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Why The Court Removed A Liquidator From Office is a post about Redhouse Holdings Limited v Johnson CLAIM NO. BVIHCM 2010/0138.

The applicants in this matter sought the removal of Mr Johnson from office. But why the court removed a liquidator from office was a rather lugubrious case.

When examined the Court was seemingly critical of a wide range of matters. Perhaps the Court considered the range sufficiently wide that although it noted it would be slow to remove its own officer, it felt it relevant to do so in this case. There is reference to alleged intimidation, allegations, intemperate behaviour, lack of discretion and so on.

Reasons Why The Court Removed A Liquidator From Office

In summary, the Court gave the following four reasons which are fleshed out in more detail below from the judgment:

(1) Since Mr. Johnson has not been forthright with the Court in numerous respects, the Court no longer has confidence that he will faithfully discharge his duties as an officer of the Court. This concerns, in particular, the merits and prospects of recovery in respect of the various putative claims Mr. Johnson identifies. It also concerns other matters, which
I have identified, including his accounts of the unfortunate restaurant incident in September 2013. Mr. Johnson’s two accounts thereof could not have been more different. This seriously undermines the Court’s confidence in Mr. Johnson’s reporting of events and the way he has portrayed matters pertaining to the liquidation in general. These instances, taken together, indicate that Mr. Johnson’s lack of full and frank disclosure is systemic. It is not in the interests of a liquidation for a liquidator to be permitted by the Court to incur chargeable time on unproductive workstreams, as this would directly affect the amount of any distribution at the end of the liquidation. Mr. Johnson has shown no discernment whatsoever in this regard. He paints apparently very difficult claims as strong, regardless of any proper analysis of their merits, in an effort, it seems, to continue to have as wide as possible a platform on which to continue to work as he pleases.
(2) Whilst Mr. Johnson has been less than forthright with the Court, he has demonstrated a history of lack of discretion, commenting publicly and airing details concerning the affairs pertaining to OVL and the liquidation in the public area. The Court is thus moved to protect its processes by ending Mr. Johnson’s appointment as liquidator in this liquidation.
(3) Mr. Johnson has allowed his feelings and passions to have the upper hand over his reason. Mr. Johnson has now, for many years, taken a partial view in relation to this liquidation. It is readily apparent that Mr. Johnson’s presentation of evidential matters upon this application was heavily aimed at persuading the Court not to remove him. Much of Mr. Johnson’s evidence was self-serving. It is readily apparent that he is 70 prepared to go to considerable lengths to retain the platform of this liquidation so that he
can continue his campaign against Lord Ashcroft.
(4) Mr. Johnson has shown himself tone-deaf as to conduct that an officer of the Court should avoid. The intimidation and attempts to influence public opinion described above are examples of this. It is thus not the case that the Court can have much, nor indeed any, optimism that Mr. Johnson will change his ways. Whilst Mr. Johnson, through his Queen’s Counsel, admitted to making ‘mistakes’ in relation to the liquidation, such errors
appear to concern only the JLs failure to obtain this Court’s sanction before seeking sanction for court proceedings in the TCI and his use of profane language during the restaurant incident in September 2013. Mr. Johnson appears completely unapologetic about everything else. That does not afford the Court with any reassurance that Mr. Johnson will suddenly become forthright, dispassionate, objective and eschew all sharp
. The Court regrets to say that it is not reasonably confident that Mr. Johnson will live up to the required standards in future in this liquidation.

Alleged Intimidation – Why The Court Removed A Liquidator From Office

Mr Johnson sought information from a Mr Breeze, who was a former financial officer of the company in liquidation. However, Mr Johnson is said to have referred to information in an affidavit as being “short on information and pretty much useless” and then suggested to Mr Breeze’s solicitor, “[h]opefully at any meeting [Mr. Breeze] will not be suffering from amnesia“.

Further, the court said:

Mr. Johnson presented the allegation of causing or permitting companies to have traded whilst insolvent as established fact. At the very least Mr. Johnson should have acknowledged that no finding of a court of law in respect of such a serious allegation had yet been made. Mr. Johnson’s purpose, from that correspondence, appears to have been to press further responses and information from Mr. Breeze through intimidation.

There appears to have been threats of referring Mr Breeze and his solicitor to their regulators but this did not happen.

