Office-holders, investigations and conflicts of interest—don’t expect judicial bomb-proofing (Re Comet Group Ltd)

Office-holders, investigations and conflicts of interest—don’t expect judicial bomb-proofing (Re Comet Group Ltd)

This judgment is significant for the issues it raises, both with regard to the conflicts and the court’s willingness to sanction office-holder decisions and with regard to disciplinary investigations. Comet’s joint liquidators (who were also its former joint administrators) applied for directions under section 112 of the Insolvency Act 1986 (IA 1986), effectively permitting them not to carry out any further investigation into the validity of a debenture held by a special purpose vehicle (HAL) that had been granted by Comet within twelve months of its collapse into administration. The liquidators also sought a direction that they be permitted to transfer a further tranche of funds to HAL that had been realised under the floating charge contained within the debenture. The application was made in the light of a disciplinary investigation launched by the Institute of Chartered Accountants of England and Wales (ICAEW), the liquidators’ regulator, into the conduct of the former administrators and that of their firm, Deloitte LLP. The ICAEW was made respondent to the application. After a three-day hearing, the judge—who expressed serious concerns about the office-holders’ conduct both before and after their appointment as administrators—refused the application and was not prepared to make any order that might afford, protection to the liquidators in the ICAEW disciplinary proceedings. Among other things, the judge cited what Neuberger J said in Re T&D Industries plc: ‘... a person appointed to act as an administrator may be called upon to make important and urgent decisions. He has a responsible and potentially demanding role. Commercial and administrative decisions are for him, and the court is not there to act as a sort of bomb shelter for him.’ Written by Marcia Shekerdemian QC, barrister at Wilberforce Chambers.

Re Comet Group Ltd (in liquidation); Kahn and another (in their capacity as the joint liquidators of Comet Group Ltd) v Institute of Chartered Accountants in England and Wales [2018] EWHC 1378 (Ch)

What are the practical implications

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About the author:

Zahra started working as a paralegal at Lexis Nexis in Banking and Insolvency teams in April 2019. Zahra graduated with a 2.1 honours in a BA French and Spanish, completed the GDL at BPP University and is seeking some experience before commencing the LPC. She has undertaken voluntary work for law firms in London, Argentina and Colombia.