Philip Lanigan & Anor v Derek Hyslop & Ors

1. This was the final hearing of an application issued on 3 May 2024, made by Messrs Philip Lanigan and Anthony Lenehan pursuant to sections 112 and 168(5) of the Insolvency Act 1986 (“ the ”) for an order setting aside, insofar as it related to them, an agreement (“ IA 1986 the Assignment Agreement ”) made on 29 June 2023 by the First Respondents, Messrs Derek Hyslop and Trevor Oates, in their capacity as the joint liquidators of Styles & Wood Group Limited (respectively, “ the Liquidators ” and “ the Company ”). By means of the Assignment Agreement, certain claims against the Applicants, both of whom were formerly directors of the Company, were assigned to the Second Respondent, Knaresborough Investments Limited (“ KIL ”).

2. In support of the Application were the First and Third Witness Statements of Mr Lee Dunnill, made on 3 May 2024 and 8 August 2025. Mr Dunnill is the managing director of Hewlett Swanson Limited, the Applicants’ solicitors. In opposition, were the First and Second Witness Statements of Mr Hyslop, made on 25 October 2024 and 21 October 2025. In addition, Mr Hyslop gave oral evidence, and was cross-examined. Neither of the Applicants made a statement or directly gave evidence.

3. Essentially, the Applicants’ case was that in the circumstances in which it was taken, and because of some of its consequences, the Liquidators’ decision to enter into the Assignment Agreement was perverse – a decision so “ utterly unreasonable and absurd that no reasonable man ”, properly advised, would have made it ( per Nourse LJ in Re Edennote Limited [1996] 2 BCLC 389 at 394b-d). Their case was denied. The Background

4. The Company was incorporated on 14 November 2005 and was the holding company for the “Styles & Wood” group of companies. In October 2006, it was listed on AIM and changed its name to Styles & Wood Group PLC.

5. Mr Lanigan was a director of the Company from 1 August 2009 until 29 November 2019; he was at all material times its Group Finance Director; Mr Lenehan was a director from 1 January 2011 until 29 November 2019; he was at all material times its Chief Executive Officer.

6. On 1 April 2015, Extentia Group Ltd (“ Extentia ”), a company beneficially owned and controlled by Mr Steven Parkin, acquired 25% of the issued shares of a holding company called Southerns Ltd (“ Southerns ”). About a year later, the prospect arose of a merger between Southerns and the Company, itself a holding company; that deal came to be known as “ Project Revie ”. It was later decided that Project Revie would be completed by means of Extentia acquiring the remaining shares in Southerns and all of the shares in the Company, thus becoming the parent of both.

7. In due course, on 21 December 2017, Extentia announced its firm intention to make an offer to buy the Company, and the acquisition was completed on 8 March 2018; the Applicants - both previously officers of the Company - became, respectively, the Chief Financial Officer and the Chief Executive Officer of Extentia.

8. Unhappily, almost immediately, Extentia faced severe financial difficulties. In the event, both Extentia and the Company entered formal insolvency processes: 8.1. on 28 February 2020, Extentia went into administration; its appointed administrators were Messrs Robert Kelly (who later resigned), Charles King and Samuel Woodward, each of Ernst & Young LLP (respectively, “ the Administrators ” (as constituted from time to time), and “ EY ”); and, 8.2. on 13 July 2020, a few months later, the Company went into creditors’ voluntary liquidation; Mr Colin Dempster and Mr Hyslop - both also of EY - were appointed as its joint liquidators (although subsequently, on 19 June 2023, following a block transfer order, Mr Dempster ceased to be a liquidator and was replaced by Mr Oates, again, of EY).

9. In substance, EY were engaged to wind-up the affairs of the whole group, including all that had been acquired by Extentia (and ultimately Mr Parkin) in the preceding years.

10. According to a Statement of Affairs signed and dated 30 June 2020, the Company’s assets comprised “ investments ” subject to a fixed charge (and in any event estimated to realise no value) and assets subject to a floating charge comprising intra-group debts (again, estimated to realise no value), as well as “ debtors ” with a book value of £22,414 and cash in the sum of £2,298. Its liabilities were stated to comprise debts owed to Toscafund GP and HSBC (both of which were secured) in the sums of £27,740,742 and £20,940,181 respectively, as well as other debts in the aggregate sum of about £11.4 million. It was therefore (and it remains) very significantly insolvent.

11. Moreover, Mr Hyslop’s evidence was that the only receipt into the liquidation has been £10,644 in respect of a debt owed by a related group company, Styles and Wood Limited; not only therefore was the Company insolvent, but there was very little available to the Liquidators to meet any expenses of the liquidation, or for example, to fund investigations or litigation; those expenses that were incurred were by agreement underwritten by HSBC, which held security across the whole group, and which therefore no doubt had an interest in its orderly winding-up.

12. During the hearing, a further, up to date statement of the Company’s creditor position was produced. It showed that additional claimant creditors have emerged since the beginning of the liquidation, and that proofs of debt amounting to £22,679,101.54 have now been received from unsecured creditors (although none have been adjudicated).

13. At the point of its liquidation, and indeed, for some years afterwards, the Liquidators were not aware either that Extentia had or might assert claims against the Company or its former directors in respect of Project Revie or (therefore) that in that context, the Company might have its own claims against its former directors.

14. In fact however, by an agreement made on 19 October 2021 (“ the Original Extentia Assignment Agreement ”) Extentia and the Administrators had assigned to KIL, certain claims in relation to Project Revie; Mr Parkin is KIL’s ultimate beneficial owner. That Agreement provided that if, during the course of its subsequent investigations, KIL “ discovers that it may have a claim against a party not included within the definition of Claims ”, the parties would discuss and consider a further assignment. For various reasons therefore, KIL was in a strong position to conduct further investigations: first, it had (as had Mr Parkin) been involved in the business (and in the acquisition of Southerns and Styles & Wood) before its collapse – in other words, it had its own direct knowledge; second, it had been given access by the Administrators to books, records and documents held by Extentia; third, it transpired that those documents included documents belonging and relating to Extentia’s numerous subsidiaries (including the Company); fourth, it had a contractual entitlement to consideration of a further assignment; and finally – and of real and obvious significance given the scale of the undertaking – it, and apparently Mr Parkin, could afford, financially, to investigate, and to pay professionals, including lawyers, to assist in that process – and it was willing to do so.

15. Such investigations having been conducted in the course of the following period, on 29 June 2023 (also the date of the challenged Assignment Agreement), more than a year and half later, the Original Extentia Assignment Agreement was varied by an “ Amended Assignment of Claims ” (“ the Extentia Assignment Agreement ”) made between Extentia, Styles & Wood Limited (which was also in administration), the Administrators, KIL, and Mr Parkin, as the personal guarantor of KIL’s obligations. The claims assigned to KIL included claims against the Company and (directly against) the Applicants personally, broadly relating both to Project Revie and to the subsequent operation of Extentia and its business.

16. In the meantime, on 20 March 2023, in the course of a “ call ” between Mr Hyslop, Mr King (one of the Administrators) and a Mr Tom Harvey (also of EY, and a member of Mr King’s team), Mr Hyslop (and thus the Liquidators) first became aware of the possibility of claims arising out of Project Revie. An attendance note of the call recorded, amongst other things: Initially the group had two secured creditors, TOSCA and HSBC. Subsequently, HSBC has written off its debt and has released its security. As consideration, TOSCA assigned its receivables from the administrations to HSBC. As sole secured creditor, TOSCA is now pushing for the closure of the administrations. Prior to the pre-insolvency restructuring in March 2018 which formed the Extentia Group through a merger of Styles & Wood Group Limited and Southerns, [KIL] was the majority shareholder and is owed circa £40m. Claims against the directors have been identified post the pre insolvency reorganisation and these claims have been sold by the administrators to [KIL]. These has (sic) subsequently been valued at £32m although a settlement would be lower than this amount. The administrators have received £25k upfront and are entitled to 50% of the first million of recoveries and 20% of subsequent realisations up to a maximum of £5m. [KIL] has funded the investigation and is now in a position to issue a LBA. However, they have also identified that claims exist pre-dating the restructuring and the rights to these claims rest with [the Company]. [KIL] is therefore keen to acquire the rights to these claims to increase the value of their overall claim. The directors had DNO (sic) cover in both the pre and post transaction period, each with a value of £20m. It appears that selling the claims from the pre transaction period would enable [KIL] to claim against both policies, therefore increasing their possible recoveries from £20m to £40m .”

17. In substance, the note recorded, amongst other things, that Mr Hyslop was told that claims directly against the Applicants arising out of their conduct after the completion of Project Revie had been assigned to KIL (these have come to be referred to as “ the Post-Revie Claims ”) valued at £32 million; that KIL had funded an investigation and was now in a position to send a letter before action; but that in addition, they had discovered, by their further investigations, that claims existed arising out of the period before the completion of Project Revie, and that the right to assert those claims, including claims against the Company’s former directors, vested in the Company. In respect of each period - before and after the completion of Project Revie - the directors had the benefit of Directors & Officers insurance policies (“ the D&O Policies ”), such that a sale of the Company’s pre-completion claims to KIL would increase KIL’s possible recoveries by (and from) £20 million to £40 million (leaving aside any assets that might otherwise be available to satisfy a judgment, of which nothing was said).

18. In dispute was whether Mr Hyslop was told during that call, on 20 March 2023, not only that the Company had possible claims against the Applicants in respect of the period before the completion of Project Revie (these I will refer to as “ the Outbound Claims ”) but that those Outbound Claims were contingent upon, and intimately related to, the success of Extentia/KIL’s claims against the Company in respect of the same period and events (“ the Inbound Claims ”); in other words, whether or not he was told that the Outbound Claims were intended, in substance, to compensate the Company for any losses suffered by virtue of the Inbound Claims, and indeed, whether he was told anything at all of the existence of the Inbound Claims.

