York Gas Ltd, Re

An acknowledged conflict of interest between insolvency office-holders may, in principle, be managed by appointing an additional office-holder from the same firm. Independent legal advice and effective separation of responsibilities may provide adequate protection. The absence of creditor consultation is not necessarily decisive, particularly where no creditors’ committee exists. Nor is the office-holders’ possession of information obtained from both companies necessarily a reason to reject the arrangement, where there is no reason to regard the information as improper to use and relevant materials would in any event be exchanged.

The liquidators of York Gas Limited also acted as liquidators of its parent company, Independent Energy Holdings PLC. Independent Energy Holdings had a substantial claim in the liquidation of York Gas, creating a conflict because the same individuals would have to pursue and adjudicate the claim.

The liquidators applied for an additional insolvency practitioner from the same firm to be appointed to York Gas. The Registrar dismissed the application, principally because creditor consultation had not occurred and the existing liquidators had information obtained from both companies. The issue on appeal was whether the proposed appointment adequately managed the conflict.

1. Appeal allowed. The Registrar’s decision was erroneous. An additional insolvency practitioner from the same firm can potentially provide an acceptable means of managing a conflict between connected companies.
2. The authorities, including Re Arrows Ltd [1992] BCC 121 and Sisu Capital Fund Ltd v Tucker [2005] EWHC 2170 (Ch), supported that conclusion. Independent legal advice for the additional office-holder was a relevant safeguard.
3. The absence of creditor consultation was not sufficient, in the circumstances, to justify dismissal of the application. York Gas had no creditors’ committee, and there was no practical body available for consultation.
4. The existing liquidators’ knowledge of the affairs of both companies did not justify refusing the appointment. There was no reason to think that information available to York Gas could not properly be used in advancing Independent Energy Holdings’ claim. The liquidators of the two companies would in any event be expected to exchange all relevant materials.
5. The proposed arrangements adequately managed the recognised conflict. Mr Shierson was therefore appointed as an additional liquidator of York Gas pursuant to section 108 of the Insolvency Act 1986.

1. High Court (Chancery Division): Allowed the appeal from the Registrar’s decision dated 19 April 2010 and ordered the appointment of Mr Shierson as an additional liquidator of York Gas.