Daniel Conway & Ors v Matthew Plass & Ors

1. This is the judgment in relation to two paragraphs of directions sought by the Applicants, the Joint Administrators of the above named LLP (Argentex or the Firm). Argentex was placed into special administration on 21 July 2025. By application notice dated 12 August 2025, the Joint Special Administrators ( the JAs ) seek direction from the court pursuant to paragraph 63 of Schedule B1 of the Insolvency Act 1986 , as applicable by Regulation 37 of the Payment and Electronic Money Institution Insolvency Regulations 2021 (“the 2021 Regulations ”).

2. The directions specifically sought before me are as follows:- (1) A direction as to whether the Joint Special Administrators will be (i) incurring liability as an expense of the special administration; or otherwise (ii) adopting the contracts entered into between the Company and its customers for both forward contracts and OTC derivatives (“the Trading Book ”), by: a. not performing the contracts in the Trading Book as they reach maturity following the appointment of the Joint Special Administrators; or b. closing out some or all of the customer contracts that make up the Trading Book and enforcing the debts that arise under the terms of those contracts (‘direction 1(a) and direction 1(b)’).

3. There are further directions sought but those are not before me for determination. The direction sought in 1(a) is clearly urgent in that currently the JAs are not performing the contracts and therefore they require to have the determination by the Court as a matter of urgency. After hearing from all parties on 25 September 2025, I determined that the JAs will not be incurring liability as an expense of the special administration under direction 1(a). This judgment sets out my reasons for that determination as well as my decision in relation to direction 1(b). I should add that before me the parties were agreed that direction 1(b) was referring to termination of the contracts pursuant to clauses 13 and 26 of Argentex’s general terms and conditions and clause 11 of Argentex’s ‘terms applicable to the provision of MiFID II Services’.

4. In accordance with the order dated 4 September 2025 of ICC Judge Greenwood, the first to fifth Respondents act in a representative capacity, representing the ‘ITM Customers’ and the sixth Respondent acts as representative of the ‘OTM Customers’, as defined in that order and also below in this judgment. The Financial Conduct Authority (FCA) has been given notice of this hearing and does not appear before me. Factual Background

5. The background facts are not in dispute for the purpose of directions 1 (a) and 1 (b) so therefore I take them from the skeleton argument of the JAs. The Firm’s specialist business was in payment services offered together with currency conversions. The Firm was authorised by the FCA as both: (i) an Electronic Money Institution under the Electronic Money Regulations 2011 (with permission to carry out certain associated payment transactions); and (ii) a MiFID investment firm under Part 4A of the Financial Services and Markets Act 2000 .

6. The Firm offered spot, forward, and option foreign exchange contracts to its customers. It did not have the capital or authorisation to take market risk and, as such, the Firm ‘backed off’ each contract sold to a customer by taking out a corresponding hedging contract with one of its banking partners. For example, if a customer of the Firm purchased a forward contract from the Firm, then the Firm would purchase a corresponding forward contract with one of its banking partners, such that the Firm had a means of performing the customer’s contract at maturity. The contracts purchased by customers (both forward contracts and options) are collectively referred to as the Trading Book.

7. Shortly before the JA’s appointment, the Firm’s banking partners ‘closed out’ (i.e. terminated) the contracts that the Firm held with its banking partners. As such, the Trading Book is no longer hedged and the Firm no longer has the same ability of performing its customer contracts at maturity.

8. Since their appointment, the JAs have been reviewing the portfolio of customers of the Firm, working to reconcile the funds held by the Firm against its records and pool such funds, and identifying the accounts holding ‘relevant funds’ pursuant to the Electronic Money Regulations 2011 and the accounts holding client money pursuant to Chapter 7 and 7A of the client assets sourcebook of the FCA Handbook, amongst other tasks. This is set out in the witness statements filed on behalf of the JAs.

9. After the JAs concluded that sale of the Trading Book was not possible, they considered that it would be desirable, if contractually entitled to do so, for Argentex is to terminate the services agreements between the Firm and its customers, close out some or all of the customer contracts that make up the Trading Book and pursue the debts which arise thereunder in order to achieve a return for creditors of the Firm, as well as, according to the JAs, to achieve certainty for all concerned. Brief description of the operation of the Trading Book

10. A Trading Book contract is either ‘in the money’, if it has got a positive value against the current market price such that, if closed out at this point in time, the Firm would have a liability to the customer (the ITM Customers ); or ‘out of the money’, being if it has got a negative value against the current market price such that, if closed out at this point in time, the customer would have a liability to the Firm (the OTM Customers).

