Conflict liquidators have been appointed by the High Court to a group of companies to investigate claims by the director that the companies’ bank had artificially distressed the companies and driven them into administration.


The Angel Group of companies was founded by Ms Julia Davey. They owned residential and commercial properties which were rented out. The companies borrowed substantial amounts from Lloyds HBOS. After getting into financial difficulties, the bank appointed administrators from KPMG over them.

The administrators have claimed that Ms Davey extracted money from the companies unlawfully by fraudulently backdating the transfer to her of properties or substantial sums by the company. Ms Davey has cross-claims against the bank for breach of contract, negligence, misrepresentation, conspiracy and/or misfeasance on the grounds that the bank and KPMG artificially distressed the companies in order to push them into administration. 

Ms Davey applied for the removal of the administrators on the grounds that they had conflicts of interest arising from their previous involvement with the companies on behalf of the bank. The administrators then applied for an order requiring Ms Davey to produce documents relating to their claim against her. 


At a hearing in July 2015, Ms Davey argued that disclosure should not be ordered against her because it had only been requested as a defence to her application to remove the administrators. The Court rejected the administrators’ request for disclosure, arguing that although the claims against Ms Davey might be material at the removal application, that was an issue for the trial judge to decide.

At a subsequent hearing in the High Court on 3 December 2015, the parties agreed that the administrators would resign and be replaced by four new liquidators, two nominated by the bank and two nominated by Ms Davey. The liquidators agreed to divide their roles and responsibilities so that Ms Davey’s nominees will pursue any claims the companies have against the bank and the bank’s nominees will complete the disposal of the companies’ assets and pursue claims against Ms Davey.


The appointment of conflict liquidators or administrators is not uncommon in situations where conflicts of interest have to be managed. The more interesting aspect about this case is the nature of the allegations made against the bank and the administrators. These claims allege that the group’s business was the victim of a conspiracy to remove certain risk weighted assets from the bank’s balance sheet. The bank wanted these loans off its balance sheet and it is alleged that to achieve this it conspired artificially to distress the business by, for example, placing it in what was described as a “business support unit” but which in fact drained millions of pounds away from the cash flow. To some extent, these claims rely on the general pattern of behaviours alleged to be associated with business support units, particularly that of the Global Restructuring Group (‘GRG’) at RBS. GRG is currently the subject of an FCA investigation which is expected to be published shortly.

The court noted that although the bank said it would resist the claims strongly, it had not suggested that these claims were fanciful or without substance.