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

The Applicants say that the abrupt reversal in the Administrators’ position was triggered by the discovery of the conflict problem by Mr Lloyd of Hogan Lovells (solicitors for the Applicants). As noted above, Mr O’Connell had disclosed in general terms that he had provided advice to the Company prior to its entry into administration. However, it seems that it was only when Mr Lloyd received the New Directors Points of Defence on 4 September 2024 that he (or anyone else on the Applicants side) discovered that Mr O’Connell was alleged to have advised the New Directors personally on the disposal of the relevant assets. Mr Lloyd promptly contacted KaurMaxwell to say that these seemed to him important and significant points which required to be firmly rebutted. However the rebuttal actually provided was – in his view – equivocal, and indicated that there might be some substance to these points.

It seems to have been shortly after these communications that, on 15 November, Mr Hardman sent an e-mail suggesting that BAT’s proof of debt would be adjudicated as having no value because of the Windward Floor. The reason that this matters is that Mr Hardman’s view seemed to be that the fact that he intended to adjudicate this proof at zero meant that BAT was no longer a “Creditor” for the purpose of the proceedings. It is entirely clear that this seems to have been an attempt to justify excluding BAT from the proceedings – and in particular from the Creditors Committee (whose approval was required before the Administrators could be paid fees). The Applicants suggest that this was part of an attempt to exclude BAT (and subsequently BTI) from the conduct of the Administration in order to protect themselves. The Administrators’ case is that it was in response to the suggestion that the BAT proof should be adjudicated as zero that the Applicants embarked on a campaign against them aimed at forcing them out in order to put in place more compliant Administrators who would accede to their (ex hypothesi illegitimate) demands.

The Administrators argue that full disclosure of the facts giving rise to the conflict was properly given at an appropriate time. This argument relies on the “Statement of Prior Professional Relationship” contained in the December 2018 Joint Administrators’ report. This statement discloses that Mr O’Connell had given advice to the company prior to the Administration, but did not specify the nature of that advice, and did not mention advice to the New Directors. Mr O’Connell’s explanation of this is that at the time that this disclosure was given “the Administrators were wholly unaware of the possibility of a claim against the Directors at the time of our disclosures or that any advice I might have given to the Company might be an issue.” That may well be true. However, it merely explains why the appropriate disclosure was not given at that time.

On the 16th January 2025, Mr Lloyd sent an e-mail to the effect that there was a “real issue as to whether [the Administrators may have] assumed a duty of care to the Directors … and whether this issue could provide an effective defence for the directors” and that the Administrators’ conflict could “expose [the Administrators’ firm] to a claim by the Company (of which its officers are administrators”.. In response, Mr O’Connell again denied that the Administrators had “a conflict issue as regards our ongoing litigation against the directors”, albeit in the same email he stated that “we are going to make an application to court soon to appoint them as a conflicts administrator”.

In the event, it was not until six weeks after the Applicants issued the Removal Application – and over eight months after the conflict first came to light – that the Conflict Application was issued.

The Applicants say that there can be no real doubt that the latter application was only issued as an attempt to resist the former application. Just as in Ve Vegas, the Administrators ought to have concluded, effectively from the date of their appointment but certainly by the time the Director Claims were in reasonable contemplation, that they were conflicted. Their apparent failure even to appreciate this, and their wholesale failure to address it save as a reactive attempt to avoid their removal from office, is one of the reasons why the creditors have overwhelmingly lost confidence in the Administrators.