19. Ultimately, as I shall explain, that dispute was unimportant. Nonetheless, in my judgment it was more likely than not that Mr Hyslop was told (albeit in the broadest terms) at least that the Inbound Claims existed as a possibility: given the close relationship between the two, it is I think unlikely that he would have been told about the Outbound but not the Inbound Claims (which would provide their very ground and value). Having said that, he was given no detail and no particulars; as to the content of the possible claims - whether Inbound or Outbound - the Liquidators were thus wholly ignorant. The claims arising out of the period before completion of Project Revie (whether against the Company or the Applicants) were referred to as “ the Pre-Revie Claims ”.

20. That state of ignorance continued for some time afterwards, until 2 May 2023, or about then, when the Administrators forwarded to the Liquidators (with KIL’s permission) an email which they had received (confidentially and subject to asserted litigation privilege) from KIL’s solicitors, DAC Beachcroft LLP, attaching documents including draft letters before action in relation to the proposed Inbound Claims, Outbound Claims and claims asserted directly against the Applicants in respect of the periods both before and after the completion of Project Revie. The purpose of sending those documents was so that the Liquidators could consider the merits of the proposed claims and decide whether or not they would assign the Outbound Claims to KIL, and if so, on what commercial terms. Amongst other things, the draft letter before action in respect of the Outbound Claims said, that “ a claim form will shortly be issued on a protective basis in connection with the claims set out in this letter ”; in circumstances where the allegations concerned events during 2017/2018, it is passably clear that there were some concerns regarding limitation (or at least, that without reasonably prompt action, an issue might soon arise).

21. The Liquidators came to the conclusion that the Outbound Claims were neither hopeless nor vexatious; that they therefore had at least some properly arguable merit. In that respect, there was no issue: at least for present purposes, the Applicants accepted the accuracy of the Liquidators’ ultimate assessment of the merits of the Outbound Claims (although they continue strenuously to deny them, and indeed to deny all of the other allegations of wrongdoing made against them in respect of the affairs of the Company and wider group).

22. Accordingly, during the period of weeks that followed, there was a negotiation, as a result of which, on 29 June 2023, the Assignment Agreement was made between the Company, Styles & Wood Investments Limited, KIL, and again as the personal guarantor of KIL’s obligations, Mr Parkin.

23. Of that negotiation, and of their decision to enter into the Assignment Agreement, it was not said that the Liquidators acted to any degree dishonestly, fraudulently or in bad faith; it was not said that the negotiation process itself was conducted unprofessionally or incompetently (although it was said, as I shall explain, that the Liquidators had failed to investigate the Claims properly and so assess their true value); neither was there evidence of any better alternative offer having been received or having in fact been available (whether at the time or since then, including by the time of the hearing); in other words, there was no evidence that the Company’s rights were sold to KIL at an undervalue, for less than they were in fact worth. Instead, one of the Applicants’ allegations was that the opportunity to buy the rights should have been marketed by the Liquidators, both to the Applicants themselves and/or to third parties specialising in the acquisition and prosecution of claims, and that had they been marketed, it was at least possible that some other, better offer would have been made.

24. Amongst other things, the Assignment Agreement provided: 24.1. for the assignment of claims to KIL, in return for payment of “ the Pre-Revie Consideration ”; 24.2. the Pre-Revie Consideration was defined to be that “ part of the Aggregate Consideration that is determined to be attributable to the Pre-Revie Claims ”; in addition, by Clause 3.1, KIL agreed to pay £1 to each of the assignors on the date of the assignment; 24.3. the “ Aggregate Consideration ” was defined as meaning 22.5% of the “ Net Proceeds ” (up to a cap of £7 million under both the Assignment Agreement and the Extentia Assignment Agreement) and the Net Proceeds were defined as the proceeds arising from the Pre-Revie and the Post-Revie Claims less KIL’s legal costs, to the extent not included in a costs order, or agreed to be paid by way of settlement; 24.4. Clause 3 of the Assignment Agreement provided for the calculation of the Pre-Revie Consideration, once the Aggregate Consideration had been determined – in substance, a means of allocating the sum attributable to the Pre-Revie Claims, essentially as the pro rata amount in any Court order, or a sum apportioned from any global settlement of the claims, or (failing that) 50% of the Aggregate Consideration.

25. The effect was that in principle, the Company might receive payment of up to £7 million (if 22.5% of the Net Proceeds is no less than £7 million, and the whole of that sum were to be attributed to the Pre-Revie Claims). In reality of course, that sum is contingent upon the success of the Pre-Revie Claims, the amount of the proceeds in fact “ arising from ” the Pre- and the Post-Revie Claims (itself contingent upon the actual resources of the Applicants combined with the benefit of the D&O Policies, from which their own costs are also to be paid), and upon the amount of KIL’s costs not covered by an order or settlement.

26. Inevitably, it follows that the amount of any sum eventually available for payment of a dividend to the Company’s creditors after payment of the costs and expenses of the liquidation, will be less than £7 million, and possibly (if the case goes to trial) very much less; possibly nothing at all. Indeed, on that footing, one of the Applicants’ allegations was that the consideration was “ illusory ”.

27. By Clause 5 of the Assignment Agreement, KIL also agreed to indemnify the Liquidators and the Company against all actions, proceedings, claims, demands and costs whatsoever arising directly or indirectly out of the assignment of the claims and/or KIL’s pursuit of the claims.

28. In issue between the Liquidators and the Applicants was the extent to which, if at all, the Liquidators’ solicitors, Addleshaw Goddard, who were also the Administrators’ solicitors, participated in the process of negotiation of the terms of the Assignment Agreement. The Applicants’ allegation was that they were in a position of conflict (and thus the Liquidators’ position to that extent unprotected) because a better outcome for KIL would mean a better outcome for Extentia and its Administrators (under the Extentia Assignment Agreement). They relied on an email sent by Mr Andy Bates of Addleshaw Goddard on 24 May 2023 to DAC Beachcroft (for KIL), in which he first dealt with certain issues concerning the putative Extentia Assignment Agreement with the Administrators, and then said, “ I have not had chance to discuss with the Liquidators yet, but know from prior discussions that, in addition to the above two points which apply equally to the new assignment: 1. they will require upfront consideration - please can you make a proposal in that respect; and 2. the ratchet will need some consideration (both in terms of whether it is sufficient and why it is lower than the existing ratchet). ”

29. In that regard however, I accept the evidence of Mr Hyslop, that Addleshaw Goddard’s involvement was confined to drafting the terms of the contract (and at most, from time to time communicating views) – in other words, giving legal effect to the outcome of the commercial negotiation which he/the Liquidators themselves actively conducted.

30. The two Assignments were executed on 29 June 2023. Subsequently, by Claim Forms issued on 30 June 2023 (served on 30 October 2023, in relation to the Pre-Revie Claims) and 8 March 2024 (served on 9 July 2024, in relation to the Post-Revie Claims), KIL brought two actions in the Commercial Court, against the Company and the Applicants by virtue of the Extentia Assignment Agreement, and against the Applicants alone by virtue of the Assignment Agreement; those claims are due to be heard together at a trial starting on 7 April 2027, and estimated to last 56 days. Very broadly, KIL’s case is as follows. 30.1. First, the Pre-Revie Claims: before the completion of Project Revie, the Applicants and the Company are alleged to have made a series of statements to Extentia regarding the Company’s current and forecasted position. KIL alleges that those statements were false, and that Extentia relied upon them when deciding to enter into Project Revie. It claims for Extentia’s resulting loss; its case is that the Company was in fact worth nothing, alternatively very significantly less than its purchase price; the amount claimed exceeds £58 million. 30.2. I will refer to the Pre-Revie Claims made against the Applicants directly as “ the Direct Claims ”. In the present context, their significance lies in the fact that as a result of those Claims, the Applicants issued an Additional Claim (presently stayed) seeking from the Company, in respect of any established liability, an indemnity or contribution pursuant to the Company’s Articles of Association and/or the Civil Liability (Contribution) Act 1978 . As a result, the Applicants claim to be contingent creditors of the Company, potentially therefore entitled to share in the distribution of its assets (including of course any proceeds of the sale of the Outbound Claims to KIL under the Assignment Agreement); for present purposes, that claim (as to their status) was not in issue. It was on that basis that the Applicants sought to establish their standing, qua creditors, to make the present Application. Nonetheless, the Liquidators denied their standing, not because the Applicants are not creditors, but because, so it was said, their interests do not align, and are indeed adverse to, those of the general class of creditors. I consider the question of the Applicants’ standing at paragraphs [72]-[80] below. 30.3. Second, by virtue of the Post-Revie Claims, KIL alleges that after the completion of Project Revie, the Applicants breached their statutory and contractual duties to Extentia (and one of its subsidiaries); the Post-Revie Claims therefore concern alleged mismanagement by the Applicants between March 2018 and October 2019 (when they were dismissed, albeit their (undefended) unfair dismissal claims against Extentia later succeeded); the amount claimed in that respect exceeds £35 million. 30.4. The aggregate sum claimed is therefore in excess of £93 million.

31. The Commercial Court proceedings are on a grand scale; they were properly described as heavy, commercial litigation; self-evidently, they are extremely complex, and extremely costly, so much so that Mr Pickering KC (for the Applicants) at least suggested, as I understood it, the possibility that the parties’ legal costs might come to consume all or most of the benefit of the D&O Policies (up to £40 million). It was common ground that before entering into the Assignment Agreement, the Liquidators did not seek or receive their own legal advice as to the merits of the Claims; their case was that they were under no duty and in any event in no position to do so, and that the suggestion that they ought somehow to have formed their own independent view of the Claims (beyond the unchallenged conclusion that they were not vexatious) was misconceived, and in the circumstances of this case, given their resources and the immense scale of the suggested undertaking, wholly fanciful.

