Hostile block transfer application dismissed – “too much, too soon”

The First Respondent had operated as an insolvency office holder from Triap Limited (“the Company”). The Second Respondent had acted as a consultant, also taking appointments.

HMRC presented a winding up petition against the Company. Shortly thereafter the First Respondent transferred the business and assets to a new company, including the work in progress in relation to office holder appointments. No payment was made for the transfer.

The Company was wound up and the Applicants were appointed as joint liquidators. They commenced proceedings in respect of the transfer of the business on the basis that it was a void transaction under section 127 of the Insolvency Act 1986 (“the Act”).

They also applied for a block transfer of the insolvency appointments held by the Respondents under rules 12.36 to 12.38 of the Insolvency (England and Wales) Rules 2016.

The Applicants applied in their personal capacity as proposed replacement office holders. They had filed evidence criticising the conduct of the Respondents, in particular the First Respondent’s failure to co-operate with the Applicants in their capacity as liquidators, and his action in transferring the business notwithstanding his knowledge of section 127 of the Act.

The Court considered that whilst replacement office holders had standing to make a block transfer application, this was only as part of a shortcut procedure, where an insolvency practitioner was no longer willing or able to act and it is expedient to transfer cases in a single transaction. That was not the case here.

Despite the Applicants potentially having standing as expense creditors in many of the cases, this did not give them legitimate interest in the relief sought, namely a wholesale transfer of the cases.

The Court concluded that the Applicants were, in reality, attempting to seek relief which could only properly be sought by parties entitled to bring an application under section 108 of the Act (or the equivalent) concerning the hostile removal of an insolvency office holder, or by a regulatory professional body.

In this case the Court was concerned here that the creditors had not been given a voice. Whilst the conduct of the First Respondent could be open to criticism, and that there were clearly matters to investigate in the liquidation, the Court concluded that Applicants sought too much, too soon.

No doubt, there will be more to come in relation to this liquidation.

2020 WL 02748279

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