Allied Irish Banks and Aramid Entertainment have won their legal case againt the administrators of production company Capitol Films, which was declared insolvent in January 2010.

Administrators acting for defunct production company Capitol Films will have to personally pay the company’s creditors after the High Court ruled it has acted “unreasonably” in its bid to sell off Capitol’s assets.

UK production company Capitol Films went into administration in January 2010, at which point the administrators, David Rubin and Henry Lan, applied to the court for permission to sell the company’s interest in over 40 films, including John Maybury’s 2008 feature The Edge of Love, which the company produced.

However the company’s creditors Allied Irish Banks plc (AIB) and Aramid Entertainment Fund have today won their legal case against those administrators, 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 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.  

Michael Mulligan of media law firm Field Fisher Waterhouse, who acted for AIB and Aramid, said: “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.”