32. As to the progress of the litigation: 32.1. on 5 June 2024, Nigel Cooper KC, sitting in the Commercial Court, dismissed the Applicants’ application, made on 21 February 2024 (and heard on 5 May 2024) for an extension of the time for service of their Defence, of some seven months, advanced on the grounds that they lacked sufficient documentation to plead, alternatively to stay the Pre-Revie Claim pending the outcome of the present Application (over a year later) which had been issued on 3 May 2024, only two days before the hearing (having first been raised as a possibility by the Applicants on 16 February 2024): ; [2024] EWHC 1356 (Comm) 32.2. from the judgment, I note that the Applicants argued that a fair opportunity to plead would have required them to be given access to “ some 700,000 documents ” held by KIL (and a chance to review them) and that the extension sought would be justified given the complexity of the claim, the passage of time since the material events, and the necessity of pleading to the Inbound (as well as the Outbound) Claims, in circumstances where “ the Liquidators are not taking part in the litigation ”; the judge noted, at [48], that “ Both the duration of the extension sought … and the scale of the task which the Applicants seek to undertake make it obvious that the costs to be incurred in connection with the review will be extremely high ”; he also recorded their submission that were the present Application to succeed, it would “ knock out the majority of the claim ” against them; in the event (taking account of the time and documents already given, and of the documents soon to be provided by the Liquidators) the judge granted an extension of time for a Defence to 4.30pm on 31 July 2024, a period of eight weeks; 32.3. subsequently, the Defendants served their Defences to the Pre-Revie Claims on 30 July 2024, and to the Post-Revie Claims on 15 November 2024; amongst other things, the Applicants pleaded - reiterating submissions made at the hearing on 5 May 2024 - that if their present Application were to succeed, and the Assignment Agreement be set aside, “ that part of KIL’s claim will be struck out and the Defendant Directors will seek to amend this Defence accordingly ”; if the Outbound Claims (to which this was a reference) were to be struck out, the Company would of course be deprived of the prospect of any receipt at all under the Assignment Agreement; 32.4. before me, there was a dispute (albeit undeveloped in argument, and in respect of which I cannot sensibly form a view, beyond concluding that an issue would exist) that were the Outbound Claims to be struck out, they would become time barred (given that Project Revie completed on 8 March 2018, substantially more than six years ago), meaning that if they were to re-vest in the Company, it may now be too late to assign (or even itself to assert) them again; before me, in contrast to their position in the Commercial Court at the hearing on 5 May 2024, and in contrast to their pleading, the Applicants were keen to suggest that rather than being dealt a fatal blow, the Outbound Claims would once more vest in the Company whose Liquidators would then be free to assign them, albeit not this time acting perversely; 32.5. aside from issues of limitation, were the Claims to be struck out, KIL would (I assume) be at some significant risk in respect of the Applicants’ and its own costs of the Commercial Court litigation to date, in addition to which, the Inbound Claims would become commercially pointless, because the Company has no assets – as I have said, the only real point of the Inbound Claims is to ground the Outbound Claims; it is for that reason that the Applicants, in their Defences, in effect seek to oppose and defeat both the Inbound Claims (against the Company) as well as those asserted against them personally; 32.6. on 27 January 2025, the Applicants issued an application seeking the joint case management and trial of the Pre-Revie and Post-Revie Claims; that application was granted by Sean O’Sullivan KC, sitting as a Deputy Judge of the High Court, at a Case Management Conference held on 2 and 3 April 2025; 32.7. at that CMC, the court gave directions to trial for both Claims; 32.8. the main stages in those directions are as follows: 32.8.1. 1 December 2025: disclosure; 32.8.2. 8 May 2026: witness evidence; 32.8.3. 19 June 2026: reply witness evidence; 32.8.4. 22 September 2026: KIL’s expert evidence; 32.8.5. 10 November 2026: the directors’ (including the Applicants’) expert evidence; 32.8.6. 12 January 2027: expert joint statements; 32.8.7. 7 April 2027: trial of the Claims (estimated 56 days).

33. At no point have the Applicants applied to strike out the Pre-Revie or Post-Revie Claims or any part of them. A Summary of the Applicants’ Case

34. As to the alleged perversity of the Liquidators’ decision to execute the Assignment Agreement, Mr Pickering made four principal submissions. 34.1. First, that the process of investigation and assessment of the Claims (both Inbound and Outbound) by the Liquidators, was inadequate and therefore fundamentally flawed, both: (i) in the period between being told about them on 20 March 2023, and being sent the draft letters before action on 2 May 2023, and (ii) in the period subsequently, until the date of the Assignment Agreement, 29 June 2023; in effect, that they gave the matter no real thought, or no properly grounded thought – they took no legal advice on the merits, and failed to obtain, review and consider the underlying documents and/or the views and responses of the Applicants (and possibly others), allowing themselves instead to be “ led by ” the Administrators and their solicitors, who were actually serving the interests of other companies, with different creditors and different interests; it was said that the Liquidators therefore abdicated their duty to investigate and properly assess the value of the Company’s asset (the Outbound Claims). 34.2. Second, connectedly, that there was a failure to conduct a proper (or indeed any) marketing process before selling the Outbound Claims to KIL; the Liquidators, so it was said, ought to have approached the Applicants and/or other potentially interested third parties; had they done so, they might have been able to negotiate a better price; it was said that it might “ readily be inferred ” (although there was no evidence) that the Applicants (in effect perhaps, their insurers) might have been willing to make a “ nuisance payment ”, to rid themselves of a weak claim. 34.3. Third, that the deal finally struck was itself “ flawed ”: it was not a “ good deal ”. That submission was on the basis: 34.3.1. first, that despite being in a strong bargaining position, the Liquidators decided to accept an initial “ up-front ” payment of only £1, and that the agreed deferred consideration, which I have described above at paragraph [24], was “ quite obviously illusory in terms of the actual benefit ”, essentially because of the huge costs of the litigation, which are to be paid first from the D&O Policies (diminishing the amount of the possible “ Net Proceeds ”) and because of the costs and expenses of the Company’s liquidation which are to be met before payment to creditors; and, 34.3.2. second, that because the Liquidators failed to offer the asset for sale to the Applicants and/or others, the court can “ readily infer ” that some better deal might have been available and/or that there would have been a bidding-war. 34.4. Finally, fourth, that the decision to assign to KIL placed the Liquidators in a position of conflict, in which it was in their/the Company’s interests not to defend the Inbound Claims, despite being under a “duty” to do so – it was suggested that as a result of the Assignment, the Liquidators had a positive interest in the success of the Inbound Claims against the Company in whose interests they ought to be acting (by opposing the Inbound Claims).

35. Broadly, the third and fourth submissions (that the deal was itself a bad one, and that it created a position of conflict) concerned the terms and effect of the Assignment itself (that it was an Agreement in terms so utterly absurd that no reasonable office-holder, properly informed, could possibly have executed it), and the first and second submissions (advanced by the Applicants as a failure of “ process ”) concerned the circumstances in which the Liquidators made their decision, allegedly in ignorance of the assigned claims’ true value, having failed to assess or market them (and thus an Agreement made in circumstances in which no reasonable office-holder, properly informed, could possibly have decided to make it).

36. As to standing, the Applicants’ case was that by virtue of their decision not to defend the Inbound Claims (thus potentially increasing the creditor pool), combined with the possibility that the Assignment Agreement will not result in any or much benefit for creditors, the Liquidators have acted contrary to the interests of creditors: as it was said in their skeleton argument, “ Ordinarily, the Applicants’ (and other creditors’) interests and those of the Liquidators would have been aligned in defence of the Inbound Claim and the Direct Claim. They would both have an interest (and would have collaborated) in defending those claims. … The Assignment Agreement, and the decision not to defend the Inbound Claim, however, have reversed those interests; the interests of the Liquidators are now aligned with KIL – the Liquidators’ interests mean that the Inbound Claim against the Company – the very Company of which they are office-holders - should succeed. Quite obviously, however, that is not in the best interests of the creditors .” Although conceptually discrete, the standing issue therefore overlapped with issues of substance. For that reason, and because the Application had reached trial, I refused Ms Kyriakides’ invitation, on the Liquidators’ behalf, to determine the issue of standing as a preliminary point. The Relevant Principles of Law

37. In essence, liquidation is a process by which the assets of a company are collected and realised in order to discharge its debts and liabilities equitably, and as far as possible; any balance that remains after payment of the costs and expenses of the process itself, is distributed among its members in accordance with their rights; the company is then dissolved. The nature of that process is inherently collective and compulsory: each creditor loses its individual right to enforce against the company and its property; it is not permitted to undermine or circumvent that collective nature, or to obtain collateral personal advantage; the primary beneficiary therefore (certainly in the case of insolvent liquidations) is the general group or class of unsecured creditors, in whose interests the process is undertaken.

38. The process is conducted by one or more professionally qualified liquidators, personally appointed. Liquidators are subject to various duties, both general - for example, fiduciary, and to act with skill and care, and specific - for example, to collect and realise assets, “ to investigate what assets there are … and what recoveries can be made ” ( Statement of Insolvency Practice 2, England and Wales, paragraph 2 ).

39. A viable right of action vested in the company comprises property – it is an asset of the company which stands to be realised; moreover, an offer to pay for an assignment, made by a potential assignee of that right, is itself treated as an asset which an office-holder may wish to preserve and pursue, and might therefore be held liable for failing to exploit: see for example, LF2 Ltd v Supperstone [2018] EWHC 1776 (Ch) at [65]-[67], per Morgan J, discussed further below.

