Travelex Bank Notes Limited in liquidation, Re

The court has jurisdiction under Insolvency Act 1986 section 108(1) to appoint an additional liquidator where an existing liquidator is affected by an actual, potential or perceived conflict. Conflict management must be implemented promptly and must be adequate to address the conflict. A court need not apply the higher threshold of bad faith or Wednesbury unreasonableness when deciding whether to appoint a conflict liquidator.

The discretion should be exercised where there is a real prospect of recoveries for creditors, and concerns about cost or delay can be addressed by funding, security, time limits and reporting requirements. Majority creditor views merit substantial weight but are not conclusive, particularly where the supporting creditors are associated with former management or otherwise lack independence.

Rawbank S.A., an unsecured creditor of Travelex Bank Notes Limited, applied under section 108(1) of the Insolvency Act 1986 for the appointment of two additional liquidators from Grant Thornton. The proposed appointees were to investigate potential claims arising during the period when PwC had advised the Travelex Group before the appointment of the existing administrators and liquidators.

The existing office-holders denied any conflict and relied on investigations and legal advice obtained after their appointment. Other substantial creditors opposed the application, citing cost, delay and the nearing closure of the liquidation. The central issues were whether the jurisdiction was engaged, whether additional liquidators should be appointed, how creditor views should be weighed, and whether the proposed appointees were suitable.

1. Jurisdiction. The court held that section 108(1) of the Insolvency Act 1986 permits the appointment of an additional liquidator in appropriate circumstances, including where a conflict liquidator is required. The ratio of Novalpina Capital LLP was not confined to interlocutory appointments. The court accepted that the existing office-holders were in an actual or, at least, perceived conflict when investigating transactions and decisions made while PwC was advising the Group.
2. Management of conflict. Although conflicts can sometimes be managed, effective management must be implemented immediately. The existing office-holders had investigated their own conduct for approximately six months before obtaining external advice. The later advice and review were insufficiently independent and could not be properly tested because the instructions, underlying documents and full advice were not disclosed. The court therefore held that the conflict had not been adequately managed.
3. Threshold for intervention. The court rejected the submission that intervention required bad faith or Wednesbury unreasonableness. A clear and immediate conflict, or a decision reached without proper investigation, could justify intervention. The strong prima facie case concerning payments to another creditor provided a real prospect of recoveries for the general body of creditors.
4. Discretion. Appointment was in the best interests of creditors. The Applicant’s purpose was to investigate claims for creditors generally, not proprietary claims for itself. Cost and delay could be controlled through undertakings, security, indemnity or insurance against adverse costs, a time-limited appointment and an updating report. The Applicant was directed to provide appropriate security, with £150,000 identified as a starting point.
5. Creditor views and appointees. Majority creditor views ordinarily receive great weight but are not conclusive. The New Travelex Creditors and Majority Noteholders were not independent outsiders because of their association with former management and the restructuring. Nicholas Nicholson and Robert Starkins of Grant Thornton were suitable and were appointed as additional conflict liquidators. The appointment was subject to consequential directions and appropriate funding and costs protection.

This was a first-instance application under section 108(1) of the Insolvency Act 1986. The court appointed additional conflict liquidators, subject to consequential directions and appropriate funding and adverse-costs protection.