On Friday, Trade & Industry Secretary Nicholas Ridley ordered a full investigation into the affairs of Atlantic Computers Plc. Meantime in court last week, Atlantic’s adminstrators succeeded in getting dismissed a petition alleging that they were administrating the company’s affairs in a way that was unfairly prejudicial to Norwich Union. This was the outcome of one aspect a recent court case brought by head lessor, The Norwich Union Insurance Group. Both Norwich Union and Allied Irish Banks Plc also challenged the administrators’ right to cease payments to head lessors during the period of administration, and questioned whether leased equipment was actually the company’s property under the terms of lease agreements. The administrators’ claim they are still formulating proposals to minimise Atlantic’s liabilities, and until those proposals are ready, they are unwilling to pay head lessors for the period of administration. But both Norwich Union and Allied Irish claim that the administrators have no right to to use computers owned by the financial institutions to produce an income for the benefit of general creditors. The court decided that if a head lessor’s property was used or its value was realised during the period of administration, then the lessor is entitled to receive the payment – but as an expense of the administration. Secondly, it was decided that so long as an end-user continues to make lease payments and complies with the terms of the Flexlease, then the head lessor is unable to repossess his equipment during the lease period. The third moot point is whether head lessors have the right to take steps to obtain payments as they fall due. The court decided that allowances have to be made for the uncertainties of the Atlantic situation, and since there is still a great deal to be resolved, the administrators do not have to make payments as they are due. However, the court did not dismiss the head lessors’ application to take appropriate steps, but adjourned with leave to reapply.