40. In connection with the fulfilment of their duties, and in the conduct of the liquidation, liquidators have certain powers, both statutory, for example under section 234 of the IA 1986 , and otherwise, by virtue of their position (as for example, an agent of the company); moreover, again in the course of fulfilling their duties, inevitably, they will have to exercise their own discretion – a discretion which is not to be delegated in matters requiring the exercise of personal judgment; they may, for example, have to decide whether or not to use specific powers; whether or not to apply to court; and whether or the extent to which the company’s (inadequate) resources are to be devoted to (and thus risked in) the pursuit of one course or another; they may, as in the present case, have to negotiate a commercial agreement to sell an asset. In the exercise of their discretion they will have to consider all relevant circumstances within the broad framework of their fundamental duties and the purposes of liquidation. In the context of compulsory liquidations, the office-holder’s obligation to “ use his own discretion in the management of the assets and their distribution among the creditors ” is expressly provided for by statute, in section 168(4) of the IA 1986 . One consequence of that is, for example, that the court will not generally give directions to an office-holder in respect of an essentially commercial decision, which it is for the office-holder himself to take: see for example, Re MF Global UK Ltd (in special administration) (No.5) [2014] EWHC 2222, at [41] – “ in commercial matters, administrators are generally expected to exercise their own judgment rather than to rely on the approval or endorsement of the court ”, and Re Sova Capital Ltd [2023] EWHC 452.

41. It follows that by various means - and according in each case to their nature - the acts and decisions of liquidators can be reviewed and controlled, ultimately by the court, in order to ensure that they have acted properly, in accordance with their duties, and within the limits of their powers; in certain circumstances, liquidators can be removed (for example under section 108(2) in the context of a voluntary liquidation) or made financially liable (under section 212).

42. In that context, section 168(5) of the IA 1986 states that in a compulsory liquidation: “ If any person is aggrieved by an act or decision of the liquidator, that person may apply to the court; and the court may confirm, reverse or modify the act or decision complained of, and make such order in the case as it thinks just .”

43. To similar effect is section 167(3), which provides that the “ exercise by the liquidator in a winding up by the court of the powers conferred by this section is subject to the control of the court, and any creditor or contributory may apply to the court with respect to any exercise or proposed exercise of any of those powers ”.

44. By virtue of section 112 of the IA 1986 , the jurisdiction conferred by section 168(5) is also available to be exercised in voluntary liquidations (as in the present case): see Re Hans Place Ltd [1992] BCC 737 at 741. Standing to Apply under Section 168(5)

45. The court is only able to act under section 168(5) on an application made by a “ person … aggrieved ”; only such a person has standing to apply. That expression has been considered and given meaning by the court as follows.

46. In Re Edennote Ltd [1996] 2 BCLC 389 , an application was successfully made under section 168(5) to set aside a liquidator’s decision to assign a cause of action which was being pursued against two of the applicants by the company in proceedings commenced (by the company and the assignee, Mr Venables) before liquidation. The assignment had been made to Mr Venables despite objections from the applicants that they would have been willing to pay more for an assignment, essentially by way of settlement of the claim made against them by the company (which had previously belonged to Mr Venables). Each of the applicants, two of whom, as I have said, were defendants, was an unsecured creditor of company.

47. As to standing, Nourse LJ (with whom Millett LJ, as he then was, agreed) said, at 393d-g: “ It is neither necessary nor desirable to attempt a classification of those who may be persons aggrieved by an act or decision of a liquidator in a compulsory winding up. On the footing that the claims of secured creditors have been or will be satisfied, it is perfectly clear that unless and until there proves to be a surplus available for contributories (a most improbable event) ‘persons aggrieved’ must include the company's unsecured creditors. If the liquidator disposes of an asset of the company at an undervalue, their interests are prejudiced and each of them can claim to be a person aggrieved by his act. Such was the position of the applicants here. [Counsel for the assignee] submitted that they brought the application not as creditors but as persons who had not been given an opportunity to make an offer for the asset. In the latter capacity alone, like any other outsider to the liquidation, they would not have had the locus stand to apply under .” s. 168(5) . But even if that were wrong, they would still have been able to apply in a dual capacity

48. Thus, according to those observations, unsecured creditors would, or certainly could have standing (consistent with the purpose of a liquidation) but outsiders to the liquidation would not; those with a “ dual capacity ”, such as the applicants in that case, who were both (insider) creditors and (outsider) defendants/offerors could nonetheless apply; their dual capacity did not preclude their application.

49. Standing was again considered by the Court of Appeal in Re Edengate Homes (Butley Hall) Ltd [2022] 2 BCLC 1 . In that case, an application was made (this time unsuccessfully) to set aside a liquidator’s decision to assign (to a litigation funder) various causes of action against the applicant, her parents, her husband and her parents’ company. At [26]-[27], Males LJ (with whom Asplin and Stuart-Smith LJJ agreed), having referred to the decision in Re Edennote , said: “26. The reference to "a dual capacity" needs some explanation. The applicants had two capacities. The first was as defendants to the claim who had not been given an opportunity to make an offer to purchase it. That, however, was irrelevant as, in that capacity, they were outsiders to the liquidation and had no standing to make an application under section 168(5) . The second was as creditors of the company. In that capacity, they did have standing. However, it is important to note in understanding this decision that, whatever the applicants' motivation in their dispute with Mr Venables, there was no suggestion that their application was otherwise than in accordance with the interests of creditors generally. Those interests were to maximise the recovery to the estate from the claim. The fact that the applicants were prepared to offer more than Mr Venables had agreed to pay confirmed that their application was to the benefit of the whole class of creditors.

27. Accordingly Re Edennote stands as authority for the proposition that an outsider to the liquidation has no standing to make an application under section 168(5) to set aside an assignment by the liquidator of a claim against him. In everyday language, a defendant to a claim may be "aggrieved" that he has not been given an opportunity to acquire the claim, but that is not sufficient to confer standing under section 168(5) . However, the case is not authority for the proposition that a creditor has standing under .” (Emphasis added.) section 168(5) regardless of whether, in seeking to set aside the assignment, he is acting in the interests of the creditors as a class. That point did not arise for decision

50. At [29], having considered the decision of the Privy Council in Deloitte & Touche AG v Johnson [1999] 1 WLR 1605 (concerning an application to remove liquidators under the Cayman Islands equivalent of section 108 of the IA 1986 ), Males LJ said: “29. The advice of the Privy Council was given by Lord Millett, whose exposition of the two-stage approach to be adopted in such cases was of general application. It follows, in my judgment, that the same approach must be adopted to an application under section 168(5) . The first stage is to consider whether the applicant is "a person aggrieved" by an act or decision of the liquidator within the meaning of the section. The second stage is to consider whether the applicant has a legitimate interest in obtaining the relief sought. It will not have such interest if its interests "are adverse to the liquidation and the interests of the creditors". Thus an applicant may qualify as "a person aggrieved" by virtue of being a creditor, but will not have a "legitimate interest" if its interest in obtaining the relief is contrary to the interests of creditors generally. Lord Millett had been a party to the decision in Re Edennote , which was cited in argument although not in the judgment. He cannot have thought that there was any conflict between the decision in Re Edennote and the two-stage approach which he described .” (Emphasis added.)

51. In other words, according to the decision in Re Edengate , a person’s status as a creditor is not enough to confer standing to apply under section 168(5) : as well as being a creditor in fact, the applicant must act as a creditor, not adversely to the interests of the class. Having considered Walker Morris (a firm) v Khalastchi [2001] 1 BCLC 1 , and the decision of the Court of Appeal in Ultraframe (UK) Ltd v Rigby [2005] EWCA Civ 276 (which indicated that in the assessment of its interest and thus its standing, “ a creditor’s motivation in challenging an assignment is likely to be irrelevant ”), Males LJ concluded at [36]: “36. In my judgment these authorities demonstrate that the judge’s approach to the issue of standing was correct. It is not sufficient that an applicant for relief under section 168(5) is a creditor of the insolvent company. It must in addition have a legitimate interest in the relief sought . Where the application is to set aside a disposal of property by the liquidator, including the assignment of a claim, an applicant will have a legitimate interest if it is acting in the interests of creditors generally. Typically that will be the case when the effect of the relief sought will be to maximise the assets of the estate. But an applicant will not have standing if the relief sought is contrary to the interests of the creditors as a class, as it will be where that will result in a lesser recovery . This concept can be expressed in a variety of ways. "Where an application may be made as 'a creditor' then it must be made by that creditor in his capacity as such (and not in any other capacity)": BLV Realty Organization Ltd v Batten [2009] EWHC 2994 (Ch) ; [2010] B.P.I.R. 277 at [24] per Mr Justice Norris; "whether an application in a liquidation or other insolvency process is really for the benefit of the creditors as a whole ": Nero Holdings Ltd v Young [2021] EWHC 1453 (Ch) ; [2021] B.P.I.R. 1324 at [59] per Mr Justice Michael Green; or as the judge put it at [34], the applicant’s "interest in the outcome of the application must also be aligned with the interest of the class as a whole and it must not have a collateral interest which transcends the class interest ". However it is put, the essential point is clear .” (Again, emphasis added.)

52. On that basis, on the facts of that case, the court decided that the applicant lacked standing. At [38]-[40], Males LJ said:

38. Applying these principles to the facts of the present case, it is clear that Mrs Lock’s interest is as a defendant in the litigation brought by Manolete. Her position has consistently been that the claims against her and her family are without merit. She acknowledges that they have some nuisance value in view of the stress and inconvenience caused by being a defendant even to an unmeritorious claim, but that is as far as she has been prepared to go. In the circumstances, it is clear in my judgment that Mrs Lock’s challenge to the assignment of the claims to Manolete is not made for the benefit of creditors generally and is not aligned with the interest of the class as a whole. ….

39. This is not to say that a defendant to a claim by an insolvent company or its liquidator who is also a creditor of the company will never have a legitimate interest in acquiring the claim. There may be circumstances in which it will have such an interest, as in Re Edennote . But it was highly material in that case that the section 168(5) applicants were prepared to outbid Mr Venables to acquire the claim against them, thereby increasing the recovery for the benefit of creditors generally.

40. In contrast, there has never been any suggestion in the present case that Mrs Lock would be willing (or would ever have been willing) to match or to beat the offer made by Manolete. The most that she is able to say is that she raised the possibility of buying the claims at her meeting with the liquidator on 8th February 2018, but never sought to follow this up afterwards, even when aware that the liquidator proposed to assign the claims against her parents to a litigation funding company. The suggestion in Mrs Lock’s evidence that she (alone or with others) may have been able to raise something of the order of £30,000 shows a lack of understanding of what Manolete had agreed to pay. It falls far short of being satisfactory or realistic evidence that she was or would be in a position to match or beat Manolete’s bid .”

