CR-2018-009110 - [2025] EWHC 2115 (Ch)

This is a pair of cross-applications in respect of an Administration. The First and Second Applicants, BTI 2014 LLC (“BTI”) and B.A.T Industries P.L.C. (“BAT”), are creditors of the Third Respondent, Windward Prospects Limited (“the Company”). They have lost confidence in the current Administrators of the Company, Finbarr O’Connell and Colin Hardman (the First and Second Respondents and cross-applicants) and seek to have them replaced by other administrators, on the grounds (inter alia) of a conflict of interest. The current Administrators wish to address any conflict by the appointment of a second set of administrators (the “Conflict Administrators”) to conduct that aspect of the Administration in respect to which any conflict may appear to arise, and apply for an order appointing such Conflict Administrators. They also seek an order for the extension of the Administration until 30 October 2026 (the “Extension Application”).

The Applicants say that they, being the overwhelming majority of the creditors of the Company, have reasonable and legitimate grounds for a complete loss of confidence in their ability to manage the Company’s assets in the best interests of the creditors with independence, objectivity and professionalism. They advance three grounds for this loss of confidence.

The first of these is that the Administrators have a conflict of interest which could prevent them from pursuing the major asset of the company; that being an action against its directors. The Administrators accept that there is at least an appearance of such a conflict, and apply for the appointment of Conflict Administrators to manage those parts of the administration which they might be prevented by conflicts from managing themselves. However, the Applicants say that the conflict is so fundamental to the Administration that there is no imaginable protocol that could manage it successfully whilst giving the current Administrators any meaningful role in the conduct of the Administration itself.

The second ground is that the Applicants say that the Administrators’ recent conduct has shown a lack of independence, objectivity and professionalism such that they have no confidence that they will be able to exhibit any of those attributes in the future. On this ground they also rely on what they say is a failure to disclose the conflict mentioned above.

The third ground is that, since the Applicants are the overwhelming majority of the creditors, and no other creditor has expressed any view on the matter, their views should prevail on this matter.

The Administrators raise a number of points in response. As regards the conflicts point, they say that the appointment of a Conflict Administrator should be sufficient to manage any such conflict, and that this would be a cheaper and more efficient approach to the issue than their replacement. As regards the conduct point, they say that the conduct complained of by the Administrators was engaged in in response to attempts by the Applicants to put pressure on them. As regards the third point, they say two things. First, they deny that the Applicants are creditors at all. Second, they say that the disputes between the Applicants and the Administrators are so serious that the interests of the Applicants conflict with the interests of the general body of creditors, and that it would therefore be inappropriate to appoint the replacement administrators nominated by the Applicants.

The Administrators also apply for the period of their appointment to be extended by another 15 months. They say that this is necessary to complete the action against the Directors. The Applicants say two things in response to this. One is that these Administrators should not be reappointed in any event. The other is that it is well past time for the Administration to be converted into a Creditors’ Voluntary Liquidation (“CVL”), and that any extension of the period of appointment of Administrators should be only long enough to permit this.

This judgment is structured as follows. First, I describe the somewhat unusual position of the Company and the obligations which it owes. I then discuss the position which the Administrators seem to have developed that neither of the Applicants are in fact creditors, since this point seems to me to determine much of what follows. This leads to a determination of what proportion of the creditors of the company the Applicants are, which in turn takes me to the point as to the extent to which the court ought to accede to their request because they are the majority creditors. I then consider the issue of conflicts. The key issue here seems to me to be whether the conflict which exists is – as the Administrators argue - capable of being managed through the appointment of Conflict Administrators, or is – as the Applicants argue – so fundamental that the appointment of conflict Administrators would leave the existing Administrators with no meaningful residual role.

I then turn to the question of whether the Administrators’ conduct has fallen so far below the level expected of office-holders that the creditors’ loss of confidence in them is reasonable. This involves some review of their recent conduct of the Administration, but also requires consideration of their approach to the conflict of interest identified above.

The Administrators’ final argument is that, even if I am otherwise satisfied that they should be replaced, I should not accede to the Applicants’ request to replace them because the Applicants’ interests conflict with those of the ordinary body of creditors, and that the appointment of the Applicant’s nominees would give an appearance of partiality. This involves an examination of the issues which have arisen between the Applicants and the Administrators, and an analysis of whether these disagreements, individually or collectively, do in fact have this consequence.