11. Mr Haywood’s represents those who are ‘in the money’ and Mr Fisher KC represents those who are ‘out of the money’.

12. According to the evidence filed on behalf of the JAs, as they have been unable to sell the Trading Book, they have a duty to recover sums which they consider are owing to the Firm. They state that the only way they can viably do that is by closing out the OTM contracts and enforcing any resulting debt that arises against the customers.

13. The JAs state that their preference is to close out all of the customers contracts being both ITM and OTM contracts, and terminate all of the service agreements between the customers and the Firm. According to the JAs, this is to provide certainty for all customers and creditors. Contractual provisions

14. Mr Haywood very helpfully set out the relevant provisions in his skeleton argument and I make use of his useful skeleton argument in this context.

15. The underlying forwards and options in the Trading Book are governed either: (a) solely by Argentex’s general terms of conditions (the general terms ); or (b) by the general terms and also Argentex’s MiFID II services terms and conditions, which are supplemental to the general Terms (the MiFID Terms).

16. The MiFID Terms apply to all options, and also to forwards save where the forward was entered for the purpose of a means of payment within the meaning of regulation 10(1)(b) of the MiFID Organisational Regulation Commission Delegated Regulation (EU) 2017/565. (for example, to enable the payment of an invoice falling due in a foreign currency at the maturity date), as opposed to for some other purpose (for example, obtaining currency as an investment).

17. Of the total 3,346 open transactions in the Trading Book, 1,133 appear to be governed solely by the general terms and the remaining 2,213 transactions by the MiFID Terms.

18. The relevant provisions of the general terms concerning close out are clauses 13.2(h), 13.3, 13.5 to 13.7, 26.3 and 26.6. In summary: 1) By clause 13.2(h), “ Argentex may close-out, cancel or void any or all FX Contracts, Limit Orders or Stop Loss Orders with the Client if … (h) Argentex reasonably considers it necessary for its own protection ” . 2) The consequences of closing out an FX Contract (as defined in the general terms), and the mechanism for calculating any sums due (either from the client to Argentex or from Argentex to the client) as a result, are set out in clauses 13.3 and 13.5 to 13.7. Specifically: (a) Clause 13.5 provides that :“ If any of the circumstances in clause 13.2 occur and Argentex elects to close-out all FX Contracts, Limit Orders or Stop Loss Orders, Argentex will, by notice, specify a date to the Client, which may be immediate, for the termination of all such transactions in accordance with clause 13.6 .” (b) Clauses 13.6(a), (b) and (c) make provision for the calculation by Argentex of a “ Close-Out Amount ” (being the loss or gain resulting from the close out) on or as soon as reasonably practicable after the date specified by Argentex in clause 13.5. The calculation of the “ Close-Out Amount ” replaces the parties’ prior obligations to make payments or deliveries. (c) Clause 13.6 provides that: “ If the Close-Out Amount is a positive amount, the Client shall pay the Close-Out Amount to Argentex and, if it is a negative amount, Argentex shall, subject to clause 13.6, pay an amount equal to the absolute value of the Close-Out Amount to the Client. Argentex shall notify the Client of the Close-Out Amount, and by whom it is payable, as soon as reasonably practicable after the calculation of such amount. ” 3) Clause 26 provides (in so far as is relevant):: “26.3 Argentex may terminate this agreement or any of the Services: (a) immediately without advance notice if any of the circumstances set out in clause 13.2 arise; … 26.6 If Argentex terminates this agreement or any of the Services in accordance with clause 26.3(a), Argentex may close-out, cancel, void or settle any or all FX Contracts that will remain open on the termination date in accordance with clause 13 and any sums due to Argentex as a result of Argentex taking such action must be paid to Argentex by the Client in accordance with clause 13. ”

19. The relevant provisions of the MiFID Terms governing Argentex’s ability to close out transactions prior to their maturity date is clause 11. Clauses 11.4(b) and (c) provide that: “ Without prejudice to Argentex’s other rights, Argentex reserves the right, at its cost and expense, to sell or realise MiFID II investments which it holds for the Client or is entitled to receive from the Client, to purchase investments, to make delivery on its behalf and to cancel, close or hedge any outstanding transactions or positions without prior notice and at whatever price and in whatever manner it thinks fit, if: … (b) we otherwise become entitled to terminate these Terms forthwith without notice; or (c) we consider, in Argentex’s absolute discretion, that such action is necessary to protect Argentex’s interests or those of any Affiliate(s) ”.