53. It was, in other words, highly material that the applicant, although she acknowledged some “nuisance value” in the claim, had not actually been prepared to make an offer in excess of that made by Manolete, the assignee.

54. Finally as to standing, is the decision of the Supreme Court in Brake and another v The Chedington Court Estate Ltd [2023] 1 WLR 3035 , which further refined the test applied in Re Edengate . The facts were not straightforward, but concerned the decision of the applicants’ trustee in bankruptcy to facilitate their eviction from a property owned by a partnership of which they were members (and which was in liquidation), and the decision of the partnership’s liquidators to sell the property to The Chedington Court Estate Ltd. The applicants applied in respect of the trustees’ decisions under section 303(1) of the IA 1986 , and in respect of the liquidators’ decisions under section 168(5) ; amongst other things, they sought orders setting aside the sale, and requiring the liquidators to accept a bid made by them in their capacity as trustees of a family settlement. Both applications were struck out at first instance on the grounds that the applicants lacked standing; the Court of Appeal dismissed the applicants’ appeal in relation to the liquidation application, but allowed it in respect of the bankruptcy application, in so far as made by the applicants in their personal capacities as bankrupts; the Supreme Court allowed the appeal of the purchaser in respect of the bankruptcy application (which was therefore also struck out).

55. The Court held that despite the use of different language, there is no difference in the scope of sections 168(5) and 303(1). At [6], Lord Richards (who gave the Court’s judgment) said, “ While the reference in .” section 303(1) to the bankrupt is appropriate only to personal insolvency, the general term “any person … aggrieved” in section 168(5) will encompass creditors and, where appropriate, members of the company in liquidation as well as any other person who can qualify as a “person aggrieved”. There is no difference of substance between an “aggrieved” and a “dissatisfied” person

56. He continued: “7. Both section 303(1) and section 168(5) of the IA 1986 express in very broad terms the persons who may apply to challenge a trustee or liquidator, as did their predecessor sections. The express terms are not, however, to be given a literal reading. On both principle and authority, there are limitations on the persons who have standing to apply under these provisions. The authorities

8. Neither section is intended to provide a means of redress to a party with no connection to the bankruptcy or liquidation. …

9. Limitations apply also to bankrupts, creditors and others who are connected with the bankruptcy or liquidation. In accordance with the principles that serve to confine standing under these sections, the authorities have established the following propositions. First, subject to very limited exceptions discussed below, a bankrupt must show that there is or is likely to be a surplus of assets once all liabilities to creditors, and the costs and expenses of the bankruptcy, have been paid. The same is true of a contributory of a company holding fully paid shares, although there has been no decided authority on this point. Second, a creditor will not have standing, except as regards a matter which affects the creditor in its capacity as such . As a matter of principle, this limitation applies also to bankrupts, even when they can demonstrate a surplus. Third, there are other, very limited, circumstances which will provide standing to an applicant, whether or not the applicant is the bankrupt, a creditor or a contributory. So far as the authorities go, those circumstances are confined to cases where the challenge concerns a matter which could only arise in a bankruptcy or liquidation and in which the applicant has a direct and legitimate interest .” (Emphasis added.)

57. The decisions in Re Edennote and Re Edengate were said to have illustrated the second principle in connection with the standing of creditors. Importantly, Lord Richards also explained that although a creditor applying as such must allege conduct adverse to their own interests as a creditor, it was not invariably necessary to show conduct adverse to the interests of the whole class, or therefore that their own interests were perfectly aligned with those of the whole class. It was in this respect that the test, as explained by the Court of Appeal in Re Edennote , was refined. At [97], Lord Richards said: “97. Submissions were made to the Court of Appeal in the present case which laid emphasis on Lord Millett's observation that the applicant in Deloitte & Touche was not only a stranger to the liquidation but “its interests are adverse to the liquidation and the interests of the creditors”. Asplin LJ was, in my view, right at para 82 to reject this as a touchstone for the circumstances in which an application can be made under section 303(1) or section 168(5) of the IA 1986 . This may be illustrated by the example of a creditor who challenges acts, omissions or decisions of the trustee or liquidator as they impact on his claim as a creditor. It cannot be doubted that the creditor would have standing under section 303(1) or section 168(5) in those circumstances, but it would be irrelevant whether his challenge was, or was not, adverse to the interests of creditors generally. Indeed, the challenge might be adverse to the interests of all the other creditors. The same would be true of applications by third parties, such as the landlord in In re Hans Place Ltd. In many cases, the fact that the application is adverse to the interests of the bankruptcy or liquidation or to the interests of creditors will indicate a lack of standing, but it is not in my view a wholly accurate approach . Insofar as Males LJ suggested otherwise in In re Edengate Homes (Butley Hall) Ltd at para 36, I would respectfully disagree. The issue is whether the challenge is brought by the creditor in its capacity as a creditor , as it was in my view correctly put by Norris J in In re Zegna III Holdings Inc [2010] BPIR 277 at para 24. ”

58. In summary, under section 168(5) , to have standing, a creditor applicant must show that it seeks relief, and has an interest in the relief sought, in its capacity as a creditor adversely affected by the act or decision in issue. In many cases, its interests will coincide with those of the class generally; but that is not invariably true or necessary.

59. For the purposes of the present application, the Liquidators accepted that the Applicants are creditors. They nonetheless denied their standing. They submitted first, that the interest of the Applicants in the relief sought was not aligned with, and was in fact positively adverse to the interests of the creditor class, and moreover, second, that the Applicants were not in truth or substance acting in their capacity as creditors alleging conduct affecting and adverse to their interests as such, but were instead acting as defendants to the Outbound Claims, seeking to bring those Claims to an end for their own collateral, private purposes and benefit (as in Re Edengate ). I have summarised the Applicants’ case above, at paragraph [36]. The Relevant Substantive Test

60. The decision of a liquidator to assign (or not) a cause of action to a particular person at a particular price and on particular terms, involves an exercise of the liquidator’s discretion (as well as the exercise of a power in the fulfilment of a duty). It was common ground that the court will only interfere with such a decision under section 168(5) , if “ (fraud and bad faith apart) … [the liquidator] has done something so utterly unreasonable and absurd that no reasonable man would have done it ” per Nourse LJ in Re Edennote at [1996] 2 BCLC 389 , 394c; the judge added that a reasonable liquidator must be “ taken to be one who is properly advised ”: 396c; finally, the issue was to be judged both objectively and without the benefit of hindsight.

61. In Re Edennote itself, the decision was held to have been perverse because (at [1996] 2 BCLC 389 , 395h) “ it ought to have been obvious to [the Liquidator] that if Mr Venables acquired [the company’s] cause of action in the Queen's Bench action, it would give him a very considerable nuisance value in the settlement of the action as a whole, so that [the liquidator] ought to have enquired from the applicants' solicitors whether they were prepared to make a better offer than Mr Venables. In other words, it ought to have been obvious to [the liquidator] that he should make that approach .” Nourse LJ concluded, at 396d-f: “ Very often a liquidator will not need advice before he acts. Here he clearly did. If [the liquidator] had been properly advised, he would have been told that the applicants, once apprised of the possibility of an assignment to Mr Venables, would see that their application for security was likely to avail them nothing and, as the judge observed, that Mr Venables would acquire a very considerable nuisance value in the settlement of the action as a whole. Thus it would have become obvious to a liquidator in Mr Ryman's position, properly advised, that an approach should be made to the applicants .”

62. As I have explained above, Re Edennote was a case in which there were extant proceedings as at the commencement of the liquidation, in the course of which an application for security for costs had been made by the defendants against the company. Moreover, the defendants/applicants had expressed their own willingness to buy (thus to settle) the cause of action for more than the proposed price. In those circumstances, the applicants established the requisite degree of unreasonableness.

63. In Re Edengate , by contrast, the applicant failed to establish either standing (as explained above) or in any event, that the court ought to interfere with the decision to assign. Males LJ repeated the test set out in Re Edennote ; he described it as being “ one of perversity ”, “ a formidable test ”; he agreed furthermore that perversity is to be assessed objectively – regardless of the adequacy or otherwise of the liquidator’s own reasons subjectively held and acted upon.

64. As in Re Edennote , the applicant’s complaint was that the causes of action had not been offered to her or to the other defendants for sale, before their assignment to the litigation funder/claimant – a “ failure of process … necessarily perverse ”. At [47]-[52] Males LJ rejected that argument. He said: “47. … While it may often be sensible, or good practice, to give a defendant to a claim an opportunity to acquire (or settle) it before assigning it to a litigation funding company, failure to do so is not necessarily perverse. Whether it is or not must depend on careful scrutiny of all the facts of the case. In Re Edennote that failure was held to be perverse, but there were two important features of the case which are not present here. The first, which I have already mentioned, is that on the facts the defendants to the claim (the section 168(5) applicants) were prepared to make what was likely to be a better offer than Mr Venables had made. The second is that the liquidator was proceeding under a belief, wrong in law, that he was not permitted to assign the claim to Tottenham Plc and Mr Sugar. Moreover, he did not take legal advice on the complicated question of how an assignment of the claim would impact on an application for security for costs being made in the litigation between Edennote and Tottenham Plc, which would appreciably affect the value of the claim.

48. Lord Justice Nourse acknowledged that "it is certainly possible for a liquidator to do something so utterly unreasonable and absurd that no reasonable man would have done it, simply by selling an asset of the company without taking into account the possibility that a third party might well have made a better offer than he to whom it was sold". But to say that this is possible does not mean that it is necessarily perverse not to do so. It all depends .

49. In my judgment, therefore, there was no failure by the judge to recognise that the liquidator was under a duty to give Mrs Lock and her family an opportunity to acquire the claims. He was under no such duty. Rather, the question is whether it was perverse of him not to do so .