In a nutshell the Court had this to say about the nature of Mr Johnson’s communications:

Communications from an officer of the Court should always be respectful, using professional language, and they must present matters fairly. From what I have seen, Mr. Johnson’s communications with Mr. Breeze and Mr. Spragg fell short of this.

Server Sabotage Allegations – Why The Court Removed A Liquidator From Office

Mr Johnson had apparently repeatedly stated certain servers had been sabotaged but on the Court’s examination of the matter it had this to say which did not endorse the position of Mr Johnson:

This suggests that Mr. Johnson has been distorting and exaggerating server access difficulties, and that it is not in fact the case that such difficulties caused the JLs not to have access to OVL’s records. Whilst I am not in a position to go so far as to find that this is what Mr. Johnson was doing (although, from the material available to me, which may be incomplete, it looks like it is), it is unsatisfactory that Mr. Johnson should not explain fully and frankly why he maintains that the servers were ‘sabotaged’, without qualification. That is particularly unsatisfactory, given the prejudicial implication conveyed by that allegation, of nefarious and deliberately obstructive acts on the part of those that Mr. Johnson portrays as controlling the OVL group, and the fact that Mr. Johnson repeats the allegation over and over again. This has all the appearance of Mr. Johnson exploiting the allegation with a view (1) to extracting maximum prejudicial effect against OVL related persons and/or (2) using this as an over-arching excuse for not succeeding in mounting claims more successfully.

The ‘Panorama’ Television Programme And Newspaper Contributions

The Court had this to say about Mr Johnson’s involvement in a Panorama interview in which he discusssed the liquidation:

Mr. Johnson’s responses here indicate that he was freely discussing the affairs of the liquidation in the public domain, and indeed putting into the public domain information from the liquidation. It does not matter that such information, in the shape of the facsimile documents, had somehow already been provided to the programme team, an act that Mr. Johnson denies he himself did, and thus that it might already have been in the public domain. What we have here is Mr. Johnson deliberately fostering the narrative that Lord Ashcroft remained in control, using alleged passages from facsimiles to bolster that view. The Court must ask itself why Mr. Johnson was doing so. Why was Mr. Johnson so gushing with his information and interpretation of documents, and in such a public setting? This runs directly contrary to the discretion and self-restraint an officer of the Court should exercise in the performance of his duties...His giving of detail is not so much informative but performative, in the sense of being a polemic against BCB and related entities and persons. Its effect is to ‘name and shame’ BCB and connected persons and entities, and to disparage their integrity. This shows an undue lack of discretion and proper restraint in discussing matters pertaining to a liquidation in public.

Alleged Intemperate Behavior – Why The Court Removed A Liquidator From Office

This was highlighted by a piece of correspondence written to a QC that said “I have no idea who you are” and in the same email, Mr Johnson referred to a Mr “Hashcroft“. It seems the Court was unimpressed:

In my respectful judgment, two aspects stand out from Mr. Johnson’s response. First, it falls short of due professional etiquette to write to a lawyer, let alone one of Her Majesty’s Counsel, in terms of ‘I have no idea who you are…’.
[136] Secondly, it is disrespectful and causes offence to misspell the name of another, in particular in formal communications. It is highly disrespectful and offensive to add, or permit the addition of, a pejorative inference through such misspelling. ‘Hash’ is, according to the Cambridge Dictionary, an informal form of the word ‘hashish’. ‘Hashish’ is described in that dictionary as ‘a drug, illegal in many countries, made from the cannabis plant and usually smoked’.5 ‘Hashcroft’ tends to suggest that Mr. Ashcroft takes that narcotic substance, although less contemptuous and offensive, but still disrespectful, connotations (such that he makes a ‘hash’ or mess of things) are also possible.

