High Court confirms jurisdiction to appoint additional liquidators: what does Rawbank SA v Banfield mean for stakeholders?

The High Court has confirmed that it has clear jurisdiction under the Insolvency Act 1986 to appoint additional liquidators during an existing compulsory liquidation. The judgment in Rawbank SA v Banfield provides welcome clarity for creditors and stakeholders concerned about the progress of a liquidation or the conduct of current office-holders. It confirms that the court can intervene where necessary to protect the integrity of the process.

At a glance

• The High Court confirmed it has statutory power to appoint additional liquidators where the circumstances justify it.
• Creditors can apply to the court if they believe the existing liquidator cannot properly carry out all the required functions.
• The judgment highlights the court’s supervisory role in compulsory liquidations under the Insolvency Act 1986.

What was the dispute in Rawbank SA v Banfield about?

The case concerned an existing compulsory liquidation in which Rawbank SA, a creditor, raised concerns about the conduct and progress of the liquidation. Rawbank believed that the appointment of an additional liquidator was necessary to protect creditor interests and ensure that all assets and potential claims were properly investigated.

• The respondent liquidators opposed the application, arguing that the court did not have jurisdiction to make the appointment in the way the creditor proposed.
• This raised an important procedural issue: when, and on what basis, can the High Court appoint additional liquidators after a liquidation has already begun?

The matter came before the High Court, which examined the statutory framework in the Insolvency Act 1986 and the Insolvency (England and Wales) Rules 2016. The court ultimately confirmed that it does have the power to make such appointments when justified, in this case an actual (or at the very least a perceived) conflict of interests on that part of the liquidators.

FWJ Takeaway: The dispute centred on the court’s ability to intervene in an ongoing liquidation. The judgment confirms that stakeholders can seek additional liquidators where there is a legitimate need such as a conflict of interests.

What powers does the High Court have to appoint or add liquidators under the Insolvency Act 1986?

The court’s power to appoint liquidators is set out primarily in section 108 of the Insolvency Act 1986. This provision allows the High Court to appoint, remove, or replace liquidators if it considers the decision necessary for the proper conduct of the liquidation.

In a compulsory liquidation, the court retains ultimate supervisory authority. While creditors may vote on the liquidator’s appointment at the outset, the court can intervene at any time if concerns arise about the progress of the liquidation or the conduct of the office-holders.

The court’s powers include:

• appointing additional liquidators alongside those already in office;
• removing a liquidator who is no longer able to perform their duties;
• replacing a liquidator entirely;
• directing how liquidators should carry out certain aspects of the liquidation.

The flexibility of these powers ensures that stakeholders have a direct route to the court if serious concerns arise.

FWJ Takeaway: The court has wide statutory powers to safeguard the liquidation process. Section 108 allows intervention where necessary to ensure proper administration of the estate.

Why did the court decide that appointing additional liquidators was appropriate?

In Rawbank SA v Banfield, the High Court considered whether additional liquidators would improve the overall conduct of the liquidation and protect creditor interests. Several factors supported the decision.

• First, creditors had expressed genuine concerns about the progress of the liquidation. The court accepted that appointing additional liquidators could provide additional expertise or resources.
• Second, the court reiterated that its supervisory jurisdiction exists to ensure liquidations are conducted fairly, transparently and efficiently. If adding further liquidators can assist in issues such as removing perceived conflicts of interests the court is entitled to intervene.
• Third, the judgment emphasised that appointing additional liquidators does not imply wrongdoing by the existing liquidator. Instead, it can simply reflect the scale or complexity of the work required, or indeed potential conflicts of interests.

By confirming that such appointments are permissible, the court provided clarity for creditors who may need reassurance that all potential claims, including possible claims against directors, are examined thoroughly.

FWJ Takeaway: The court will intervene where justified to ensure an effective liquidation. Additional liquidators may be appointed to enhance capacity, expertise or oversight.

When should creditors or stakeholders consider applying for additional or replacement liquidators?

The judgment provides a useful framework for creditors or other stakeholders considering whether to apply to the court.

An application may be appropriate where:

1. There is concern about the progress of the liquidation.

If investigations appear delayed or incomplete, stakeholders may request additional support.

2. The estate includes potentially complex assets or claims.

Specialist expertise may be needed to pursue litigation, recover assets or investigate transactions. At FWJ we have a team dedicated to this type of work.

3. There is a perceived conflict of interest.

Where an existing liquidator may have a conflict, for example, involving former advisers, the court may consider a new appointment.

4. Creditors disagree strongly with the direction of the liquidation.

If creditor confidence is undermined, adding or replacing a liquidator can restore trust.

5. Substantial claims against directors or third parties are identified.

Creditors sometimes seek new office-holders where significant claims against directors need pursuing. FWJ’s page on claims against directors offers more guidance on these issues.

These applications require careful formulation and evidence. The court will not grant an order lightly. It must be satisfied that the appointment will genuinely improve the liquidation.

FWJ Takeaway: Creditors and other stakeholders can apply for additional liquidators where there is a clear, evidence-based need. The court will look carefully at the justification for intervention.

What does this judgment mean for directors, creditors and existing liquidators?

The court’s decision has practical implications for all stakeholders involved in compulsory liquidations.

• For creditors: The judgment confirms that creditors can seek court assistance where they are concerned about the conduct or progress of a liquidation. This provides an important safeguard in complex or contentious cases.
• For directors: Directors should understand that liquidator appointments can change if creditors push for further investigation or believe that additional expertise is needed. This can be particularly relevant where claims may be brought against former directors.
• For existing liquidators: The decision does not undermine their authority. Instead, it confirms that the appointment of additional liquidators can complement existing arrangements. Liquidators remain subject to the court’s supervisory role.

For the insolvency system as a whole:

The judgment reinforces the court’s essential function in ensuring liquidations are carried out fairly, effectively and in the best interests of creditors as a whole.

FWJ Takeaway: The decision underlines the court’s willingness to intervene where needed. It is a reminder that liquidation is a court-supervised process designed to protect creditors’ collective interests.

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