50. … The judge was entitled to conclude, if the facts justified it, that the liquidator’s decision to assign the claims to Manolete was not perverse even if the reasons which he gave for his decision were unsatisfactory.

51. In my judgment the facts here clearly justified [the conclusion that the liquidator's decision was not perverse] . In particular, [the applicant] never followed up the suggestion made at the meeting on 8th February 2018 that she might be interested in buying the claims; her parents did not respond to the liquidator's solicitors' letter dated 21st May 2019 warning that he was contemplating selling the claims against them to a specialist insolvency litigation funder and that, in the absence of settlement within a reasonable time, the sale would be completed and the claims would be pursued; the liquidator would have been entitled to infer (and would have been correct to do so) that this letter had been passed to [the applicant] ; and [the applicant] had maintained that the claims against her parents were without merit, worth only nuisance value. It is true (and may be a ground for criticising the liquidator) that there had been no mention of a claim against her personally, but it is hard to think that she would have taken a different view if there had been.

52. Moreover, the liquidator had no reason at all to think that [the applicant] or her parents would have offered a better deal than the terms on which Manolete was prepared to acquire the claims – and in fact they would not have done. Those terms included not only an upfront sum, but also a share in the proceeds of the claims. In order to match those terms, [the applicant] or her parents would have had to be prepared to pay considerably more than the £30,000 upfront sum which Manolete had paid. They were not, and still are not, prepared to do so .”

65. The issue therefore is one of “ perversity ”, to be assessed objectively by the court on a careful scrutiny of the facts; there is no irreducible duty in every case to offer a cause of action to the alleged wrongdoer (in order to settle), or indeed to any person in particular; whether or not a failure to do so should be held to have been perverse will depend on the circumstances of the case – “ it all depends ”.

66. Similarly, in LF2 Ltd , referred to above, the applicant’s case was that the refusal of administrators to assign to it a cause of action against the company’s former solicitors had caused it unfair harm under paragraph 74 of Schedule B1 to the IA 1986 ; it sought an order requiring assignment to itself; its application was dismissed, as was its appeal. Morgan J gave useful guidance as to the proper approach (drawing on the “ helpful authority ” of Citicorp Australia v Official Trustee in Bankruptcy [1997] BPIR 574, a decision of the Federal Court of Australia). At [65]-[69] he said: “65. A viable claim by the company against a third party is an asset of the company. A claim which is arguably viable, is a potential asset of the company. In principle, an administrator ought to be ready to investigate whether such an asset should be preserved and pursued. Of course, there may be obstacles in the way of doing so. The administrator may have no funds with which to take legal advice. In such a case, it may be open to the body of creditors to provide the necessary funds.

66. If the administrator has no funds to investigate a possible claim against a third party and he receives an offer from a potential assignee of the claim to pay for an assignment, that offer will potentially constitute an asset of the company. The administrator should normally wish to preserve and pursue that asset. If it is clear to the administrator that the claim would be hopeless and that the potential assignee is bent on pursuing a hopeless claim in order to harass the third party, then the administrator should normally decline to assign the hopeless claim. The administrator is an officer of the court and the court expects him to behave honestly and fairly. In the same way as the court would not direct an assignment of a hopeless claim where the court was of the view that the assignee's intention was to use the hopeless claim to harass a third party, then the administrator might well take the same view as to his own participation without finding it necessary to seek a direction from the court.

67. But there will be other cases. One such case is where the administrator does not have a clear view that the proposed claim would be vexatious and he is offered a sum of money for the assignment of the claim. In such a case, the administrator should be prepared to obtain a proper payment for the assignment . If it is not clear that the offer reflects the true value of the cause of action, then the administrator may well be advised to conduct some process of inviting rival bids or to hold an auction of the cause of action. The receipt of a sum of money for the claim would be likely to benefit someone, whether it is the administrator (as a contribution to his expenses) or the creditors.

68. There may also be practical considerations and time pressures which the administrator has to take into account. If the administrator is considering whether the company has a potential claim and there is a high risk that the limitation period for the claim may be about to expire, the administrator may have to take immediate action to protect a potential asset of the company . The administrator may have to cause the company to issue a protective claim form or even to conduct some rapid negotiations to obtain the best available offer for an assignment of the cause of action.

69. The focus of the submissions on behalf of the administrators in this case was on protecting a third party from the possibility of being harassed by litigation rather than (as it should be) on the administrators realising the assets or potential assets of the company for the benefit of the creditors . It must be remembered that if the alleged claim is assigned and the assignee then issues a claim form, the defendant will be able to apply to strike out the claim form or to seek a reverse summary judgment if the defendant wishes to contend that the claim is frivolous or vexatious. ” (Emphasis added.)

67. Accordingly, an office-holder should not ordinarily assign an obviously hopeless claim. But if the claim is not obviously hopeless (as in the present case was common ground) the claim is an asset (as is, potentially, an offer to acquire it) which the office-holder is under a duty to preserve and realise for the benefit of creditors: how precisely he chooses to go about fulfilling that duty, in the circumstances of the particular case, is a matter for him, a matter for the exercise of his own discretion, subject to the constraints of perversity. It follows that as I have said, a refusal to assign might itself be perverse (and thus reversed by the court), as much as an agreement to assign: see Hamilton v The OR [1998] BPIR 602.

68. Finally is the decision of the Court of Appeal in Re Faryab [2001] BPIR 246, which concerned the (successful) application of a bankrupt, Mr Faryab, to set aside the assignment of a cause of action (against his former solicitors) which was being pursued in litigation commenced by Mr Faryab before the beginning of his bankruptcy. As well as being defendants, the solicitors were (potentially at any rate) creditors, albeit in a relatively modest sum - £17,000; on the other hand, the claim against them was for “ at least £2 million ”, and Mr Faryab had offered to account to the trustee for the whole of any net sum recovered; the claim had been assigned to the solicitors (and thus settled) in return for payment of £17,000. The debt claimed by the solicitors was pursuant to a costs order made in their favour on a successful application to strike out Mr Faryab’s claim; that order (and the strike out) were subject to appeal, in respect of which permission to appeal had been given.

69. In giving judgment, having cited the test in Re Edennote , Robert Walker LJ (as he then was) said, at [38]-[39]: “38. [The trustee] had written to the creditors on 15 November 1999 that he required advice from counsel about the “status and merits” of the case. However, it became clear that none of the creditors was prepared to fund the action, even to the extent of enabling [him] to take the preliminary step of obtaining counsel's advice. Since he could not afford to take advice at the expense of the estate, he moved … to the position that there was no need for him to take advice and that it was a matter for his discretion. He seems to have exercised his discretion on the basis that Mr Faryab appeared to be a loser rather than a winner. That is how [the trustee] himself put it, although I do not doubt that he did his best to form a view as to the prospects of success in the action. Nevertheless, I consider that for an insolvency practitioner who is an experienced chartered accountant but not a lawyer, that is a most unsatisfactory basis on which to form decisions as to the disposal of a claim for less than one per cent of its minimum potential value (or on Mr Faryab's more optimistic view for about one-third of one per cent). The more difficult a claim is to evaluate (and I do not in any way diminish the problems of evaluation or the size of the difficulty facing [the trustee] ), the stronger the argument must be for the sort of procedure described by Lord Hoffmann in Stein v Blake which enables the claim to go forward and see whether it is worth anything or not. Mr Faryab is, as he has shown today and has shown on many previous occasions, an experienced and skilled litigant in person who could be expected to prosecute the cause of action if it is re-assigned to him with skill as well as vigour and determination.

39. It seems to me that the judge did, with great respect to him, too readily accept that the trustee in bankruptcy had done his best without considering that £17,000 was not merely “rather a small bird in the hand”, but was a sum which was derisory (or almost derisory) in relation to the claim against [the solicitors]. It is also not wholly immaterial to note that the sum of £17,000 seems to have been the estimate which [the trustee] made of his own fees and expenses at the creditors' meeting. In saying that, I am not intending to make any imputation against [him], but merely to point out that his natural concern about his own position must have played some part in the decision-making process .” “40. As to the prospects of success of the claim, I have already referred to some of the lurid features of the claim based on [the solicitors’] professional conduct. I say no more about that beyond expressing the view that to my mind the claim is not obviously hopeless or near hopeless. …, if the appeal against the strike-out is allowed, as … it might be, then [the solicitors] will cease to be a creditor of the estate and will be facing a claim potentially for a very large sum indeed. I also think (although I do not attach much weight to this) that there is a public interest element in such cases. Bankruptcy should not be too readily available as a means of stifling claims which may have substance. Sometimes, indeed, it may be proper and the only sensible course open to a trustee in bankruptcy who has no funds at all to assign a claim to the defendant to the claim, even knowing that that means that the claim will meet a sudden death . …” (Emphasis added.)

70. The “ procedure described by Lord Hoffmann ” was a reference to his judgment in Stein v Blake [1996] AC 243 , 260: “ It is a matter of common occurrence for an individual to become insolvent while attempting to pursue a claim against someone else. In some cases, the bankruptcy will itself have been caused by the failure of the other party to meet his obligations. In many more cases, this will be the view of the bankrupt. It is not unusual in such circumstances for there to be a difference of opinion between the trustee and the bankrupt over whether a claim should be pursued. The trustee may have nothing in his hands with which to fund litigation. Even if he has, he must act in the interests of creditors generally and the creditors will often prefer to receive an immediate distribution rather than see the bankrupt's assets ventured on the costs of litigation which may or may not yield a larger distribution at some future date. The bankrupt, with nothing more to lose, tends to take a more sanguine view of the prospects of success. In such a case the trustee may decide, as in this case, that the practical course in the interests of all concerned (apart from the defendant) is to assign the claim to the bankrupt and let him pursue it for himself, on terms that he accounts to the trustee for some proportion of the proceeds .”

