Administrator removed from pre-pack


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The court has removed an administrator of a firm of solicitors who was closely involved in the negotiations for the pre-pack administration on the grounds that it was difficult for him to conduct an independent review in the face of a challenge by major creditors.

In Clydesdale Financial Services v Smailes [2009] EWHC 1745 (Ch) a firm of solicitors which specialised in personal injury claims and was financed by Clydesdale had become insolvent. The principal obtained advice from the insolvency practitioner who concluded that the best solution would be a sale of the firm’s work in progress, and accordingly a pre-pack contract was entered into with another firm.

The bank objected to the terms of the sale, and in particular the valuation of the work in progress. They argued that the matter required an independent review which would require the removal of the administrator.

The court accepted that there were legitimate concerns that required an investigation by an appropriate office holder, and it would be difficult for the administrator to conduct such an independent review. The court also took into account that the majority of the creditors supported the application. The court also declined to strike out an application by the bank for equitable compensation and damages.

Paul Howcroft, Partner, Fladgate LLP (phowcroft@fladgate.com)

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