Monneo Ltd, Re [2025] EWHC 2818 (Ch)

[2025] EWHC 2818 (Ch)Case No CR-2023-002766
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Venue 7 Rolls Buildings, Fetter Lane, London
EC4A 1NL
Date of hearing: 16 October 2025
Before
HIS HONOUR JUDGE DAVIS-WHITE KC(sitting as a Judge of the Chancery Division)IN THE MATTER OF MONNEO LTD (IN SPECIAL ADMINISTRATION)IN THE MATTER OF THE PAYMENT AND ELECTRONIC MONEY INSTITUTION INSOLVENCY REGULATIONS 2021IN THE MATTER OF THE PAYMENT AND ELECTRONIC MONEY INSTITUTION INSOLVENCY (ENGLAND AND WALES) RULES 2021
On the application of:
DANIEL CONWAY, PAUL ALLEN and DAVID HUDSON
(In their capacity as Joint Special Administrators of Monneo Ltd
(in Special Administration))
MR WILLIAM WILLSON for the Applicants
Instructed by Simmons & Simmons LLP
APPROVED JUDGMENT
Digital Transcription by Marten Walsh Cherer Ltd
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Date 2025-10-16
[1]I have before me an application notice dated 18 June 2025 by the joint special administrators of Monneo Limited. Monneo Limited (the “Company”) is an authorised payment institution regulated by the Financial Conduct Authority under The Payment Services Regulations 2017 (the “PSR 2017”). By this application, the Joint Special Administrators (“JSAs”) have applied to the court pursuant to The Payment and Electronic Money Institution Insolvency Regulations 2021 (the “2021 Regulations”) and The Payment and Electronic Money Institution Insolvency (England and Wales) Rules 2021 the “2021 Rules”) for, in broad terms, the approval of a distribution plan, the fixing of a hard bar date (which I will explain, but is essentially a date by which claims must be made and if they are not made, they can be disregarded in the distribution process), thirdly, an ancillary order limiting access to the court file under Rule 189 of the 2021 Rules, and finally an order for costs.[2]One application, or ancillary application, that is within the application notice but is not pursued is for permission to make an interim distribution notwithstanding that there might be an appeal against a decision of the JSAs with respect to a claim brought by a relevant person with a claim to relevant funds.[3]The evidence in support comprises three witness statements from Mr Conway, one of the JSAs, dated respectively, in the case of the first two witness statements, 18 June of this year and, as regards the final witness statement, 14 October. The first witness statement sets out the evidence supporting the application. There is a small part of it (or an exhibit to it) which is the subject of the application under Rule 189.[4]The second witness statement is one to which an order under Rule 189 is sought. It deals in large part with certain steps that the JSAs have had to take in relation to regulatory reports and the JSAs’ investigations in connection with such matters. The relevance of that information for present purposes is in part to explain the delay which has taken place since an administration order was made and a distribution plan was proposed but also to explain in part the costs that have been incurred by the JSAs and which form an element which I will come on to in the distribution plan.[5]As regards the third witness statement, that is an updating witness statement to provide the court with relevant information following the date of the application.[6]The Company, as I have said, is an authorised payment institution which was incorporated on 29 March 2016 under the name “E-Pay International Limited”. It adopted its current name on 10 February 2021. The Company was established as a specialist money transfer business in the e-commerce space to provide a more efficient means of remitting and disbursing funds received from multiple sources. However, the business evolved and from 2019 it was also authorised to execute payment transactions. In broad terms, prior to entering special administration, it provided payment solutions to corporate customers in the e-commerce sector through a dedicated banking platform and related services comprising virtual IBANs and user interface to manage incoming and outgoing domestic and international payments and business to business payments. In that respect, it maintained outsourcing arrangements with a sister company in the Czech Republic as well as having a separate arrangement with an entity in Bulgaria.[7]Before me is Mr William Willson on behalf of the applicants has appeared instructed by Simmons & Simmons LLP. I am grateful to him for his extremely helpful submissions both written and oral and also, of course, to the solicitors and JSAs for the helpful way in which the evidence has been put together and also been helpfully presented.

Background

[8]The Company, as I have indicated, has entered special administration. The background to that is that on 5 April 2023 the Financial Conduct Authority (“FCA”) issued a first supervisory notice to the company based on concerns about the conduct of its former Chief Financial Officer, a Mr Harfield. Mr Harfield had been a defendant in a number of multiple interconnected court cases and had been made subject to a worldwide freezing order and was also subject to a prison sentence for contempt of court. Subsequent investigations have revealed that in the period from approximately January 2019 to April 2023 more than €8.7 million in unauthorised payments had been made by the Company to Mr Harfield or to entities connected with him.[9]Once the first supervisory notice had been issued by the FCA, the Company was unable to comply in terms of the conditions required for the carrying on of the business. It was realised that the Company was insolvent. This was due in large part if not entirely to the missing monies that I have referred to and the result was that the directors applied to the court to place the Company into special administration.[10]On 30 May 2023 a special administration order was made by ICC Judge Prentis and the JSAs were appointed as the special administrators.[11]Upon appointment, the JSAs carried out investigations. They ultimately determined to maximise recoveries to customers by focusing their time and resources on the recovery of the safeguarded funds and the other key assets in the estate with a high likelihood of recovery, there being obvious problems which quickly emerged in relation to ability to recover sums from Mr Harfield, not least the high costs of doing so and the risks that nothing, in fact, would be recovered.