71. Accordingly, in Re Faryab , it was perverse of the trustee (having not taken advice, “ through no fault of his own ”, because he could not afford to do so) to allow a defendant to settle a very substantial claim for a derisory sum, notwithstanding Mr Faryab’s offer to acquire and pursue it, and then to account for the net proceeds – in that position of unavoidable uncertainty, the trustee “ failed to see that an assignment to Mr Faryab was the best way of ensuring that what is potentially a valuable claim was not stifled by the payment of a relatively very small sum. …. [W] hether the receipt of £17,000 into the estate would produce any significant benefit for the creditors seems to me very debatable indeed .” Thus there is, in addition, a public interest element – bankruptcy (and I would add, liquidation also) should not be seen as a “ too readily available ” means of stifling potentially good claims. Discussion Standing

72. In my judgment, the Application was advanced, and relief was sought by the Applicants, in their capacity as defendants to the assigned claims brought against them by KIL, and not in their capacity as creditors of the Company. Their real purpose was not to advance or protect the interests of the creditor class, or even of themselves as creditors or members of that class, but was to disrupt and if possible, to defeat KIL’s actions. However, if KIL’s action on the assigned Outbound Claims does not succeed, the creditors’ only prospect of a distribution in the liquidation will be extinguished; thus, it is not in the commercial or economic interests of the creditor class (or in the interests of the Applicants qua creditors) that KIL’s action should be defeated. It follows that although the Applicants are (conceded for present purposes to be) creditors, they do not have standing to apply under section 168(5) in respect of the Liquidators’ decision to assign the Outbound Claims to KIL – as it was put by Michael Green J in Nero Holdings (see above at [51]), the Applicants in the present case have a collateral interest which transcends that of the creditor class for the benefit of which they purport to act.

73. More particularly, my reasons are as follows.

74. First, in the Commercial Court proceedings, as explained above, the Applicants have said explicitly that were the present Application to succeed, it would (on their case) “ knock out the majority of the claim ” against them, which if not withdrawn, they would seek to strike out: manifestly, that was the purpose of the Application. It was for that reason, on that basis, that they sought a stay of those proceedings pending the outcome of the Application. There has been no suggestion in the Commercial Court proceedings that the purpose of the Application was somehow to enable the Outbound Claims to be re-assigned by the Liquidators but on commercially more advantageous terms.

75. Second, as I have explained, in relation to standing, the Applicants’ case was that by virtue of the Assignment Agreement, the Liquidators “ enabled ” the Inbound Claims (which without the assignment were valueless) and thus aligned the interests of the Liquidators with those of KIL rather than those of the Company and its creditors – that was also the essence of their conflict argument in respect of alleged perversity. Their position was “ not solely that the [Assignment Agreement] was perverse, but that it is perverse combined with the decision not to defend the Inbound Claim ". In other words, their case was that qua creditors, in common with all other members of the creditor class, they had standing to complain about the Assignment Agreement because its effect was to encourage, or to make possible, worthwhile and potentially profitable, KIL’s claims against the Company, whereas the class has an interest in defending or preventing such claims.

76. In respect of standing, the misconception in that argument was that the Company’s creditors (including the Applicants in that capacity) have no commercial or other interest in the failure or withdrawal of KIL’s claims; indeed, it is only by virtue of those claims that creditors have any prospect at all of any recovery – other than sums received under the Assignment Agreement, there are no other assets of sufficient value in the liquidation. The Applicants’ argument was therefore self-defeating; it served only to illustrate their true purpose, which was to stifle KIL’s claims against them personally, rather than to protect the Company and its stakeholders.

77. Mr Pickering sought to meet these points by suggesting that were the Assignment Agreement to be set aside, the Outbound Claims would re-vest in the Company, and still be available either to be litigated or assigned again, this time on better terms - and that securing the valuable opportunity for this much more advantageous assignment, for the benefit of the creditor class, in fact comprised the Applicants’ purpose and interest in their character as creditors. I do not accept those arguments, for reasons much the same as those relied upon by the Court of Appeal in Re Edengate ; in the circumstances of the case, they were unreal. 77.1. Were the Assignment Agreement to be set aside, certainly if the Outbound Claims were to be struck out (as pleaded by the Applicants in the Commercial Court proceedings) there would be at least the possibility of a serious limitation issue; the claims might at that point be valueless – they arose in 2017/2018. Moreover, there would be, presumably, the real prospect of orders for costs against KIL, in significant sums. 77.2. In any event, the Company itself has no financial means of litigating the Outbound Claims; its only means of realising their value was and would be to sell them. 77.3. In that regard, the Applicants themselves have never made an offer to settle the claims made against them (whether by acquisition of the Outbound Claims or otherwise); they have not suggested that were the Assignment Agreement to be set aside, they would be willing to offer payment of any substantial sum; at most it was suggested (without evidence) that the court could “ readily infer ” that they might (at least at the time of their assignment to KIL) have been willing to make some sort of offer based on the Claims’ nuisance value, and the inevitability of some irrecoverable cost; whether they would be willing to make any such payment were the Agreement now to be set aside (over 2 years after it was made and the Commercial Court proceedings began, and in the circumstances of success on this Application) is wholly uncertain. 77.4. Neither was there any evidence to suggest that a third party litigation funder would now be willing to acquire the assigned claims, whether on better terms or at all. Furthermore, leaving aside the absence of any evidence, and issues of limitation, there would be numerous other very serious obstacles to any such assignment: 77.4.1. the Outbound Claims only have value in the event of the Inbound Claims’ success – they are intended to compensate the Company for losses comprised within the Inbound Claims; 77.4.2. however, KIL (or any other person) would not pursue the Inbound Claims unless they also owned the Outbound Claims – on their own, given the Company’s impecuniosity, the Inbound Claims have no commercial value because the Company has no means of satisfying them; it follows that were they to re-vest in the Company, the Outbound Claims could not realistically be assigned to any person other than KIL unless KIL also agreed to assign to that person the benefit of the Inbound Claims; both must vest in the same person; 77.4.3. as I have said, pursuit of the Inbound and Outbound Claims in the Commercial Court is extremely expensive, in proceedings on a grand and costly scale; the stakes and the inherent risks are obvious and significant; KIL has personal knowledge of the underlying events, and has spent a good deal of time and money investigating, preparing and pursuing claims; it has shown itself to be willing and financially able to do so, and has had access to the relevant evidence; 77.4.4. in the circumstances, it is inherently implausible that an unconnected third party funder (apart from anything, without access to the relevant materials and evidence) would now be willing to investigate (at great cost) and then acquire from the Company and KIL the benefit of both the Outbound and Inbound Claims, whether at all or on terms more advantageous to the Company than those in the Assignment Agreement; in any event, that process of investigation and negotiation would inevitably take time, during which, if not in any event, the Outbound Claims would be at risk of dismissal and extinction; 77.4.5. overall, it is most unlikely, in my judgment, that in the event of the Assignment Agreement being set aside, the Liquidators would be able to negotiate better terms with some as yet unidentified litigation funder. 77.5. Furthermore, in those circumstances, there is no reason to think that KIL would offer better terms – it would have no reason to do so (even if the claims remained viable); conceivably, adverse costs orders might be made against it, further diminishing its appetite to renegotiate (or indeed, to litigate at all).

78. I do not doubt that these and perhaps other difficulties would be faced by the Liquidators and KIL; I do not seriously doubt that it is the Applicants’ purpose to cause those difficulties, in order, ideally, to bring the proceedings against them to a premature end.

79. Finally, although for present purposes the Liquidators conceded that the Applicants are creditors (in that they have a potential claim against the Company in the event that the Direct Claims succeed) those claims are contingent on the Applicants’ own prior defeat – thus, if the proceedings against them were to be brought to an end, their interests as creditors would not be adversely affected: in fact, they would no longer be creditors at all – their real interest was in extracting themselves completely from the creditor class (losing their status as creditors) rather than protecting or improving its position.

80. Accordingly, I do not accept that the Application was advanced by the Applicants in their capacity as creditors, in order to benefit themselves as such, or the creditor class generally. In my judgment therefore, for these reasons, they do not have standing. Perversity

81. In any event, even if the Applicants have standing, I am not satisfied that the decision of the Liquidators to enter into the Assignment Agreement was perverse.

82. I set out above at paragraphs [34]-[35], a summary of the Applicants’ submissions. The first and second were based on alleged defects of “ process ”, and the third and fourth on the terms and effect of the Agreement itself. Process

83. First, as to the process based submissions, I do not accept that the Liquidators acted improperly or in breach of duty either by failing to carry out any further investigation of the Claims or to market them more widely.

84. As to investigations, the circumstances were as follows. 84.1. The Company and the Liquidators did not have the money or resources required to pay for any significant investigation or advice. 84.2. On the other hand, as I have explained, KIL had its own knowledge, had access to witnesses and documents, and had spent considerable time (and money) carrying out investigations. It had already acquired claims by assignment from the Administrators, including the Inbound Claims. It had the means required to litigate, and was willing to do so. 84.3. The Liquidators knew nothing at all even about the possibility of claims until the telephone conference of 20 March 2023, when they were told something, but very little, and then in the most general terms. The suggestion that they ought at that point to have started their own (unfinanced) investigations into complex claims of which they were told and knew virtually nothing, was patently absurd; certainly, their decision not to investigate at that point was well within the bounds of their discretion properly exercised. 84.4. Similarly, having been sent the draft letters before action, their decision at that stage not to conduct their own more detailed investigation was also a reasonable one: they had no money to do so; although suggested by the Applicants, there was no reason to think that KIL would have funded the Liquidators’ independent investigations - they had absolutely no reason to do so, and it would have been expensive, and time consuming; the scale of the task – were it to have been usefully conducted by the Liquidators - was too great; it had apparently taken even KIL many months to formulate claims; in any event, it is highly questionable that investigation would have been of any real utility to the Liquidators – they concluded (correctly) that the claims were not obviously vexatious or hopeless, but to go further, in the context of claims on this scale, subject to so many contingencies, and before issue, would have been very difficult; it would also have been very time consuming, and there was plainly the possibility of a limitation bar at some point in the relatively near future – the Liquidators did not have the luxury of time in which to conduct their own independent investigations – an issue which in cross-examination, Mr Hyslop said he had held in mind; again, it was well within the bounds of their discretion, properly exercised, to decide against doing so; it was not an abdication of their duty, but a fulfilment. 84.5. In fact, the Liquidators reached the conclusion (not said to have been wrong) that the Claims were not obviously hopeless or vexatious, and that it would not therefore be wrong to assign them (and so subject the Applicants to expensive but pointless litigation, bound to fail) but would in fact be proper to do so. They reached that conclusion, according to Mr Hyslop’s evidence, which I accept, based on, and because of what they knew about the circumstances: that KIL had been involved in the relevant events; that it had access to documents and evidence which it had investigated and in respect of which it had received legal advice from solicitors and counsel; that it had formulated detailed letters before action stating claims not on their face hopeless; that it had already negotiated an assignment of the Inbound Claims with the Administrators, and that it was willing to pursue and fund expensive and complex proceedings. In those circumstances, it was reasonable to infer, as did the Liquidators, that the proposed Claims were not obviously hopeless; as I have said, it was not argued that their conclusion was wrong. Having reached that conclusion, it was for the Liquidators to seek to realise the asset on the best available terms - which brings me to the issue of marketing.