Restaurant Incident

Then there was a restaurant incident that the Court referred to as follows:

… it appears that Mr. Johnson provoked a confrontation by making threats in respect of at least Mr. Ashcroft’s father Lord Ashcroft. Hot words were then traded between Mr. Johnson and Mr. Ashcroft’s companion (but not by Mr. Ashcroft) and others in the restaurant separated the protagonists and de-escalated the situation. Against his own contemporaneous account, Mr. Johnson’s later explanation to the Court rings hollow. It is incoherent, because it omits the key element that he had started the confrontation, and with a threat against Mr. Ashcroft’s father. Lack of candour with the Court is one of two aspects that constitute the Court’s main interest in this email.
[149] I have taken into account that Mr. Johnson’s email described himself as ‘a bit [drunk]’ as he wrote that message. This does not, in my view, render the account given there unreliable. To the contrary. It has the ring of truth. The account has a direct freshness to it, devoid of artifice (other than a perhaps somewhat swaggering account of the drama of the evening and Mr. Johnson’s own historical prowess as a scrapper). I am more inclined to believe that version of events than the blanched account he proffered the Court several years after the event, in which he portrayed himself as a blameless victim. [150] The second aspect of main interest is that this email provides an insight into Mr. Johnson’s thinking concerning Lord Ashcroft. Mr. Johnson appears to have formed the intention of bringing about Lord Ashcroft’s downfall and of pursuing this goal in an ever more determined fashion, to the point that Mr. Johnson himself recognized that this was becoming an obsession. A liquidator as an officer of the Court should maintain a personal disinterest and a professional, dispassionate approach to the performance of his duties. Mr. Johnson appears here to have embarked upon a personal campaign to bring about Lord Ashcroft’s downfall

Lord Ashcroft Questionnaire

The Court referred to a lengthy questionnaire that Mr Johnson afforded Lord Ashcroft 21 days to reply to. To say this questionnaire was lengthy might even appear a little bit of an understatement. It was apparently some 750 questions over 62 pages, covering a period over 10 years. The Court was critical of the stylistic nature of some of the questions and the timescale afforded.

The Court’s Findings Giving Rise To Liquidator Removal

The Court was concerned about the following points:

  • a lack of candour with the Court in relation to potential claims by seemingly not highlighting all sides of the argument and merits
  • distortion and exaggeration by Mr Johnson about the servers being sabotaged
  • seeking to exonerate himself in respect of the restaurant incident
  • the Court suggested this showed a pattern of conduct
  • suggestions of partiality for example in apparently accosting Mr Andrew Ashcroft in a restaurant and suggesting he was going to be ‘taking out’ his father
  • the intimidation in threatening to report Mr Breeze and his solicitor to their regulators

In relation to the threat to report to the regulators of Mr Breeze and his solicitor, the Court said was a grave matter and appears to have even gone further:

First, to assert something (that he would report them) which is not true is to lie; it is dishonest.

The addressee of such threats would have reason to fear the trouble at least such a complaint could cause, however unfounded or misplaced. The addressee cannot have confidence that those within the regulatory bodies would see such a complaint as groundless and that it would be dismissed without more. Such complaints are literally a matter of professional life and death. They can have catastrophic financial and personal consequences for the hapless subject and his family. That may be so even if they do not proceed. The mere fact of a complaint may need to be declared to an nsurer or potential insurer, and that can also be held against a professional in respect of a career move, a promotion or other professional accolade or form of advancement. Thirdly, we should not lose sight of the purpose of professional regulatory rules and sanctions. Ultimately, it is to protect consumers of the professional services and for upholding the integrity of a particular profession. Whilst there may be circumstances where one professional could and should properly refer another to a regulatory body, to use the threat of a complaint merely for the ulterior motive of forcing answers to be given to requests for information is in principle an abuse of the complaints process. [276] Such a practice is therefore not proper for a liquidator as an officer of the Court to undertake.

The Court made reference to attempts apparently to influence public opinion as follows:

In respect of the first probable reason, even though negative comments in the press about a person or entity might not be unlawful or illegal, when combined with an intention to prompt the target to ‘buy off’ the commentator, this is a type of blackmail. It is a sharp practice. As such, it is not becoming to an officer of the Court to indulge in this. [281] In respect of the other three reasons, an officer of the Court who succumbs to these fails to be dispassionate. He allows his personal feelings to rule him, creating a fundamental conflict between fulfillment of his duty as an officer of the Court and his own aims and personal sentiments.

Disclaimer: This post Why The Court Removed A Liquidator From Office is not legal advice and not to be relied upon as such. It is provided for information purposes only.

Elliot Green

Licensed Insolvency Practitioner & Chartered Accountant. We Know Insolvency Inside Out.