IN THE MATTER OF ALLIED WALLET LIMITED (IN LIQUIDATION)

Where safeguarding regulations create a priority asset pool, the pool bears only costs associated with identifying, reconstituting and distributing it. It does not bear every cost of the liquidation.

Foreign-currency claims against the pool should be converted at the date of the winding-up order. Where separate pools are deficient and the regulations provide no allocation rule, available general assets should be divided rateably by reference to each pool’s shortfall.

The joint liquidators sought directions in the liquidation of a regulated payment and electronic-money institution whose safeguarding obligations had not been fulfilled. The issues concerned the costs chargeable to statutory asset pools, the conversion date for foreign-currency claims, and the allocation of limited general assets between separate pools under the Electronic Money Regulations 2011 and Payment Services Regulations 2017.

The Court of Appeal’s decision in Baker and Rowley v The Financial Conduct Authority, Re ipagoo LLP, [2022] EWCA Civ 302, had established that the regulations did not create a trust and that deficient pools were to be made good from the company’s general estate.

1. The Court of Appeal’s interpretation of regulation 24 of the Electronic Money Regulations 2011 applied equally to the materially similar payment-services provisions. The asset pools included sums that ought to have been safeguarded.
2. The costs chargeable to the pools included the costs of appointing and directing office-holders, investigating and realising assets, identifying pool claims, reporting to the court and creditors, and liaising with the FCA where those activities were directed to reconstituting or distributing the pools.
3. General liquidation work unrelated to the pools remained payable as general liquidation expenses. The judge therefore adopted a version of Scenario 2, subject to further submissions on particular employee and reporting items.
4. Pool creditors were more closely analogous to unsecured creditors whose claims were payable from a specified fund than to ordinary secured creditors. Their claims had to be proved. Foreign-currency claims were to be converted into sterling at the date of the winding-up order, 20 March 2020.
5. Where the EMR and PSR pools were both deficient, the available general assets were to be divided rateably by reference to the shortfall suffered by each pool. This applied the equitable maxim that equality is equity.