85. As to that, the Applicants’ allegation was that having failed to market the Claims more broadly - to third party litigation funders and/or to the Applicants themselves, by way of settlement - it was perverse to assign them to KIL on the terms agreed. However, essentially for the reasons that I have explained at paragraph [77] above, in connection with standing, I do not accept the premise of that argument: KIL owned the Inbound Claims already (without which the Outbound Claims were useless) - as I have said, both Inbound and Outbound Claims had to vest in the same person; KIL had personal knowledge of the case, and had committed very significant time and resources to its investigations and preparatory work; the Claims were complex and plainly subject to all manner of inherent risk; importantly however, KIL had the money and the will to litigate; time was short, and there would soon be issues of limitation; moreover, KIL had told the Liquidators that it wanted to buy the Outbound Claims – that it was in fact willing to negotiate a price (and as I have explained, that willingness comprised a variety of asset which the Liquidators were duty bound to seek to realise); although the Liquidators had been sent draft letters before action, they had been sent them on terms that they were not to disclose them to others.

86. In all of those circumstances, KIL was (and the Liquidators in fact reasonably and realistically decided that it was) the only person with whom sensibly to negotiate, which is what the Liquidators then did. The circumstances were unlike those in Re Edennote , in which there was (at the time of the challenged assignment) extant litigation, because of which it ought to have been obvious that the applicants should have been approached. Moreover, in that case, the applicants had been prepared to make a better offer, whereas in the present case, there was no evidence either that they were, or that they are now, willing to do so; at most, it was said that it might “ readily be inferred ” that some sort of payment based on nuisance value might have been offered – but there was no evidence to suggest that had the Applicants (or any other person) been approached, there would have been some sort of “ bidding war ”. Moreover, as was said in Re Faryab , there is a public interest element: liquidation ought not to be seen as a too readily available means of stifling claims which may have substance, and which merit investigation and exposure to enquiry.

87. In the circumstances, there was no basis therefore on which to conclude that it was perverse to negotiate only with KIL, or to decide to sell the Claims to it, having not negotiated with others, and without having conducted further investigations; the Liquidators exercised their discretion to adopt that course, and acted reasonably in doing so. Although it was conceded by Mr Hyslop that the Liquidators’ contemporaneous records of their decision taking were perhaps not adequate, that failure was ultimately, in this case, irrelevant: first, because the assessment of perversity is objective – the question is whether the admitted decision to assign to KIL on the terms of the Assignment Agreement was objectively perverse, regardless of the Liquidators’ own reasons; and second, regardless of the adequacy of the contemporaneous written record (which may or may not raise some regulatory matter) Mr Hyslop gave evidence which I have accepted; he has explained the Liquidators’ thoughts and processes. Substance & Effect

88. I turn then to the terms and effect of the Assignment Agreement itself, as to which the Applicants advanced arguments based on conflict and commercial substance.

89. Essentially, the argument based on conflict was in the terms explained above at paragraphs [75]-[76]: that in consequence of the Assignment Agreement, the Liquidators (contrary to the interests of the Company and its creditors) had aligned themselves with KIL and with its interests – enabling or encouraging its claim against the Company, and disincentivising any opposition to the Inbound Claims, and that it was perverse to have done so. That argument was hopeless. 89.1. First, the fact of the assignment was immaterial to the existence of the alleged conflict: both before and after, and regardless of the assignment, the Company had an interest in the success of the Outbound Claims (its only potential source of wealth) which was wholly contingent upon the success of the claims to which it was itself exposed (the Inbound Claims, which exist regardless of the assignment); accordingly, the assignment to KIL was not the source of the alleged problem. 89.2. Second, in any event, for the same reasons, no such problem exists, because the Company’s creditors have no economic interest in defending the Inbound Claims; even if those claims were to succeed, and the Outbound Claims fail, the Company’s creditors would not be prejudiced; the Liquidators have not acted contrary to their interests. 89.3. Third, the Applicants’ complaints in respect of process (and indeed, the basis of their case in respect of standing) were to the effect that in other circumstances, the Liquidators would have assigned the Outbound Claims but on more advantageous terms – in other words, for a better price; that complaint was essentially inconsistent with (and undermines) the suggestion that the fact of the assignment to KIL created a position of conflict; in other words, realistically (unless the price was fixed, regardless of the outcome of the litigation, which was most unlikely) any assignment would have produced the stated effect, because the value of the Outbound Claims (and so their likely purchase price) depends, amongst other things, on the success of the Inbound Claims. Moreover, as I have said, in circumstances where the Company could not afford to litigate the Outbound Claims, it would likely have been a breach of duty not to seek to assign them – assignment was the only means of realising their value. 89.4. Fourth, the Applicants’ own position in the Commercial Court proceedings has not in fact been prejudiced in substance by the assignment: in any event, the Liquidators simply do not have (anything even approaching) the knowledge and resources required to defend against the Inbound Claims, and they are under no obligation to do so; the Applicants however do have an interest in defeating the Inbound Claims (and the means to do so) and they have accordingly raised defences to those Claims in aid of their own defence; the Liquidators have acted fairly to allow them to do so – including by the provision of the documents (up to 8 March 2018) that had been provided to KIL by the Administrators, and by seeking assurances from KIL that it would not seek judgment in default against the Company.

90. I therefore reject the argument based on alleged conflict.

91. As to the terms of the Assignment Agreement, it was argued for the Applicants that the decision to assign to KIL was - on the commercial terms in fact negotiated - perverse, because the prospect of any ultimate financial benefit to creditors was “ illusory ”, despite having enjoyed a strong bargaining position. Again, in my judgment, for various reasons, that argument was hopeless. 91.1. First, it was an argument raised for the first time orally, at the hearing, not in evidence; even in the Applicants’ skeleton argument it was merely said that it is “ quite likely that creditors will receive no benefit ”, and that it is “ unclear what … will be left ... for distribution ”, not that there is no prospect at all, or that any such prospect was nothing more than an illusion. In the event, the Liquidators adduced no evidence to meet the argument. I agree with Ms Kyriakides that it was not an argument that could fairly be advanced. 91.2. Second, the argument was in any event an impossible one: the Liquidators’ conduct of the commercial negotiations with KIL was not in itself closely interrogated or criticised, and whilst of course, as in every case, it is perfectly possible to conceive in principle of some other more beneficial arrangement having emerged from those (or other hypothetical) negotiations, there was nothing to suggest, no evidential basis upon which to find, that any such arrangement was in fact available, or negotiable with KIL, let alone that it was somehow “ perverse ” of the Liquidators to have failed to strike a better deal. Mr Hyslop conducted the negotiations professionally and competently, and the Assignment Agreement was their outcome; he said that whilst true that he had a strong bargaining position, in that he had something which he knew KIL wanted, he did not wish to overplay his hand; in any event, he was duty bound to realise, if he could, the asset – duty bound if possible to reach some sort of agreement; the theoretical possibility that another person might have negotiated differently, or reached a different or better agreement, is not in itself enough – that is simply the way of business; the Liquidators were acting within the broad scope of their discretionary powers. 91.3. Third, the argument that the prospect of benefit is a chimera, such that it was perverse to sell on the agreed terms, depended on all manner of unpredictable contingencies, including the merits and outcome of the proceedings, the means by which that outcome is reached and when, the amount of the parties’ costs, and of the costs and expenses of the Company’s own liquidation. It is of course possible that the outcome, and in particular the costs, will be such that the Company and/or its creditors will receive nothing at all, or not much, but (i) in that case, it would seem unlikely that a much better deal could have been negotiated, since it assumes that the costs of litigating are so great as to consume in large measure the assets available to meet a judgment; and (ii) in any event, the fact that on certain unfavourable assumed bases or outcomes, the Company and/or its creditors would receive nothing, does not render perverse the decision to enter into the assignment at the time when it was made, and as at which time it must be assessed; the outcome was, at that time (and still is), singularly unpredictable and unknown, as is the defendants’ ability to meet any judgment beyond the D&O Policies. Mr Pickering suggested that in those circumstances, it was perverse to agree to the receipt of a small initial sum (£1), and to make substantial benefit dependent on the uncertain outcome. As to that, Mr Hyslop explained that payment of any greater initial sum was likely only to have benefitted the Liquidators by payment of their costs, expenses and remuneration; his preference was to negotiate a larger final sum albeit contingent on the outcome; that was a reasonable approach to take.

92. Ultimately, the test of perversity is a formidable one. In this case, for the reasons I have explained, the Applicants do not have standing to complain, and in any event, the Liquidators’ decision to enter into the Assignment Agreement was not perverse. Accordingly, the Application is dismissed. Dated: 28 January 2026