The Regulatory Regime

[12]I turn to the regulatory regime. In the case of Re Rational Foreign Exchange Limited (in Special Administration) [2025] EWHC 1958 (Ch) Mellor J helpfully summarised the background to both the authorised payment institution regime and to the main relevant insolvency provisions at paragraphs [30] to [43] as follows: “[30] Payment services businesses in the UK are subject to the PSR 2017 which were made to transpose the second EU Payment Services Directive (‘the Payment Services Directive II’) into domestic law. The PSR 2017 implemented the requirements of the Payment Services Directive II in England and Wales. [31] Regulation 23 of the PSR 2017 provides that an authorised payment institution must safeguard relevant funds (relevant funds being defined in Regulation 23(1) as being funds received for the execution of a payment transaction). (In Kicks 1 This was a reference to the first witness statement of one of the joint special administrators in that case, Kristina Kicks. these are referred to as ‘Safeguarded Funds’ to ensure consistency with the proposed Distribution Plan and correspondence previously sent to customers). An authorised payment institution has two different options in respect of Relevant Funds, they can either be segregated from other funds held by the Company or covered by an insurance policy. The Company chose the segregation method. [32] Regulation 23 of the PSR 2017 creates a bespoke statutory regime in relation to Relevant Funds in the hands of the payment institution. The payment service users are granted rights over the Relevant Funds in priority to other creditors, by virtue of the express wording of Regulation 23(14) of the PSR 2017. [33] In order to achieve the safeguarding requirements of the Payment Services Directive II, the relevant funds needed to be treated as not being limited to those that were safeguarded but instead should extend to include company funds equal to the relevant funds which ought to have been, but were not, safeguarded; Ipagoo LLP [2022] EWCA Civ 302. Regulation 13(8) put this on a statutory footing. [34] Payment service users entitled to a Relevant Funds claim have an interest akin to a secured interest over the Relevant Funds, which takes priority over the waterfall of payments prescribed by s.175 of the Insolvency Act 1986 (‘IA 1986’): Ipagoo LLP [2022] EWCA Civ 302. Although Ipagoo was an Electronic Money Institution (EMI) and therefore the decision was under the Electronic Money Regulations 2011, the decision of the Court of Appeal applies equally to the PSRs; Re Allied Wallet [2022] EWHC 1877 (Ch) at [8]. Claims to Relevant Funds rank ahead of unsecured creditors and the costs of the liquidation, other than the costs associated with distributing the Relevant Funds; Regulation 23(15). [35] The 2021 Regulations created a special administration regime for payment institutions and electronic money institutions: Regulation 4(2)-(3). It was modelled on the Investment Bank Special Administration Regulations 2011 (which were made in response to the problems that arose in the administration of Lehman Brothers: Re SVS Securities Plc (In Special Administration) [2020] EWHC 1501 (Ch) at [14] - the problems that arose could not be overcome by a Scheme of Arrangement under Part 26 of the CA 2006; Re Lehman Brothers International (Europe) [2010] 1 BCLC 496). [36] The special administrators are obliged to pursue the special administration objectives set out in Regulation 12: ‘(1) The administrator has the following special administration objectives. (2) Objective 1 is to ensure the return of relevant funds—(a) as soon as is reasonably practicable in accordance with regulations 13 to 15 and 17 to 34, or(b) promptly, in the case of post-administration receipts, in accordance with regulation 16, subject to paragraph (10). (3) Objective 2 is to ensure timely engagement with payment system operators, the Payment Systems Regulator and the Authorities in accordance with regulation 35. (4) Objective 3 is to either— (a) rescue the institution as a going concern, or (b) wind it up in the best interests of the creditors.’ [37] The Application is concerned with Objective 1. [38] The distribution of Relevant Funds back to customers must be by way of a distribution plan, drawn up in accordance with Rules 112(2) - (4) and approved by the Court: Rules 112 and 114. [39] Prior to Court approval, the distribution plan must be put before the committee of customers/creditors for their approval (either with or without modification): Rule 113. If the distribution plan is not approved, the committee must have an opportunity to explain their position to the Court. [40] If a shortfall exists between the amount of Relevant Funds held by a Company and the amount of admitted claims to Relevant Funds, then the administrators must use company monies to top-up the Relevant Funds insofar as is possible; Regulation 13(8). There is provision in Regulation 19(2) for how any remaining shortfall (after top-up) is to be dealt with in the distribution plan. Any shortfall is to be borne pro rata. [41] The 2021 Rules prescribe specific elements that the distribution plan is required to address (detailed below). The 2021 Rules are modelled on the Investment Bank Special Administration Rules 2011. [42] As to costs, Regulation 18(5) and Rule 99 detail how a client’s share of the expenses of the special administration will be discharged, insofar as they relate to the achievement of Objective 1. The costs and expenses of Objective 1 are to be paid out of Relevant Funds. [43] On an application to Court pursuant to Rule 114 for approval of a distribution plan, the court has a discretion as to whether to grant the relief sought, but it must be satisfied that (i) where Rule 111 applies (as it does here) that the JSAs have made the necessary notifications in accordance with that rule; and (ii) the creditors committee has approved the distribution plan under Rule 113, or that it has been given an opportunity to explain why not. It must also be satisfied that certain prescribed notifications have been given, pursuant to Rule 114(3) and (5).” ‘(1) The administrator has the following special administration objectives. (a) as soon as is reasonably practicable in accordance with regulations 13 to 15 and 17 to 34, or (b) promptly, in the case of post-administration receipts, in accordance with regulation 16, subject to paragraph (10). (3) Objective 2 is to ensure timely engagement with payment system operators, the Payment Systems Regulator and the Authorities in accordance with regulation 35. (4) Objective 3 is to either— (a) rescue the institution as a going concern, or (b) wind it up in the best interests of the creditors.’[13]As I shall go on to explain, in many respects the Distribution Plan considered by Mellor J was similar to that before me as were the surrounding circumstances. Thus, by way of example, this case also concerns Objective 1 and Rule 111 also applies.

