Judge's conflict of interest warning

Lord Hodge, on issuing an opinion in Liquidation of Quantum Distribution (UK) Ltd [2012] CSOH 191 (18 December 2012), has asked that publicity be given to the opinion, to avoid some of the issues that arose in the liquidation reoccurring.

In particular Lord Hodge noted:

1. The obligations that a solicitor and a liquidator as officers of court may owe to the court to bring to its attention concerns which a court reporter has raised about possible conflicts of interest and possible inadequate disclosure to creditors.
2. The potential conflicts of interest which can arise when a solicitor acting for a creditor (albeit one that has the largest economic interest in the process) petitions to appoint an insolvency practitioner and agrees to act as well for the insolvency practitioner, and the importance of letters of engagement between a liquidator and his solicitor setting out the parameters of the advice sought and given.
3. That once a reporter has been appointed to examine and audit the accounts of the liquidator’s intromissions and fix the liquidator’s fee, it would not be appropriate to choose a different way to fix a liquidator’s remuneration if the liquidator is dissatisfied with the auditor’s report.
4. The need to obtain sanction from the court to compromise a claim with a creditor, to comply with para 2 of sched 4 to the Insolvency Act 1986.