20. The consequences of closing out, cancelling or voiding an FX Contract (as defined in the general terms), and the mechanism for calculating any sums due as a result, are set out in clauses 11.3 and 11.5 of the MiFID Terms as follows: “11.3 Subject to clause 13 of the Terms & Conditions (Settlement and Closeout of FX Contracts), if a transaction is terminated, following a default by either the Client or Argentex or otherwise in accordance with the terms of the transaction, the early termination value of such transaction will be determined by reference to the early termination provisions set out in the contract between the Client and Argentex with respect to such transaction. The early termination value will be likely to differ from the most recent valuation and may be more unfavourable to the Client. … 11.5 Any proceeds arising from such actions or disposals will be applied to reduce or discharge the Client’s liabilities or indebtedness to Argentex. The Client will be liable to Argentex and shall indemnify Argentex on demand against all liabilities, costs, losses, claims and expenses incurred by Argentex in respect of any action taken pursuant to this clause. ” Legal principles

21. The parties are agreed in relation to the relevant legislation and relevant legal principles. Their differences relate to the application to the facts before me in relation to direction 1(b). As to direction (1) (a), none of the parties before me sought to argue that the ‘doing nothing’ envisaged by direction (1)(a) would cause any liability to be treated as an administration expense pursuant to the relevant statutory provisions and/or case law.

22. Expenses of a special administration are dealt with in Part 4 of the 2021 Rules. Pursuant to r.98 and subject to r.99 (which provides for the expenses of pursuing Objective 1 to be paid out of ‘relevant funds’) “the expenses of the special administration to be paid out of the assets of the institution are payable in the following order of priority- (a)expenses properly incurred by the administrator in performing the administrator’s functions in the special administration … (g) any necessary disbursements incurred by the administrator in the course of the special administration … (i) the administrator’s remuneration for services in pursuit of Objectives 2 and 3 the basis of which has been fixed under Chapter 2 of Part 9 of these Rules, and unpaid pre-administration costs approved under rule 100 for work done in pursuit of Objectives 2 and 3; … ”

23. Paragraph 99(3) of Schedule B1, as applicable by Regulation 37 of the 2021 Regulations with modifications (which provide for the remuneration and expenses of pursuing Objective 1 to be paid out of ‘relevant funds’) provides that “ The former administrator’s remuneration and expenses shall be (a) charged on and payable out of property of which he had custody or control immediately before cessation. ”

24. All the parties before me agreed that any liabilities which could arise under directions 1(a) or (b) do not fall under the (a) expenses properly incurred by the administrator in performing the administrator’s function in the special administration or under (g), being any necessary disbursements incurred by the administrators in the course of the special administration. In my judgment, this is correct because the liabilities in question under direction 1(a) and (b) arise from contracts entered into by the Firm prior to its entry into administration. Instead, all parties are agreed that if the relevant liabilities qualify as being an administration expenses, this arises from what is known as the ‘ Lundy Granite ’ principle.

25. Lord Hoffmann said of the Lundy Granite Co principle in Re Toshoku Finance [2002] 1 WLR 671 at [29]: “ The principle … is thus one which permits, on equitable grounds, the concept of a liability incurred as an expense of the liquidation to be expanded to include liabilities incurred before the liquidation in respect of property afterwards retained by the liquidator for the benefit of the insolvent estate. ”

26. Most of the case law concerning the application of the Lundy Granite principle concern liabilities under leases of land ( Jervis v Pillar Denton Ltd [2015] Ch 87 ) or equipment ( Re Atlantic Computer Systems plc [1992] Ch 505 ). However, the principle is not confined to liabilities resulting from the retention of physical property. In Powdrill v Watson [1995] 2 AC 394 , Lord Browne-Wilkinson said at 450: “ The salvage principle in liquidation indicates that if a liquidator adopts a contract for the purpose of the more beneficial conduct of a liquidation all such liabilities under such contract after the date of adoption are entitled to priority. ”