Recoveries, Reconciliation and Top Up

[14]I have been given a great deal of evidence of the strenuous and expensive steps that the JSAs, have been obliged to follow in the special administration. First of all, dealing with the position of the “Relevant Funds”, they have had to identify and to safeguard those funds. To date they have recovered approximately €18.1 million or about 65% of the Relevant Funds which were held in individual and multi-client IBAN accounts with nine different overseas banks from jurisdictions as different as Jordan, Switzerland, Malta and Bulgaria to name but a few. That has itself involved local law firms being involved, in some cases recognition of the joint administration being applied for in local courts and there have been various other complicating factors.[15]In addition to the Relevant Funds, the JSAs have also recovered general assets of the Company from multiple sources including, among others, foreign corporate accounts, two subsidiaries (in Bulgaria and the British Virgin Islands) and sums from the Company’s sole shareholder.[16]So far as entitlement to Relevant Funds is concerned, under Regulation 13 a special administrator has to carry out a reconciliation exercise immediately after appointment using the company’s records to identify shortfalls or excesses in the assets pool. In this particular case, a reconciliation in the manner prescribed by Regulation 13 was not possible for a number of good reasons. These include an inability to restore the Company’s banking system despite instructing specialist IT agents to deal with it, the fact that there had been regular cash sweeps between various accounts and the information posted on the banking systems which clients could see did not mirror the actual movements of funds and did not properly reconcile. However, the JSAs have taken the course of identifying or seeking to identify and get in touch with customers to identify the claims that they would have against the Relevant Funds and in effect to achieve the same end as the Regulation 13 reconciliation exercise.[17]The matter has been reported on regularly to customers and to the FCA and the court therefore has comfort that the approach that the JSAs have taken has been sensible, proportionate and reasonable. As regards customers, the JSAs, in their progress report dated 28 June 2024, confirmed that a reconciliation exercise was not viable or proportionate and set out their suggested approach for identifying Relevant Funds and claims to them and that approach has not been challenged or questioned. The overall result of the investigation has been that, in broad terms, the JSAs have determined that there is a shortfall of about €10 million on the basis that, as at 4 May 2023, the Company’s records indicated it should have been holding about €27.6 million in customer funds. That latter sum, on further review, has slightly increased to about €28.1 million and following the first supervisory notice issued by the FCA and the investigations of the directors’ position, the Company records show that only about €18.8 million was in fact held.[18]The position now, and in broad terms, is that, as I have said, the JSAs have recovered about €18.1 million by way of Relevant Funds but have received claims or identified claims to Relevant Funds of about €25.6 million which, subject to final review, have been agreed and admitted. This leaves a revised shortfall of about €7.5 million. That revised shortfall does not take into account, first of all, a claim that has been rejected (the time for appealing against that rejection has run out) and also what was described in the evidence as “Unresponsive Claims” and “Silent Claims”. Unresponsive Claims are, for this purpose, claims which are known about and where a claim has been lodged at some point but either no formal claim has been lodged following the setting of a soft bar date or the unresponsive claimant has not taken the matter any further forward. Silent Claims are, for this purpose, claims where there has simply been no communication from the would-be claimant or potential claimant despite the best efforts of the JSAs to contact them and encourage them to respond.[19]Under the Regulations the position is that in the event there is a shortfall, the Company is required to transfer an amount equal to the shortfall from the Company’s own funds to “top up” the Relevant Funds. In the event that there still remains a shortfall that is to be shared amongst the claimants.[20]In this particular case, as well as the recoveries I have already mentioned in respect of the Company’s own funds, there are outstanding potential claims against professionals, in particular accountants and auditors of the Company and against a former director and company secretary of the Company. There is a claim for some $300,000 or so against a company referred to as “FTX” (FTX Digital Markets Limited) which is also in an insolvent regime but where the officeholders have accepted the claim of the Company and indicated that distribution should be made fairly shortly. There is also a question of potential corporation tax refunds.[21]The current estimate is that the “Top Up” to the Relevant Funds from the Company’s own assets is likely to be in the region of €3.1 million, taking into account receipts and payments to date and estimated future receipts and payments (after allowing for realisation costs). That figure, as a matter of prudence, does not take into account recoveries on pre-appointment tax refunds or the litigation claims that I have referred to.[22]To the extent that there are further recoveries in respect of the Company’s own assets then these too will be available to “Top Up” the Relevant Funds to the extent that any shortfall remains. At present, it seems likely that there will be a shortfall in the Relevant Funds available to meet relevant claims. If, however, future recoveries of assets for the Company result in there being no shortfall in Relevant Funds, the excess in the Company’s own funds will be available to unsecured creditors. Rules 116 and 143 would be engaged and the JSAs would then have to make distributions to unsecured creditors.[23]I have referred to the statutory objectives as set out by Mellor J in his judgment. There are, as regards Objective 1 of making a return to customers, further workstreams being pursued that could ultimately be for the benefit of customers. As I have explained, that includes the litigation claims and, as regards those, I have been taken through both the updated position as to the response of the potential defendants or recipients of those claims from the Company and the insurance position. Going ahead, if litigation emerges, that will be funded on some form of conditional fee basis or I suppose it is possible that the claims may be sold.[24]Because it is relevant both to jurisdiction to approve a distribution and because it is also relevant to discretion and the setting of the hard bar date, I should record that what is referred to as a “soft bar date” that has been set under Regulation 20. Regulation 20 provides:
“(1) The administrator may, if they think it necessary in order to expedite the return of relevant funds from an asset pool, set a bar date for the submission of relevant funds claims. (2) The bar date must be set out in a notice. (3) A reasonable time must be given after the notice has been published for persons to be able to calculate and submit relevant funds claims before the bar date. (4) The administrator must, as soon as reasonably practicable after the bar date, make a distribution of relevant funds from the asset pool to persons who are entitled to them under their claims.”
[25]As regards that, the relevant requirements under Rule 110 have all been satisfied and notice of that date was advertised on 23 October 2023 in the international editions of the Financial Times and in the London Gazette. That publication is relevant to the likelihood of further claims emerging.[26]In circumstances where the soft bar date has passed but the administrator has evidence that an eligible customer has not made a claim but the administrator has a means of contacting the customer, Rule 111 requires that the administrator write to the customer in prescribed terms referred to as a “Rule 111 Notice”. That procedure has also been followed.[27]Since giving of the Rule 111 Notice, the JSAs have adjudicated relevant fund claims in relation to the 396 customers of the Company. They have reviewed 346 claims totalling over €27 million constituting about 96.5% in value of all potential fund claims disclosed in the Company records. As I have indicated, these claims have been broken down into(a) 304 accepted claims of about €25.6 million;(b) one rejected claim, being a claim that has been rejected for just over €319,000, being 1.14% or so in value of all potentially relevant fund claims;(c) 41 relevant fund claims being Unresponsive Claims which have been submitted but not progressed and together amounting to about €1.1 million, being about 4.18% in value of all potentially relevant fund claims.[28]In addition, there are about fifty relevant fund claims being Silent Claims that have not been submitted despite the efforts to contact the claimants, amounting together to almost €974,000 and constituting about 3.46% in value of potentially relevant fund claims.

