Court Appoints An Additional Liquidator On Application Of Contingent Creditor

This post is not the ringside seat of the matter when the Court appointed an additional liquidator, it only fleshes out some of the highlights. The full monty is obtainable here NOAL SCSp & Ors v Novalpina Capital LLP & Ors [2025] EWHC 54 (Ch) or here.

The front row of the (Court’s) stalls appeared awash with KCs, suggesting it is safe to assume the matter is of significance.

In this matter, Robert Horton, assisted this members voluntary liquidation by being appointed by the Court as the additional liquidator.

Cases involving the appointment of an additional liquidator (sometimes referred to as a conflict liquidator) and or removal of a liquidator are usually fascinating. 

A key issue was that the application submitted the company Novalpina Capital LLP was insolvent by 2 September 2024.

Allegations Against Current Liquidator

It seems there were allegations made against the current liquidator which the Court referred to as follows:

There are some very serious allegations made against Mr Murphy relating to his conduct as liquidator including (1) the company, acting through Mr Murphy, entered into a debenture on 7 October 2024 with the Fifth Respondent ( OBP ) whereby all the company’s assets, including its documents and records were charged to OBP by way of security , ‘for monies advanced to Mr Murphy in accordance with the deed of indemnity’, (2) a failure to convert the MVL into a CVL by reason of the insolvent position of the company and (3) copying the books and records and providing them to Mr Kowski; (4) Mr Murphy entering into a confidential funding agreement with OBP which stated as its purpose that it was to enable Mr Murphy to conclude the liquidation before it could be converted into a creditors’ voluntary liquidation ( CVL). I should add that the Applicants assert that OBP is a vehicle owned and controlled by Mr Kowski. The Applicants also assert that in view of the actions of Mr Murphy, he has placed himself in a position of serious conflict and this is part of the application seeking his removal. Mr Murphy has not responded at this stage by way of evidence filed from him to the serious allegations, but he denies any wrongdoing and is defending the application to remove him.

Jurisdiction For The Court Appoint Another Liquidator

A key point is whether the Applicants had standing as a creditor to make the application in the first place.

The judge said it was clear that the Applicants did have standing as a contingent creditor by 15 November 2024 and therefore has a legitimate interest in the application.

The battleground then focused on whether the Court had jurisdiction to appoint another liquidator on an interim basis if the existing liquidator was not performing or capable of performing due to a conflict:

It does seem to me that a liquidator who is conflicted or potentially conflicted is arguably not performing his functions because it is no part of his functions to act in a way which creates a conflict. That is not the same point as that made by the Respondents, that the conflicted liquidator can still carry out his functions. In my example, the alleged dishonest liquidator can also still carry out his functions, but the court would clearly seek to appoint an additional liquidator to protect the position of the creditors and their interests pending the full hearing.

…

…in my judgment, Comet Group stands as authority that the court has jurisdiction to appoint an additional liquidator. 

…

In conclusion, in my judgment, the court does have jurisdiction to appoint an additional liquidator. This jurisdiction arises pursuant to section 108 IA 86 as set out in Clements v Udal. In my judgment, in a case where a serious conflict has been raised, it is arguable that the current liquidator may be unable to carry out his functions. The ability to appoint a ‘conflict liquidator’ under this provision also appears in Re York Gas even though I accept less weight should be given to that case for the reasons set out above. Furthermore, the jurisdiction is also exercisable pursuant to section 112 IA 86 as exemplified in Comet Group. That was another case relating to what was alleged to be serious conflicts which notably were not determined by the Judge before he gave the directions to the current liquidators to apply for the appointment of an additional liquidator. His reasoning is set out clearly in paragraph 118 of his judgement which I gratefully adopt. This demonstrates that the exercise of the jurisdiction does not require the facts of each case to be determined before the court can exercise the jurisdiction. In my judgment, the court has an inherent jurisdiction to appoint an additional liquidator in so far as particular cases do not fall under section 108 or section 112. It seems to me that the example I gave to counsel is apposite here. The court’s inherent jurisdiction enables the court to appoint an additional liquidator in circumstances where such an appointment is necessary and appropriate by way of interlocutory relief in order to protect those with a legitimate interest. On the facts of the case before me, as I have already set out, as a contingent creditor, the Applicants seek relief so as to protect their position as creditors of what they assert is an insolvent company and/or enable their claim to be dealt with in the event that the company is solvent. In other cases, such as Comet Group, the appointment of an additional liquidator can also be viewed as being made under the court’s inherent jurisdiction for the reasons set out in paragraph 118 of the judgment. I do not consider that the existence of such an inherent jurisdiction is contradicted by section 108 or 112 IA 86. An inherent jurisdiction is not restricted to only cases where the court has a supervisory jurisdiction over the relevant office holders, such as compulsory liquidations. In both compulsory liquidations as well as voluntary liquidations, there is a power to apply to the court to remove and replace a liquidator. In all types of liquidations, the court may well consider that some interlocutory relief is necessary, appropriate and in the interests of justice pending the determination of the application, or as in Comet Group, to be able to deal with a conflict issue.