yet been paid. This amounted to £270,000. A summary judgment was given to Mr Oldham, and Mr Royle cross appealed that Mr Oldham was in breach of a duty of care, and there was sufficient proximity to him were he an unsecured creditor. He said the failure to ensure sums were paid to him was a breach of duty.
Behrens J said the equitable charge point was good enough to go to trial, and gave summary judgment for Oldham on the duty of care point.

## Judgment

Jonathan Parker LJ said that any equitable charge was a matter for trial and there was no sufficient proximity between administrators and unsecured creditors. The duty of an administrator is owed to the company, and no special duty was assumed. So under neither of the leading tort cases, Caparo v Dickman nor Henderson v Merrett, would the position differ. This was analogous to the company law case on directors' duties, Peskin v Anderson where Mummery LJ said that fiduciary duties are owed exclusively by directors to the company, and not to shareholders individually. Outside duties can arise, but ‘are dependent on establishing a special factual relationship between the directors and the shareholders in the particular case.’ He also noted Insolvency Act 1986, section 212, allowing the court to compel an administrator to repay money as the court thinks just, or contribute sums to the company’s assets for misfeasance, or beach of fiduciary duty or other duty as the court thinks just.
   The alternative claim in negligence
   141 In my judgment it matters not whether one adopts the approach of the House of Lords in Caparo Industries plc v Dickman, or the ‘assumption of responsibility’ approach which it adopted in Henderson v Merrett Syndicates: on either approach the result is the same, namely that, absent some special relationship, an administrator appointed under the 1986 Act owes no general common law duty of care to unsecured creditors in relation to his conduct of the administration.
   142 In paras 31–34 of his judgment in Peskin v Anderson, Mummery LJ said this:
      32. A duality of duties may exist. In Stein v Blake [1998] BCC 316 at pp. 318 and 320 Millett LJ recognised that there may be special circumstances in which a fiduciary duty is owed by a director to a shareholder personally and in which breach of such a duty has caused loss to him directly (e.g. by being induced by a director to part with his shares in the company at an undervalue), as distinct from loss sustained by him by a diminution in the value of his shares (e.g. by reason of the misappropriation by a director of the company's assets), for which he (as distinct from the company) would not have a cause of action against the director personally.
      33. The fiduciary duties owed to the company arise from the legal relationship between the directors and the company directed and controlled by them. The fiduciary duties owed to the shareholders do not arise from that legal relationship. They are dependent on establishing a special factual relationship between the directors and the shareholders in the particular case. Events may take place which bring the directors of the company into direct and close contact with the shareholders in a manner capable of generating fiduciary obligations, such as a duty of disclosure of material facts to the shareholders, or an obligation to use confidential information and valuable commercial and financial opportunities, which have been acquired by the directors in that office, for the benefit of the shareholders, and not to prefer and promote their own interests at the expense of the shareholders.
   143 It has not been suggested (nor could it be, in my judgment) that there is any relevant distinction for present purposes between a fiduciary duty and a common law duty of care. Further, I accept Miss Hilliard's submission that the position of an administrator appointed under the 1986 Act vis-à-vis creditors is directly analogous to that of a director vis-à-vis shareholders.
   144 Section 8(2) of the 1986 Act defines an administration order as:
   145 Section 14(1) of the 1986 Act confers on an administrator a number of specific powers of management set out in Sch. 1, including (in para.14) a power to carry on the business of the company, together with a general power:
   146 Given the nature and scope of an administrator's powers and duties, I can for my part see no basis for concluding that an administrator owes a duty of care to creditors in circumstances where a director would not owe such a duty to shareholders. In each case the relevant duties are, absent special circumstances, owed exclusively to the company.
   147 It is also material, in my judgment, to consider the nature of the remedy provided by s.212 of the 1986 Act. Section 212(3) provides that on an application under the section the court may compel an administrator (among others):
   148 To my mind, this is a further indication that, absent some special relationship of the kind described by Mummery LJ in Peskin v Anderson , an administrator owes no general duty to creditors.
   149 My conclusion is also consistent with Romer J's decision in Knowles v Scott [1891] 1 Ch 717 , where he held that a liquidator is not a trustee for the creditors or contributories of a company in liquidation. At p.723 Romer J said this:
Dyson LJ and Thorpe LJ agreed.