The Distribution Plan

[29]It is against that backdrop that the Company now seeks approval for a distribution plan. Before I go on to the statutory and discretionary approach of the court to approval, I should just refer briefly to the terms of the distribution plan. It is in fairly short form.[30]After “Definitions” and “Interpretation” dealt with by clauses 1 and 2, clause 3 makes clear that the plan applies to all the Relevant Funds at the commencement of the special administration and confirms that for the avoidance of doubt no such funds have been received by the Company after commencement of the special administration. Paragraph 4 deals with the effective date which is the time when the sealed court order approving the plan is received by the JSAs.[31]Paragraph 5 refers to the bar date and sets out the times for distribution. As regards 5.1, as originally drafted, the special administrators as soon as reasonably practicable after what is described as “the bar date” were to make an initial interim distribution and the bar date for these purposes is the date set out in the notice already given pursuant to Rule 110. As originally drafted, the clause then went on to provide that the special administrators anticipate that the initial interim distribution will be made on or shortly after the date that is three weeks from the effective date and then it set out a calendar date. It is proposed that to firm up the interim distribution date the wording would be slightly changed to make clear that the interim distribution will be made I think it is no later than the date which is three weeks from the effective date.[32]Secondly, there is a provision that further distributions and/or a final distribution will be made following the “Hard Bar Date”, as soon as practicable thereafter and, as regards that, clause 6 defines the Hard Bar Date and provides that the special administrators would be entitled and have the option to send out a Hard Bar Date Notice. A Hard Bar Date Notice as defined under the scheme is a notice in the form required pursuant to Regulation 21(8) specifying the Hard Bar Date and including the required statements in it. The difficulty, as I saw it, was that that in itself, even taken together with the reference to the court order in the clause 6, did not sufficiently define the date by which the distribution had to be made. Rule 112 requires (among other things) that a distribution plan provides a schedule of dates on which a distribution is to be made. I do not consider that a calendar date is necessary but there must, in my judgment, be a date which is sufficiently certain if a mechanism for establishing it is to be adopted.[33]The draft order originally put before me expanded on the concept by making clear that the Hard Bar Date could be a date falling four weeks from the date of the notice pursuant to Rule 110. However, in discussion with counsel it was agreed that the order I make will contain a recital setting out in more detail how the hard bar date will be effected. The Order as made will contain provisions that the trigger for the Hard Bar Date will be the determination/conclusion by the Special Administrators that all potential recoveries have been made within the special administration estate and that all relevant funds have been finally collected by the Special Administrators (the “Hard Bar Date Trigger”). The hard bar date notice provided pursuant to Rule 110 (the “Hard Bar Date Notice”) is then to be sent not more than one week following the Hard Bar Date Trigger. The Hard Bar Date is to be on a date which is not more than five weeks following the Hard Bar Date Trigger.[34]Going back then to the scheme, clause 7 deals with the position of shortfall and the “Top-Up” and provides, in effect, that customers who themselves receive a shortfall on their claim will be treated as unsecured creditors within the Company’s affairs.[35]There is then provision in clause 9 for a costs reserve. That is sums which are held back by the JSAs in effect to meet the costs or their costs and expenses. The clause there is to be slightly amended in amount from the 4.6 million figure in pounds, I think, to a 4.7 figure or just above. I am satisfied that, as explained to me, that reserve is fair and reasonable to meet anticipated costs.[36]In that regard it has also been shown to me that the JSAs have been submitting figures to customers and the creditors’ committee regarding their incurred costs and disbursements as the case has gone through and that those figures have not been challenged.[37]I should also add that so far as the relevant costs and expenses are concerned I have been taken to Rule 99 and Regulation 18. Mr Justice Mellor dealt with the relevant law at paragraphs of his judgment in the Rational Foreign Exchange Limited case as follows:
“[191]Rule 99 provides for expenses properly incurred by the JSAs in the pursuit of Objective 1 to be paid out of Relevant Funds. Pursuant to Regulation 18(5), claims to Relevant Funds do not take priority over the costs of distribution. The costs of distribution comprise the expenses set out in Rule 99; Rule 99(5). [192] The costs of distributing the asset pool include collecting it in and then making it good (insofar as is possible) where relevant funds have not been properly safeguarded, per Asplin LJ at paragraph [92] of her judgment in Ipagoo: ‘I should add that given the proper interpretation of ‘asset pool’ includes relevant funds which have not been properly safeguarded, in order to achieve conformity with the purposes of the EMD, in my judgment, it is also necessary, as a consequence, to interpret ‘costs of distributing the asset pool’ in regulation 24(2) so as to include the costs of making good the asset pool in circumstances where relevant funds, or some of them, have not been safeguarded. These are administrative costs associated with the asset pool itself. Such an interpretation falls within the breadth of the approach to interpretation approved by Lord Dyson JSC in Lehman [2012] Bus LR 667, para 131.’” ‘I should add that given the proper interpretation of ‘asset pool’ includes relevant funds which have not been properly safeguarded, in order to achieve conformity with the purposes of the EMD, in my judgment, it is also necessary, as a consequence, to interpret ‘costs of distributing the asset pool’ in regulation 24(2) so as to include the costs of making good the asset pool in circumstances where relevant funds, or some of them, have not been safeguarded. These are administrative costs associated with the asset pool itself. Such an interpretation falls within the breadth of the approach to interpretation approved by Lord Dyson JSC in Lehman [2012] Bus LR 667, para 131.’”
