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

The legal principles in respect of applications to remove Administrators are well-established. Para 88, Schedule B1 IA 1986 provides that “the court may by order remove an Administrator from office”. Unlike the provisions of IA86 addressing the removal of a liquidator , para 88 does not use the expression “on cause shown” as a qualification to the power to remove an Administrator. However, it is generally accepted that the two powers are broadly analogous, such that “it would be for the applicant to show “cause” as to why the administrator should be removed from office and this would be measured by reference to the real, substantial, honest interests of the administration and the purpose for which the administrator is appointed” (Lightman & Moss on The Law of Administrators and Receivers of Companies, 6th edition, at 27-003). The parties before me proceeded on the basis that for this purpose there was no difference between the principles relating to the removal of an Administrator and the removal of a liquidator, and that the authorities relating to the removal of a liquidator apply mutatis mutandis to the removal of an Administrator.

Accordingly, the court must have good grounds for removing an Administrator; and what is good or sufficient must be ascertained by reference to the purposes of the office and the facts of the case (Re St George’s Property Services (London) Ltd [2012] Bus LR 594 (CA) at [15]). The evidence must first establish good or sufficient ground or cause for the removal of an Administrator: only then does the discretion to remove arise: Finnerty v Clark [2012] Bus LR 594 (CA) at [15]-[16]; [31]; [33].

Mr Isaacs places strong reliance in this regard on the Judgment of Neuberger J (as he then was) in AMP Music Box Enterprises v Hoffman [2002] EWHC 1899 (Ch) at pp. 1001-1002 (“AMP”). He said

“On the other hand, if a liquidator has been generally effective and honest, the court must think carefully before deciding to remove him and replace him. It should not be seen to be easy to remove a liquidator merely because it can be shown that in one, or possibly more than one, respect his conduct has fallen short of ideal. So to hold would encourage applications under s.108(2) by creditors who have not had their preferred liquidator appointed, or who are for some other reason disgruntled. Once a liquidation has been conducted for a time, no doubt there can almost always be criticism of the conduct, in the sense that one can identify things that could have been done better, or things that could have been done earlier. It is all too easy for an insolvency practitioner, who has not been involved in a particular liquidation, to say, with the benefit of the wisdom of hindsight, how he could have done better. It would plainly be undesirable to encourage an application to remove a liquidator on such grounds. It would mean that any liquidator who was appointed, in circumstances where there was support for another possible liquidator, would spend much of his time looking over his shoulder, and there would be a risk of the court being flooded with applications of this sort. Further, the court has to bear in mind that in almost any case where it orders a liquidator to stand down, and replaces him with another liquidator, there will be undesirable consequences in terms of costs and in terms of delay.”

This is clearly a correct statement both of the law and of the policy behind it. It is regrettably common that creditors may form adverse – sometimes extremely adverse – opinions as to the way in which an Administrator has performed his role. However, it is important that where a creditor has a dispute with an Administrator, that fact alone should not be treated as justifying an application by that creditor to remove that Administrator. Put simply, the mere fact that an Administrator has fallen out with the creditors is not per se a ground for his removal. The view which the court must form is not as to whether the applicants’ grievances are justifiable, but as to whether the conduct of the Administrator has fallen sufficiently far below the standard expected of him as an officer of the court that the court should exercise its supervisory jurisdiction to replace him. In conducting that analysis, the court should consider all of the points raised by the creditors, but the mere fact that they have raised those points is not of itself a ground for removal.

Removal therefore involves a three-stage process:

Whether a ground is good or sufficient is measured by reference to the real, substantial honest interests of the Administration, and to the purpose for which the Administrator is appointed: SISU at [84], [87]-[88].

The court is likely to be concerned only with the future and not with the past: SISU at [86]. The historic conduct of the officeholder is material, but ultimately the assessment is whether removal of the officeholder is in the interests of the insolvency process as a whole: Re Birdi [2019] BPIR 498 at [55]. The purpose of the removal is not to punish the Administrator for mistakes made in the past, it should be based solely on the likelihood of his failing to perform his functions in the future.

A conflict of interest may constitute a ground for removal but the court should consider whether the conflict can be managed without removal if such removal would be clearly detrimental to the conduct of the Administration, including cost and disruption to the insolvency process: Re Fox Street Village Ltd [2021] BCC 89 at [61]-[62]; Tailby v Hutchison Telecom FZCO [2018] EWHC 360 (Ch) at [35], [37], [94]-[97]; SISU at [91]-[132], in particular at [108], [112]; [130]-[131].

The court does not lightly remove an officeholder and will pay due regard to the impact of removal on an officeholder’s professional standing and reputation: Edennote at 398f; AMP at 1,001G-1,002B; SISU at [85].

An applicant’s concern as to the existence of a conflict need not be resolved in their favour at the time of the application so long as the evidence raises a serious issue for investigation (Re St George’s at [16]). Accordingly, and by way of example, if there is a possibility that there will be misfeasance proceedings against an Administrator/liquidator, they should ordinarily be removed (SISU at [89]).

The cases show that the critical feature is the ability (or inability) of the Administrator to retain either actual or apparent independence. It was with this specific consideration in mind that David Richards J held in Re Clydesdale Financial Services that there were sufficient grounds for removal, and concluded on the facts (at [30]) that “What is, however, clear is that Mr Smailes and his firm were so closely involved in the negotiations that he cannot be expected now to conduct an independent review”.

It is important to emphasise that a majority of creditors do not have a right to remove an Administrator (save under the qualifying decision procedure provided for in paragraph 97 of Schedule B1 to the Insolvency Act). An Administrator is an officer of the court, and should only be removed if the court is satisfied that there are good reasons why he should not continue in office. However, the applicant need not show misconduct or personal unfitness on the part of the Administrator (Re Clydesdale Financial Services [2009] EWHC 1745 (Ch) at [14]; Re St George’s at [16]).

The court will be entitled to consider and account for the impact which the removal and replacement will have on the general conduct of the Administration – in particular, in relation to issues such as costs and delay: AMP Music Box Enterprises Ltd v Hoffmann [2002] BCC 996 at 1002A-B. It is also important that the court should not act in a way which could encourage unjustified applications by disgruntled creditors.

It is also said that the court should also consider the impact on the professional standing and reputation of an Administrator. This seems to me to be a consideration of a different kind from those identified above, ad I address it further below.

A common ground of removal is that the creditors no longer have confidence in the officeholder’s ability to perform their functions (including e.g. to realise the assets of the company to the best of their advantage). However, the creditors’ loss of confidence must be reasonable (Re Edennote Ltd [1996] BCC 718, 725G-H). The loss of creditor support is much more significant where the creditors’ committee justifiably loses confidence in the officeholder (City & Suburban Pty Ltd v Smith (1998) 28 ACSR 328).

Further, the views of creditors, if legitimate and reasonably held, are especially entitled to consideration in circumstances where, as here, it is the directors – and not the creditors – who were responsible for the Administrator’s appointment (Re Clydesdale Financial Services at [30]).