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

The Applicants argue that, shortly after the discovery by the Applicants of the conflict issue, the Administrators have embarked on a series of actions which give rise to serious concerns about their motives and objectives.

First, the Administrators denied the Applicants’ status as creditors (without having adjudicated upon their proofs of debt) despite having previously acknowledged and treated them as majority creditors for years.

In January 2025, for the first time, and a matter of days after Mr Lloyd had suggested that the Administrators may need to be removed, Mr O’Connell sent an email to Ms Brown (in-house counsel at BAT) and Mr Lloyd, which purported to raise “a number of sensitive issues which the Administrators have not shared with you before now due to confidentiality […] and for other reasons”, including that “You will understand that there are clearly also outcome scenarios where neither BTI nor BAT are creditors of Windward”. Although the Administrators had said in November 2024 that they “are likely to adjudicate the BAT claim at £Nil”, this was the first time that BTI’s status was ever disputed.

The Administrators purported to rely on an observation of Mr Lloyd’s that in certain circumstances (i.e. where recoveries were sufficiently large) BTI would not be a creditor at all to say that neither BAT nor BTI were creditors at all, and that the Creditors’ Committee was disbanded (it was not).

At the same time as the Administrators were denying their status as creditors, they appeared content to continue to treat (at least) BTI as a major creditor for the purposes of seeking approval for their own fees. On 9 April 2025, in the same email that suggested that BTI may have no claim whatsoever in the Administration, Mr O’Connell was content to suggest that BTI (if not BAT) should be involved in approving the Administrators’ fees.

The emails which followed became ever more prolix and incomprehensible. In an email to Ms Brown dated 11 April 2025, Mr O’Connell proceeded (amongst many other things): (a) “regrettably” to give BAT and BTI “formal notice […] under section 236 of the Insolvency Act 1986”, i.e. seeking to use formal office-holder powers to compel information; (b) to state that he was “highly suspicious that these detailed claim figures are not forthcoming”; (c) to raise the issue of BTI’s legal standing; and (d) to call the question of BAT and BTI claims “the £0 question”, but then to accept, in a seemingly double volte face, that BTI did have a correct legal basis for a claim in the Administration. On 14 April 2025 Mr O’Connell demanded revised proofs of debt again “for adjudication by me”.

The same is true of the suggestion that BTI has no right of set-off in respect of its recoveries from its claim against PwC. It was the Administrators who first publicly acknowledged the right of set-off in respect of mutual debts under the Funding Agreement, and BTI asserted its right of set-off without objection in August 2024. This was not disputed until this hearing.

The Administrators have said that they intended to place the Company into CVL in order that an interim distribution could be paid to creditors, and in the most recent Progress Report, the Administrators stated that a CVL was “expected to be within the next few months”. The Administrators now seek to extend the Administration until 30 October 2026.

The explanation for this change given by the Administrators was that they wished to extend the Administration by (initially) 24 months, “to ensure the proceedings against the directors have concluded before converting into insolvent liquidation, unless the Company is solvent, in which case it will be returned to the custody of its directors”. This is not a convincing explanation - the Company’s own claims remain vested in it regardless of the nature of the insolvency process and the officeholder claims (to the extent that they have a meaningful status of their own) can be equally well pursued by liquidators as by Administrators. The Applicants are of course concerned that the real motivation is to use the threat of prolonging the Administration to secure the payment of their fees – Mr O’Connell, in his e-mail of 22 April 2025 on conversion of the Administration into a CVL said that the issue of fees was “a deciding point” as regards this conversion.

In addition to the above, the Applicants have serious and legitimate concerns about the Administrators calculation of their fees and charging practices. In summary, the Administrators have (a) failed to provide creditors with a proper insight into their charging practices; (b) sought to impose unwarranted fee increases which they have applied retrospectively; and (c) appeared to consider their own self-interest above that of the estate in dealing with fees issues.