[38]The comments of Mellor J in paragraph 193 of his judgment apply equally here and I accept a similar submission by Mr Willson to that made by Ms Rogers in the Rational Foreign Exchange Limited case: [193] Owing to the Shortfall, the overwhelming purpose of the Special Administration to date has been to investigate, ascertain, collect in and distribute Relevant Funds. Included within this workstream is assessing (and provisionally rejecting) claims that the JSAs did not consider were properly Relevant Funds claims. This is a necessary aspect of investigating and distributing Relevant Funds. It was not possible to identify the Shortfall unless and until(i) significant work had been carried out in order to ascertain the totality of the Relevant Funds asset pool; and(ii) all claims to Relevant Funds had been considered and provisionally adjudicated upon. Based on Ms Kicks’ evidence, Ms Rogers therefore submitted that this has been an extensive task, a submission I accept.”[39]I also accept that the relevant costs go wider than that, though I do not need for these purposes to draw the precise line. In Re Allied Wallet Limited (in liquidation) [2022] EWHC 1877 (Ch) the court, ICC Judge Burton, dealt in the context of the Electronic Money Regulations with a submission that the costs of distributing the asset pool went wider as follows and fell within the following “scenario 2” (see paragraph [14(2)]) and said that: “(2) The “costs of distributing the asset pool” includes the costs of administering and distributing the asset pools and the fees and expenses of the Joint Liquidators in undertaking work which, while not directly related to the asset pools, is necessary for the proper administration of the liquidation. That is to say, certain liquidation costs are necessary in order for there to be an asset pool scenario and for the liquidation to function. These costs are a pre-requisite for a scenario in which the asset pool can be made good and should therefore fall within the notion of “the costs of distributing the asset pool”.[40]Her conclusion was as follows: “[27] Consequently, in my judgment, Scenario 2 above applies, save that my interpretation of the categories of work that falls on the payment side of the line, may be slightly narrower than contemplated by Mr Crooks. He includes in Scenario 2, the cost of the Joint Liquidators’ compliance with all statutory and regulatory requirements in relation to the liquidation. I consider that only those costs that relate to effecting the appointments, reporting to the court, and all other tasks that were performed in order to identify and then take such steps as the Joint Liquidators now know must be taken to make good the deficiencies in the asset pools, as well as reporting to creditors on the fruits of their labours and liaising with the FCA, should fall within the provision of regulation 24(2) of the EMR and 23(15) of the PSR as “the costs of distributing the asset pool”.[41]Under the Distribution Plan, on a monthly basis, the need for the full reserve is to be assessed by the special administrators. If appropriate releases from the reserve are to be made and in due course, if released back to the special reserve, then in due course they will be distributed by way of the final distribution.[42]So far as the amendments to the scheme are concerned that I have referred to, that is as regards the bar date at clause 5, the change in the amount of the costs reserve, and, in effect, the further explanation of the setting of the hard bar date and the hard bar trigger date by reference to a recital in the order, although those matters may not have been expressly approved by the creditors’ committee, I am satisfied that they are of a minor nature, that there is jurisdiction for me to approve them and that it is appropriate to do so. They are entirely consistent with the way in which matters have been explained both to the FCA and to the relevant creditors’ committee.[43]That therefore deals with the main provisions. There are then detailed mechanical provisions about how distribution is to take place under clause 10. As regards potential claimants, clause 11 effectively provides that they will be shut out after the hard bar date if not claim has been raised before then. Dealing with what is to happen if there are rejected claims, though it seems unlikely that is to arise, and also dealing with late claimants is clause 13. There are then standard or near standard provisions on non-assignment or transfer, releases of claims arising as a result of distribution, notice provisions modification and, indeed, I note that in clause 17 there is provision for the special administrators to amend the distribution plan before the effective date which are of a minor technical or administrative nature without the need for the court to approve or the creditors’ committee to approve. Leaving aside the court for the moment, it seems to me again the amendments that I have referred to fit happily within clause 17. There is an illegality and severance clause in clause 18 and then governing law and jurisdiction in clause 19.

Approval of Distribution Plan: jurisdiction and discretion

[44]The jurisdictional requirements are set out by Mellor J in the Rational Foreign Exchange Limited case at paragraphs [38] to [43] as follows. “[38] The distribution of Relevant Funds back to customers must be by way of a distribution plan, drawn up in accordance with Rules 112(2) – (4) and approved by the Court: Rules 112 and 114. [39] Prior to Court approval, the distribution plan must be put before the committee of customers/creditors for their approval (either with or without modification): Rule 113. If the distribution plan is not approved, the committee must have an opportunity to explain their position to the Court. [40] If a shortfall exists between the amount of Relevant Funds held by a Company and the amount of admitted claims to Relevant Funds, then the administrators must use company monies to top-up the Relevant Funds insofar as is possible; Regulation 13(8). There is provision in Regulation 19(2) for how any remaining shortfall (after top-up) is to be dealt with in the distribution plan. Any shortfall is to be borne pro rata. [41] The 2021 Rules prescribe specific elements that the distribution plan is required to address (detailed below). The 2021 Rules are modelled on the Investment Bank Special Administration Rules 2011. [42] As to costs, Regulation 18(5) and Rule 99 detail how a client’s share of the expenses of the special administration will be discharged, insofar as they relate to the achievement of Objective 1. The costs and expenses of Objective 1 are to be paid out of Relevant Funds. [43] On an application to Court pursuant to Rule 114 for approval of a distribution plan, the court has a discretion as to whether to grant the relief sought, but it must be satisfied that(i) where Rule 111 applies (as it does here) that the JSAs have made the necessary notifications in accordance with that rule; and(ii) the creditors committee has approved the distribution plan under Rule 113, or that it has been given an opportunity to explain why not. It must also be satisfied that certain prescribed notifications have been given, pursuant to Rule 114(3) and (5).”