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Balancing Insolvency Practitioner Ethical Considerations

An office-holder may have to consider the arguably competing interests of various stakeholders in the insolvency process. On the one hand a creditor may seek that the office-holder expeditiously takes action to address matters they consider need to be taken. An example might be to bring legal proceedings against Directors to obtain compensation. On the other hand the officer-holder must take a step back and ensure he or she acts in the interests of the creditors as a whole.

An office-holder has a duty to act with robustness of purpose. In the case of Sisu Capital Fund Ltd and others v Tucker [2005] All ER (D) 200 (Oct)  which amongst other things considered the removal of an office-holder, Mr Justice Warren made the following notable statements in his judgment:

“…the court expects any liquidator to be efficient, vigorous and unbiased in his conduct of the liquidation and should have no hesitation in removing him if satisfied that he has failed to live up to those standards unless it can reasonably confidently be said that he will live up to those requirements in the future”

Sisu Capital Fund Ltd and others v Tucker [2005] All ER (D) 200 (Oct)

Mr Justice Warren appeared to be echoing some of the comments of then Neuberger J in AMP Music Box Enterprises Ltd v Hoffman [2003] 1 BCLC 319 where it was said:

“…they should conduct in a vigorous, effective and independent manner”

Neuberger J in AMP Music Box Enterprises Ltd v Hoffman [2003] 1 BCLC 319

The requirement for robustness of purpose is notably caveated in the context of the office-holder needing to act independently and in the interests of the creditors as a whole, not in the interests of one creditor in isolation. In the matter of Re NG (A Bankrupt) [1998] 2 FLR 386 Mr Justice Lightman put it this way:

“A trustee in bankruptcy is not vested with the powers and privileges of his office so as to enable himself to accept engagement as a hired gun. His duty is to exercise his powers and privileges for the benefit of the creditors for whom he is appointed a trustee.”

Re NG (A Bankrupt) [1998] 2 FLR 386 Mr Justice Lightman

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Author: Elliot Green
Last Updated: June 12, 2024

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