Adam Henry Stephens & Anor v Firestone Financial Assets Limited & Anor

Special administrators should generally exercise their own commercial and administrative judgment. The court should not approve a detailed protocol for a distribution plan before the statutory procedure has been followed, the plan formulated and the creditors’ committee consulted.

Directions are appropriate where there are particular issues concerning powers, conflicts, legality or rationality. They are not a substitute for the administrators’ decision-making, nor a general protection against future challenge. A Benjamin order may permit distribution on the footing that further claims are impossible or impracticable to establish.

Where client money can safely be distributed subject to an adequate hold-back for properly attributable costs, an interim distribution may be ordered.

Dolfin Financial (UK) Limited was in special administration under the Investment Bank Special Administration Regulations 2011. Its joint special administrators sought directions approving a detailed Protocol for distributing client money and other client assets.

Firestone Financial Assets Limited, supported by Investors Europe (Malta) Limited, sought an interim distribution of 90 per cent of client money and declarations that the administrators had acted too slowly. Issues included possible illegality connected with the Company’s Tier 1 investor-visa business, potential proprietary claims by Trowers’ clients, allocation of administration costs and the proper scope of court directions.

The central questions were whether the court should approve the proposed Protocol at that stage, whether delay declarations should be made summarily, and whether an interim distribution should be ordered.

1. The administrators’ application. The application for approval of the Protocol was dismissed. The statutory procedure required the administrators first to formulate a distribution plan, place it before the creditors’ committee and then seek the court’s approval under the Investment Bank Special Administration Rules 2011. Early approval of principles or draft terms would add complexity without binding the committee or preventing later challenge.
2. Special administrators are experienced professionals charged with making commercial and administrative decisions. The court is not a general sanctuary or bomb shelter for office-holders. Directions may be appropriate where there are genuine doubts about powers, conflicts, legality or rationality, but difficulty, scale or commercial importance alone is insufficient.
3. The court’s concern on an approval application is ordinarily whether the administrators could rationally regard the proposed course as beneficial and whether they honestly reached that view. Approval does not cure illegality or automatically confer immunity from later claims. Any approval must identify its purpose and consequences precisely.
4. The possible illegality of the Tier 1 scheme did not require prior court approval. The administrators had discretion to decide whether further investigation was practicable or economically justified. The evidence did not establish criminal conduct by Firestone or DASL, nor a sufficiently defined proprietary claim by Trowers’ clients capable of justifying a freeze.
5. A Benjamin order could, in principle, protect administrators distributing client money or other assets where it was impossible or impracticable to establish the correct claimants. The present application was not the appropriate occasion to grant one, but the administrators could apply within the existing proceedings.
6. Firestone’s application for delay declarations was not decided on its merits. A claim alleging breach of the duty to act as quickly and efficiently as reasonably practicable required proper pleading, evidence and, potentially, disclosure, cross-examination and expert evidence. Free-standing declarations would not sensibly determine remuneration or expense issues.
7. An interim distribution of 90 per cent of client money claims was ordered, subject to the administrators’ liberty to withhold appropriate sums from clients who might elect to meet costs attributable to other assets from client money. Firestone and DASL were not to be withheld on that basis. The distribution was directed to be declared and, for Firestone and DASL, carried out by 31 January 2026, subject to any application for a Benjamin order.