Force India – liability of joint office-holders

The recent decision in Uralkali v Rowley [2020] EWHC 3442 (Ch) provides some comfort to office-holders taking on joint appointments that they will not be automatically held jointly and severally liable for each other's actions.

Statutory and regulatory framework for joint appointments

When taking joint appointments, insolvency practitioners will have regard to statutory requirements such as:

• Paragraph 100(2) of Schedule B1 to the Insolvency Act 1986 - when joint administrators are appointed their appointor(s) must specify whether their functions are to be exercised jointly and which by any or all of them.
• Paragraph 101(4) provides that if an offence of omission is committed by an administrator, each of the joint administrators is deemed to have committed the offence and can be proceeded against and punished individually (unless appointed to act jointly in respect of only some of the administrator functions – para 101(6)).

There are similar provisions allowing office-holders to act jointly in relation to other insolvency processes.

IPs will also be familiar with the Insolvency Guidance Paper on Control of Cases (IGP) which was published by the Insolvency Service in 2014 to ensure that cases are properly controlled and administered at all times. Under the IGP it is acknowledged that IPs can delegate work and take on a reduced role on appointments taken jointly (and for example delegate work to specialists within the firm), provided they have in place appropriate safeguards, including a clear split of responsibilities and regular case reviews.

This framework is in place to ensure that while between them joint appointees have full accountability for their cases, there are mechanisms for attributing particular responsibilities and scope for an office-holder to be a ‘lead’ IP without duplication of time and cost for their joint appointees shadowing or overseeing their conduct of a case.

The court’s approach in Force India

In terms of the court’s approach to civil claims, the decision in Uralkali v Rowley provides a welcome indication that the courts will not automatically attribute liability to an office-holder for the actions of a joint office-holder.

The case concerned a claim made against Mr Rowley and Mr Baker in their capacities as former joint administrators of Force India Formula One Team Limited (now in liquidation) (the Administrators) arising out of the sale of the company’s business and assets to Racing Point UK Ltd. The claimant, PJSC Uralkali, was an unsuccessful bidder who alleged that the Administrators failed to conduct a fair and proper sale process and made claims in negligence and in breach of confidence against them.

The claims were brought against both office-holders despite Mr Baker having had little involvement in the events which were said to give rise to the claims, on the basis that as a joint office-holder he should be liable for any wrongdoings of Mr Rowley.

The court dismissed the claims against the Administrators – finding the Administrators owed no duties to bidders in these circumstances - and clarified that even if Mr Rowley were to have been found liable, the claims against Mr Baker would have been dismissed in any event.

When dealing with the negligence claim, the court helpfully confirmed that it is not improper or careless for an office-holder to rely on their joint office-holder’s expertise, particularly when he is an experienced professional supported by specialist lawyers.

With regards to the claim in breach of confidence Mr Justice Miles decided that the claim was unfounded as Mr Baker was not aware of the information alleged to be confidential and did not disclose it. The Judge decided that even in the event Mr Rowley were to be found liable for breach of confidence, it would not follow that Mr Baker would also be liable.

Comment

This decision is helpful clarification that joint office-holders will not be automatically liable for each other's acts or omissions when it is reasonable for them to rely on their joint appointee's expertise and they are not on notice of them. This reflects the reality that in many cases one appointment-taker will take the lead and will be taking decisions as they consider appropriate.

The decision though is of course is no carte blanche for IPs to “stand back and look the other way”, as the judge put it – from a professional conduct point of view, IPs will want to remain mindful of the statutory and regulatory framework and to clarify (and if appropriate, record) how responsibilities are divided between them, and how much they may need to become involved in particular aspects of a case as it develops.

For more information about this article, contact our Restructuring & Insolvency team.