[45]As regards jurisdictional requirements, the first jurisdictional requirement relates to notifications. Where Rule 111 applies the relevant necessary notifications have been made pursuant to that rule. That is in relation to setting of what has been described for convenience as a soft bar date. As regards that, I am satisfied that that condition is met. Secondly, there must be approval by the creditors’ committee or if they have not approved it, then there must be an opportunity given to them by the court or the court must have heard from them. In this particular case, as I have said, I am satisfied that the distribution plan has been approved by the creditors’ committee and that there is jurisdiction of the court to approve it, including the slight amendments that have been made to it. Finally, I am satisfied that the notifications about the distribution plan and the court hearing set out by Rule 114(3) have been met.[46]I am satisfied that the Distribution Plan contains the elements required by or is consistent with e.g. Rule 112 and Regulation 18(5)) and Rule 99.[47]The approach to dealing with approval, that is the court’s discretionary power to approve, is dealt with in passages from Mellor J’s judgment which I gratefully adopt. They are set out below: “The Approach to approving a distribution plan [44] The Rules do not provide any guidance as to the Court’s exercise of discretion pursuant to Rule 114. Ms Rogers submitted that guidance can be taken from the authorities decided under the Investment Bank Special Administration Rules 2011, in which ‘Objective 1’ is very similar to the 2021 Rules (being the timely return of client money - this being the overall purpose of CASS 7A). I agree. Ms Rogers drew my attention to the following points from those authorities, all of which I accept and propose to apply. [45] Re Strand Capital [2019] EWHC 1449 (Ch) cited with approval the (unreported) decision of David Richards J in Re MF Global UK Ltd [2012] EWHC 3789 (Ch) at [24] (also cited with approval by Arnold J (as he then was) in Re Beaufort Asset Clearing Services Limited [2018] EWHC 2287 (Ch), adding only that Objective 1 concerned not only returning client assets but returning them as quickly as reasonably practicable): ‘In my judgment, account must be taken of the purpose of the Distribution Plan under the rules, which is to assist in the achievement of the first objective of returning client assets, as it seems to me the court must be satisfied that the plan provides a fair and reasonable means of effecting the distribution of clients assets to which the plan relates.’ [46] In Hume Capital Securities Plc [2015] EWHC 25 (Ch) HHJ Keyser QC, sitting as a judge of the High Court, added at [11] (with which Arnold J (as he then was) agreed in Re Beaufort Asset Clearing Services Limited [2018] EWHC 2287 (Ch) at [11]): ‘None of those factors can be conclusive—if they were, the rules would say so or the approval of the court would not be required—but all are to be given proper weight. In particular, as it seems to me, if the court is satisfied that all relevant interests and persons have been given the proper opportunity to make representations on the proposals and have either specifically agreed to them or at least not objected to them and that the plan proposed by the administrators has been approved by the creditors’ committee, the court is very likely to be slow to withhold approval or to substitute its own assessment of what is just and reasonable for that of the persons whose interests are affected.’ [47] In Re SVS Securities Plc [2020] EWHC 1501 (Ch), Miles J summarised the principles that have been developed by the Court at [32] - [34]: ‘[32] I have mentioned the court’s discretion. Counsel for the applicant, Mr Bayfield QC, took me to a number of decisions which illustrate the approach of the court in applications for approval of a distribution plan, namely: Re MF Global UK Ltd [2012] EWHC 3789 (Ch); Re Hume Capital Securities [2015] EWHC B25 (Ch); and Re Beaufort Asset Clearing Services Limited [2018] EWHC 2287 (Ch). The cases establish the following points. First, account must be taken of the purpose of the distribution plan under the Rules, which is to assist in the achievement of Objective 1 of returning client assets as early as possible. The court must be satisfied that the plan provides a fair and reasonable means of effecting the distribution of the client assets to which the plan relates. [33] Secondly, the context in which the application is brought before the court is itself material. The distribution plan can only be approved if the creditors’ committee has approved it or has had an opportunity to explain why it has not approved it and its role in relation to the distribution plan will be a particularly material factor in the court’s decision. Individual clients will have been notified both of the plan before the hearing and are able to make representations against it so that their input, or the lack of it, will again be material. The FCA has to be notified of a hearing and its objections, or lack of them will be relevant. Finally, the making of the application will itself indicate the exercise of professional judgment on the part of the administrators as officers of the court and weight is to be given to their judgment. While none of those factors can be conclusive, and the court must exercise its own judgment, they are to be given particular weight. [34] Third, if the court is satisfied that all relevant persons have been given a proper opportunity to make representations and have either specifically agreed to them or at least not objected to them, the court is very likely to be slow to withhold approval or substitute its own assessment of what is fair and reasonable as a means of effecting the distribution of client assets for the purposes of Objective 1.’ [48] This summary was approved and applied by Trower J in Re Reyker Securities plc [2020] EWHC 3286 (Ch) at [22]-[23] and by Rajah J in Re Blankstone Sington Limited [2024] EWHC 1111 (Ch) at [9]. [49] The court has to be satisfied that the proposed plan is fair and reasonable; Re WealthTek LLP (first judgment) [2024] EWHC 2520 (Ch) at [9].” ‘In my judgment, account must be taken of the purpose of the Distribution Plan under the rules, which is to assist in the achievement of the first objective of returning client assets, as it seems to me the court must be satisfied that the plan provides a fair and reasonable means of effecting the distribution of clients assets to which the plan relates.’ ‘None of those factors can be conclusive—if they were, the rules would say so or the approval of the court would not be required—but all are to be given proper weight. In particular, as it seems to me, if the court is satisfied that all relevant interests and persons have been given the proper opportunity to make representations on the proposals and have either specifically agreed to them or at least not objected to them and that the plan proposed by the administrators has been approved by the creditors’ committee, the court is very likely to be slow to withhold approval or to substitute its own assessment of what is just and reasonable for that of the persons whose interests are affected.’ ‘[32] I have mentioned the court’s discretion. Counsel for the applicant, Mr Bayfield QC, took me to a number of decisions which illustrate the approach of the court in applications for approval of a distribution plan, namely: Re MF Global UK Ltd [2012] EWHC 3789 (Ch); Re Hume Capital Securities [2015] EWHC B25 (Ch); and Re Beaufort Asset Clearing Services Limited [2018] EWHC 2287 (Ch). The cases establish the following points. First, account must be taken of the purpose of the distribution plan under the Rules, which is to assist in the achievement of Objective 1 of returning client assets as early as possible. The court must be satisfied that the plan provides a fair and reasonable means of effecting the distribution of the client assets to which the plan relates. [33] Secondly, the context in which the application is brought before the court is itself material. The distribution plan can only be approved if the creditors’ committee has approved it or has had an opportunity to explain why it has not approved it and its role in relation to the distribution plan will be a particularly material factor in the court’s decision. Individual clients will have been notified both of the plan before the hearing and are able to make representations against it so that their input, or the lack of it, will again be material. The FCA has to be notified of a hearing and its objections, or lack of them will be relevant. Finally, the making of the application will itself indicate the exercise of professional judgment on the part of the administrators as officers of the court and weight is to be given to their judgment. While none of those factors can be conclusive, and the court must exercise its own judgment, they are to be given particular weight. [34] Third, if the court is satisfied that all relevant persons have been given a proper opportunity to make representations and have either specifically agreed to them or at least not objected to them, the court is very likely to be slow to withhold approval or substitute its own assessment of what is fair and reasonable as a means of effecting the distribution of client assets for the purposes of Objective 1.’[48]Subject to the question of approval of the hard bar date which I will have to come back to because the court has to approve that separately in any event, I am satisfied that, in the particular circumstances here, it is appropriate to approve the Distribution Plan in the amended form put before me.[49]The plan follows similar schemes in the recent past in which the JSAs in this case have been involved, including Xpress Money Services Limited [2023] EWHC 1120 (Ch) and the Silverbird case. Put shortly, the purpose of the distribution plan is the achievement of the statutory objective one. It seems to me that the distribution plan is a fair and reasonable means of making distribution of the Relevant Funds to the appropriate customers. It has been approved by the Creditors Committee. The customers have had notice of the application and there has been no objection. The FCA has had notice of the application and has no objection. It is clear that the JSAs consider in the exercise of their professional judgment that the Distribution Plan is an efficient way of returning Relevant Funds to customers in accordance with the first statutory objective.[50]In my judgment, the Distribution Plan is one that it is appropriate and desirable to be approved so that the first objective can be achieved. For those reasons, I accordingly approve it.

Approval of Hard Bar Date

[51]I mentioned that the hard bar date, which is an integral part of the distribution plan, has to be approved separately as well because Regulation 21 provides as follows:
“21.— Objective 1: hard bar date (1) The administrator may, if they think it necessary in order to further expedite the return of relevant funds from an asset pool after setting a bar date under regulation 20, set a hard bar date for the submission of final relevant funds claims. (2) The hard bar date must be set out in a notice. (3) The administrator may not set a hard bar date without the approval of the court given on application by the administrator. (4) The priority afforded to relevant funds claims under the following provisions does not apply to late claims— (a) regulation 18(3), and (b) any provision of the safeguarding provisions; and no late claim may be founded on a beneficial interest in property. (5) Immediately after the hard bar date, any relevant funds held in the asset pool which have not been claimed may also be distributed, in accordance with Objective 1, to users or holders who are entitled to them under their claims made before the hard bar date. (6) The administrator must, as soon as reasonably practicable after the hard bar date, make a final distribution of relevant funds from the asset pool to users or holders who are entitled to them under their claims made before the hard bar date. (7) Immediately after that final distribution, the ownership of any relevant funds which remain in the asset pool is vested in the institution and the administrator must, as soon as possible, transfer those funds to the institution's own bank accounts. (8) A notice under this regulation must— (a) specify the hard bar date, and (b) refer to paragraphs (4) to (6) and explain that (in accordance with paragraph (7)) following the distribution of relevant funds from the asset pool any remaining funds will be transferred to the institution's own bank accounts. (9) In this regulation—"late claim" means a relevant funds claim, in response to the setting of a hard bar date, received after the hard bar date; "safeguarding provisions" means— (a) regulation 23 of the PSR 2017, in the case of the following relevant funds— (i) those received by a payment institution, or (ii) those received by an electronic money institution for the execution of payment transactions which are not related to the issuance of electronic money, or (b) regulations 20 to 24 of the EMR 2011, in the case of relevant funds received by an electronic money institution apart from those in paragraph (a)(ii).” (a) regulation 18(3), and (b) any provision of the safeguarding provisions; and no late claim may be founded on a beneficial interest in property. (a) specify the hard bar date, and (b) refer to paragraphs (4) to (6) and explain that (in accordance with paragraph (7)) following the distribution of relevant funds from the asset pool any remaining funds will be transferred to the institution's own bank accounts. (a) regulation 23 of the PSR 2017, in the case of the following relevant funds— (i) those received by a payment institution, or (ii) those received by an electronic money institution for the execution of payment transactions which are not related to the issuance of electronic money, or (b) regulations 20 to 24 of the EMR 2011, in the case of relevant funds received by an electronic money institution apart from those in paragraph (a)(ii).”
[52]The jurisdictional limitation on the court is set out in Regulation 22(2) as follows:
“(2) The court may make an order under paragraph (1)(a) only if— (a) it is satisfied that the administrator has taken all reasonable measures to identify and contact persons who may be entitled to the return of relevant funds, and (b) it considers that, if a hard bar date is set, there is no reasonable prospect that the administrator will receive claims for the return of relevant funds after that date.” (a) it is satisfied that the administrator has taken all reasonable measures to identify and contact persons who may be entitled to the return of relevant funds, and (b) it considers that, if a hard bar date is set, there is no reasonable prospect that the administrator will receive claims for the return of relevant funds after that date.”