27. Powdrill v Watson is a case concerning employment contracts which fall under a different heading in paragraph 99 of Schedule B1 of the Insolvency Act 1986 , but all before me agreed that the passages relating to the Lundy Granite principles were relevant even outside the scope of employment contracts. I agree, save with the qualification that the use of the word ‘adoption’ is not necessarily the key factor governing the test. In short, as stated by Nicholls LJ in Re Atlantic Computer Systems plc [1992] Ch 505 at 522 the salvage principle is applicable in a wide range of circumstances “ to continuing obligations under existing contracts … which the liquidator [or administrator] chooses to continue for the benefit of the winding up [or administration] . ”

28. The effect of a particular liability being held to fall under the Lundy Granite principle is that it is treated as if it were an expense ( see by way of example In Re Portsmouth City Football Club [2013] Bus LR 374 , at first instance ). In Re Portsmouth City , Mr Justice Morgan summarised the application of the Lundy Granite principles in the following way ( paragraph 95) :- For present purposes, it is sufficient to describe the Lundy Granite principle as applying in a case where: (1) the company entered into a contract with a third party before the commencement of the insolvency process; (2) the contract continued to have effect after the insolvency process and (3) the office holder holder elected to retain the benefit of the contract for the purposes of the insolvency process. The above statement is, in my judgment, a very useful description of the Lundy Granite principles which I will apply in this case. Direction 1(a) - ‘Doing nothing’

29. Various statements in the relevant case law clearly support the position that ‘doing nothing’ does not create a liability as an expense of the administration. In Powdrill v Watson [1995] 2 AC 394 (at 448G and 449A), contracts continued in the insolvency processes of receivership and administration. Lord Browne Wilkinson stated that a mere continuation of the employment by the company does not lead to the conclusion that the contract has been adopted by the administrative receiver. In Re Debenhams Retails Ltd (in administration) [2020] EWCA Civ 600 , Lord Justice David Richards stated the question of law being, ‘is the conduct of the administrator such that he must be taken to have to accept that the relevant amounts falling due under the employment contract enjoy super-priority’ . The Judge continued (paragraphs 53 and 54), It is a wholly objective question, focussed entirely on the conduct of the administrator. As Lord Browne-Wilkinson repeatedly said, the issue is whether the office-holder has “continued” the employment of the relevant employees. This is the essence of the test propounded by him. If the office-holder has continued their employment, in other words has taken active steps to continue their employment, that necessarily results in super-priority for the relevant liabilities under the contracts of employment. As earlier noted, and by contrast, doing nothing involves no continuation by the administrators of the employment. We agree with the way in which Laddie J summarised the effect of Paramount on the meaning of adoption in Re Antal International Ltd [2003] EWHC 1339 (Ch) at [7]: “What Lord Browne-Wilkinson was pointing out was that it was important to find some conduct on behalf of the administrator or receiver which could be treated as an election or could be regarded as him exercising a choice as to whether or not the contracts of employment were to be adopted.” And again at [12] where he said: “It is necessary to look at the facts and to decide whether there has been some conduct by the administrator or receiver which can legitimately be treated as an election to continue the contract of employment.”

30. In my judgment, the law is clear in relation to issue (1) (a). Doing nothing in relation to the contracts does not in some way convert the liabilities under those contracts to being treated as administration expenses under Lundy Granite . It is clear that there must be some conduct by the administrator which could be treated as an election or be regarded as a choice. That excludes ‘doing nothing’. No one before me sought to argue this was the case and in any event, the position is clear from the authorities. The reply to direction 1(a) which I have already determined is therefore no. Direction (1)(b)- closing out some or all of the customer contracts that make up the Trading Book and enforcing the debts that arise under the terms of those contracts

31. The OTM customers, represented by Mr Fisher KC, take no position in relation to clause (1)(b). He submits that the issue does not affect the OTM customers because, put simply, their position is one, potentially of being debtors of Argentex and therefore it is difficult to imagine that OTM customers have any claim against Argentex which would engage the administration expenses principle. I agree. The ITM customers assert that their liabilities under the relevant contract will be administration expenses by reason of the JAs closing out the contracts.

32. On behalf of the ITM customers, Mr Haywood accepted the principles set out in paragraph 95 of Re Portsmouth and submits that the test effectively is whether the JAs have elected to continue the contract for the benefit of the administration. There is an election by the JAs which is for the benefit of the estate. Mr Haywood relies on what he submits is a positive election by the JAs pursuant to clause 13.5 of the general terms to close out a position. That clause provides the JAs with an election which he submits, according to their evidence, they seek to exercise.

