Nathan Samuel Eisenberg & Anor v JNFX Limited

Under the Payment and Electronic Money Institution Insolvency Regulations 2021, a special administration order may be made where either the institution is unable, or likely to become unable, to pay its debts, or it is fair to make the order. Only one ground need be established.

Where competing candidates for appointment as special administrators are all suitable, the court may resolve the choice principally by reference to the creditors’ wishes. Majority creditor support is important but is not an absolute right, and the court must consider the proper operation of the administration and justice between interested parties. Regulatory support may be relevant but is not necessarily determinative. Appointing administrators from rival creditor and company nominations may be rejected where it is likely to create practical difficulties.

The directors of JNFX Limited, an authorised payment institution providing foreign exchange services, applied under regulation 8 of the Payment and Electronic Money Institution Insolvency Regulations 2021 for a payment institution special administration order. The company accepted that it was insolvent and that an order should be made.

The dispute concerned the identity of the administrators. The directors nominated two practitioners from Opus Restructuring LLP. Creditors nominated two practitioners from Azets Holdings Ltd. The Financial Conduct Authority supported the directors’ nominees, principally because of their prior involvement and the prospect of returning safeguarded funds quickly. The central issues were whether the order should be made under ground A or ground B, and how the court should choose between suitable competing nominees.

1. Special administration order. The company was insolvent. Under regulations 9(3) and 10(2)(a) of the Payment and Electronic Money Institution Insolvency Regulations 2021, an order could be made on ground A alone. It was also fair to make an order under ground B because the company’s affairs might require independent investigation, although the court did not conduct such an investigation at this stage.
2. Standing of creditors. Creditors with an interest in the application could appear with the court’s permission under rule 13(h) of the Payment and Electronic Money Institution Insolvency (England and Wales) Rules 2021. Permission had been given implicitly by hearing their representatives and was confirmed expressly.
3. Choice of administrators. All four proposed administrators were suitable. Experience of authorised payment institutions, possible fraud investigations, prior advice to the company, or nomination by creditors did not, without more, decide the issue or establish partiality or a conflict. The approach in Med-Gourmet Restaurants Ltd v Ostuni Investments Ltd [2013] BCC 47, drawing on Fielding v Seery, was helpful, but different considerations could apply under a special administration regime. A majority creditor vote was not conclusive.
4. The court nevertheless gave primacy to the creditors’ views. The creditors supporting the Azets nominees represented approximately 57% by number and 88% by value of the liabilities. Following Oracle (Northwest) Ltd v Pinnacle Services (UK) Ltd [2008] EWHC 1920 (Ch), [2009] BCC 159, the court appointed Louise Brittain and Matthew Richards, while making no criticism of the Opus nominees. The FCA’s role remained unchanged whichever administrators were appointed, and its preference did not outweigh the creditors’ wishes.
5. A joint appointment drawn from both proposed teams was rejected because the hearing had demonstrated that it was likely to create more problems than it solved, consistent with Oracle.
6. New evidence supplied after the draft judgment was not considered. Suggested corrections were not an opportunity for further submissions. The principles in Karunia Holdings Ltd v Creativityetc Ltd [2021] EWHC 1864 (Ch) and Re YM (Care Proceedings) (Clarification of Issues) [2024] EWCA Civ 71 were applied.