Clydesdale Financial Services Ltd & Ors v Smailes & Ors

Clydesdale Financial Services Ltd & Ors v Smailes & Ors

The administrators were so closely involved in the negotiation and execution of the pre-pack sale to Jiva that they could not independently investigate its propriety; the legitimate concerns of the majority creditors justified their removal and replacement under paragraph 88 of Schedule B1. No impropriety was found, but the appearance of conflict and need for independent review warranted the order. Other grounds for removal were rejected. Focus's application for inspection of files was refused due to inadequate evidence and unresolved enforceability issues under FSMA.

Parties
Claimant: Clydesdale Financial Services Limited; Claimant: Justice Capital Limited; Claimant: Focus Insurance Company Limited; Defendant: Robert Smailes; Defendant: Jiva Solicitors LLP; Defendant: Other Defendants (including Mr Ryman)
Jurisdiction
England and Wales
Judgment Date
18 June 2009
Procedural Posture
Insolvency/administration / Interlocutory Application for Removal of Administrators and Related Interim Relief
Outcome
Administrators removed and replaced; other interim relief orders as specified; some claims struck out; Focus's application for inspection refused without prejudice to a renewed application.
Legal Topics
Removal of Administrators, Pre Pack Administration Sales, Creditors' Rights, Disclosure and Inspection of Files, Standing to Sue Administrators, Misfeasance Claims
Insolvency Company Law Civil Procedure Removal of Administrators Pre Pack Administration Sales Creditors' Rights Disclosure and Inspection of Files Standing to Sue Administrators +1 more

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Parties

Clydesdale Financial Services Limited

Claimant

Justice Capital Limited

Claimant

Focus Insurance Company Limited

Claimant

Robert Smailes

Defendant

Jiva Solicitors LLP

Defendant

Other Defendants (including Mr Ryman)

Defendant

Procedural Posture

Insolvency/administration / Interlocutory Application for Removal of Administrators and Related Interim Relief

Legal Issues

  1. 1 Whether the administrators should be removed and replaced under paragraph 88 of Schedule B1 to the Insolvency Act 1986
  2. 2 Whether the sale of LLP's assets to Jiva Solicitors LLP was at an undervalue and merits investigation
  3. 3 Whether Focus Insurance Company Limited is entitled to inspection of client files held by Jiva

Ratio Decidendi

The administrators were so closely involved in the negotiation and execution of the pre-pack sale to Jiva that they could not independently investigate its propriety; the legitimate concerns of the majority creditors justified their removal and replacement under paragraph 88 of Schedule B1. No impropriety was found, but the appearance of conflict and need for independent review warranted the order. Other grounds for removal were rejected. Focus's application for inspection of files was refused due to inadequate evidence and unresolved enforceability issues under FSMA.

Court Disposition

Administrators removed and replaced; other interim relief orders as specified; some claims struck out; Focus's application for inspection refused without prejudice to a renewed application.

Orders

  • Removal of current administrators (Mr Smailes and Mr Ryman) and appointment of Stephen Hunt as administrator
  • Dispensation with full service of the removal application on all creditors