33. This therefore involves a positive step being taken by the JAs under the terms of the contracts and that this engages the contractual mechanism to close out, effectively replacing the parties existing obligations with the close out obligations. He submits there is a distinction as between terminating the contracts and closing out the contracts and the JAs are electing to close out which is exercising a contractual right. He says what the JAs are doing goes beyond terminating the contracts because they are seeking to exercise a contractual right. He submits that the JAs do not need to take this step, but clearly this is the step they seek to take. This therefore falls into being a Lundy Granite scenario. He refers to Re Atlantic Computers where it is clear that Lundy Granite is not restricted to new debts incurred, but covers continuing obligations under existing obligations which the office holder chooses to continue for the benefit of the insolvent estate. The wording used in Powdrill v Watson ( p 450) is , ‘..if a liquidator adopts a contract for the purpose of the more beneficial conduct of a liquidation all such liabilities under such contract after the date of adoption are entitled to priority .’

34. Mr Haywood submits that there is a benefit identified by the JAs in electing to close out by exercising the terms in the contracts. He refers me to the witness statements of Mr Daniel Conway dated 12 August 2025, 3 September 2025 and 11 September 2025 to close out and effectively crystallise the liabilities which are owing from the ITM customers by the Firm. It is stated that closing out all the customer contracts ( both ITM and OTM ) and terminating all of the service agreements between customers and the Firm will provide certainty for all customers and creditors.

35. Mr Boardman KC accepts that the JAs are seeking to take a positive step. He also accepts that they are electing to take that step. He disputes that there is in accordance with the contractual terms a difference between closing out and terminating the contracts. Clause 26 uses the word, ‘terminate’ and clause 13 utilises ‘close out’. Clause 26.3 states that Argentex may terminate [the Servies Agreement ]. That termination has no impact on the FX contracts in accordance with clause 26.5. Accordingly, the JAs need to terminate the FX contracts and closing out those contracts under clause 13.3 is effectively a termination. The netting provisions are contained in clause 13.6. Accordingly, he rejects the distinction between closing out and termination.

36. He submits that the JAs are not ‘continuing’ the contracts by termination but closing out in accordance with their terms. Mr Boardman submits that the authorities refer to ‘continuing’ the contract where the actions of the JAs here are of termination. He submits that there is no benefit to the administration estate because what is being sought is an orderly crystallisation of the quantum and certainty. He submits that these steps are being carried out for the benefit of everyone rather than any perceived benefit to the ITM customers.

37. He submits that the question relating to the benefit to the estate is an objective one, as is set out in Re Debenhams . In my judgment, there is clearly conduct by the JAs envisaged in seeking to close out pursuant to the contractual obligations. That is accepted on behalf of the JAs. In my judgment, the terms of the contracts do not assist the ITM Customers. There is no distinction as between the termination and closing out for the reasons provided by Mr Boardman. The FX contracts are, in my judgment, terminated by closing out. The result of the proposed action is to close out the trades and crystallise the loss/gain.

38. Mr Boardman also sought to argue that termination is not an affirmation of the contract, but in my judgment, that is not in itself an answer to whether the Lundy Granite principles apply. There may well be termination clauses in contracts which could be viewed as being beneficial to the administration, for example, being able to retain property or a more advantageous calculation of sums due. That is not what appears here and no submission was made by Mr Haywood that the elected termination was beneficial for the administration estate in terms, for example, of improving recovery or providing the prospect of improving recovery. Objectively viewed, the position of the ITM Customers is that of being unsecured creditors by reason of contracts entered into prior to the administration. The proposed conduct of the JAs does not extinguish their status as creditors or, on the evidence before me, in some way reduce the quantum of their creditors claims. It also does not enable the JAs to obtain a benefit under the terms of the contract by electing to close out. No benefit as such has been identified. Objectively analysed, the closing out is not a benefit under the terms of the contracts for the administration estate.

39. I note that the JAs state that they seek to close out to obtain certainty and to enable them to be able to pursue those who are debtors of the Firm. That is effectively what they assert is their intention, but viewed objectively, which is the correct test, the actions of closing out and terminating is not a benefit under the terms of the contracts for the purposes of the administration estate. At its highest, the ability to exercise the closing out and the netting provisions may enable the JAs to pursue what they consider are debtors of the firm with a precise crystallised sum being due. In my judgment, that does not fall under Lundy Granite and create a super priority in relation to the unsecured creditors claims arising under the ITM contracts. I reject Mr Haywood’s arguments in this respect. The answer to direction 1(b) is in the negative.