[53]As regards the jurisdictional requirement that the administrator has taken reasonable steps to identify and contact persons who may be entitled to return of Relevant Funds, I am satisfied from the very detailed evidence set out that there is little more that the JSAs could have done, certainly on a reasonable and proportionate basis and I am satisfied that that condition is met.[54]The second jurisdictional requirement is that the court must consider that there is no reasonable prospect that the administrator will receive claims for the return of Relevant Funds after the hard bar date. As regards that, the approach of the court is most helpfully set out in the decision of Miles J in Re Sova Capital Limited [2023] EWHC 2690 (Ch). In particular, he was dealing with the equivalent regime of Investment Bank special administration which (so far as immediately relevant) is in much the same terms and the matter can be picked up at paragraph 21 of the judgment:
“[21] (2) The court may make an order under paragraph (1)(a) only if— (a) it is satisfied that the administrator has taken all reasonable measures to identify and contact persons who may be entitled to the return of relevant funds, and (b) it considers that, if a hard bar date is set, there is no reasonable prospect that the administrator will receive claims for the return of relevant funds after that date. 22. I was taken to the decision of Leech J in Re Xpress Money Services Limited (In Special Administration) [2023] EWHC 1120 (Ch), which concerned another set of regulations which are essentially in the same form as the Regulations (namely regulations made under the Payment and Electronic Money Institution Insolvency (England and Wales) Regulations 2021). In Re Xpress Money Services Limited, Leech J noted that those regulations provided no real guidance as to the proper interpretation of the phrase “reasonable prospect”
. He did not think it necessary on that case to express any general views as to the threshold that needed to be reached as he decided that it was reached on the facts of that case. 23. I was taken to various other statutory and procedural rules where a phrase such as “no reasonable prospect” is used. However I do not think that they cast any useful light on the interpretation or application of Regulation 12D(2). It seems to me that the court must read the phrase “no reasonable prospect” in the light of the policy behind the hard bar regime, namely the expedition of and assistance of the closure of the client money pool, and that the test should be applied or interpreted in a manner which makes these goals sensibly achievable.” The key point is paragraph 23, where Miles J said, as set out, that one has to consider the phrase “no reasonable prospect” in the light of the policy behind the hard bar regime. (a) it is satisfied that the administrator has taken all reasonable measures to identify and contact persons who may be entitled to the return of relevant funds, and (b) it considers that, if a hard bar date is set, there is no reasonable prospect that the administrator will receive claims for the return of relevant funds after that date.[55]As regards that, I am satisfied, for the reasons put forward by Mr Willson, whose submissions I accept, that there is no reasonable prospect of further claims coming to light. The extensive steps taken to contact customers, coupled with the soft bar notice, coupled with the passage of time since the Company entered special administration, taken together with the evidence of Mr Conway from previous similar cases that he has been involved in all point to, in reality, it being unlikely that there will be further claims put forward.[56]So far as the court’s discretion is concerned, it is clear that on the facts of this a hard bar date trigger is needed. As I understand it, what is slightly unusual about this case is that I am being asked to approve the “Hard Bar Trigger Date” and the concept of imposing a hard bar in circumstances where the hard bar may not take effect immediately or comparatively shortly after approval. However, the short point is that all steps so far as the claimants are concerned have, in effect, been followed through. The only reason for delay is nothing to do with ascertaining claims to the funds. It is simply caused by the likelihood that there are further Company assets to be brought into the pot and used by way of top-up.[57]In those circumstances, Mr Willson submits, and I accept his submission, that it would be unfortunate if the court were not able now to approve the setting of a hard bar date and the adoption of a hard bar and that the JSAs would have to come back at a later date, put a whole lot of essentially the same evidence before the court, possibly with some updating information about recovery of assets and incur a lot more costs and risk of further delay to distribution. In the circumstances of this particular case, where, as it were, all that is needed in terms of evidence and steps to be taken by the JSAs has been undertaken and the evidence is available to the court so far as relevant to the question of claims, it seems to me a hard bar should be approved and the date put forward is appropriate one. Therefore, I give permission, so far as that is the right test, for the administrators to set a hard bar date in accordance with Regulations 21(3) and 22(1)(a) of the Regulations.[58]That leaves open the last two issues. The first is the question of inspection of the court file. Initially, it was proposed that Mr Conway’s second witness statement should be withheld from the right to inspect or take copies under the rules unless the court gave permission. Normally the permission of the court is not needed. So far as the content matter of the second witness statement is concerned, it seems to me fairly obvious that that information should be not openly available on an unrestricted basis. If a person needs that information, then they can make out their case to the court. However, as originally formulated, the suggestion was that the entirety of Mr Conway’s first and third witness statements would also be excluded.[59]On discussing the matter further with Mr Willson, it emerged that a solution would be to restrict access to those parts of the first witness statement that are of concern, comprising one of the documents in the exhibit to the first witness statement, which, as I understand it, is already subject to a similar restriction in the proceedings. Accordingly, subject to the precise form of words being put before me, in principle I order that the ordinary right of inspection/to copies should not apply to that part of the exhibit to Mr Conway’s witness statement, i.e., the witness statement of the third party, and that covers the matter off.[60]For the future, it seems to me that lawyers in the future might well consider that if there are circumstances where detailed parts of a witness statement (or exhibit) make it appropriate for them to apply for an order to restrict the normal right to obtain copies and/or inspect, they might put such parts of the witness statement and/or exhibit in a confidential annexure to the witness statement so that the court can easily make an order excluding that part of the witness statement from the right of inspection and copying which would otherwise apply.[61]There is also a question, it seems to me, of timing. Mr Willson tells me it was hoped this application would come on more rapidly than it has done, but the fact of the matter is that the witness statement has, in fact, been open on the court file since June or so and we are now in October. Consideration, I think, in other cases will need to be given to whether to make a more urgent application if necessary to the ICC judge to restrict the right of access to inspect and copy over until the effective hearing of the substantive application for setting the hard bar date and/or approval of a distribution plan.[62]The final matter I have to deal with is the costs of the application and I will simply make the usual order that the costs of and incidental to the application will be payable as an expense of the special administration in the usual way. --------------------- Digital Transcription by Marten Walsh Cherer Ltd 2nd Floor, Quality House, 6-9 Quality Court, Chancery Lane, London WC2A 1HP Tel No: 020 7067 2900. 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