Adam Henry Stephens & Anor v Firestone Financial Assets Limited & Anor

Christopher Pymont KC:

1. Dolfin Financial (UK) Limited (“the Company”) is a company in special administration pursuant to the Investment Bank Special Administration Regulations 2011 (“the IBSA Regulations”). This Company was put into special administration as long ago as 30 June 2021, when Fancourt J appointed Adam Henry Stephens (“Mr Stephens”) and Kevin Ley (together “the JSAs”) as joint special administrators and entrusted them with the management of the affairs, business and property of the Company while the order was in force.

2. There are two applications now before me for resolution. Two other applications are formally before the Court at this hearing but only (now) for directions, which I will deal with after this judgment has been handed down. The two applications immediately before me are: i) by the JSAs (by application notice issued on 28 April 2025) for directions as to the future conduct of the special administration of the Company and ii) by one of the clients of the Company (by application notice issued on 17 January 2025) for (a) a direction that the JSAs make an interim distribution of 90% of the client money held by the Company and (b) a declaration that the JSAs have not performed their functions (that is, in relation to the return of client assets) as quickly or efficiently as was reasonably practicable. The applicant on this application is Firestone Financial Assets Limited (“Firestone”) and its application is supported by another client of the Company, now called Investors Europe (Malta) Limited but formerly called Dolfin Asset Services Limited (“DASL”).

3. I have heard submissions from the JSAs (through Glen Davis KC and Clara Johnson), Firestone (through William Willson) and DASL (through Robert Amey). I have also heard submissions from the Financial Services Compensation Scheme (“the FSCS”) (through Georgina Peters), though the FSCS adopts a neutral stance in relation to the issues arising and appears on these applications only to assist the Court and clarify the FSCS’s position. Background

4. The two main applications before me arise in the following circumstances. The Company was authorised and regulated by the Financial Conduct authority (“the FCA”) as an “investment bank” to which the IBSA Regulations apply. It was part of a group of companies owned or otherwise controlled, directly or indirectly, by Mr Denis Nagy (“Mr Nagy”) and Mr Roman Joukovski (“Mr Joukovski”). At the commencement of the Company’s special administration, part of the Company’s business had been providing conventional investment management and custodian services for its clients.

5. More importantly for present purposes, however, the Company had also been offering a particular service to some of its clients, to assist them in their UK immigration applications for entry visas and leave to remain. In broad summary, UK immigration rules at the material time allowed certain high net worth individuals to obtain entry visas and leave to remain in the UK as “Tier 1 Investors” if they satisfied certain financial requirements. Applicants for such a visa had to show they had not less than £2 million under their control held in a regulated financial institution (such as the Company) and “disposable in the UK”, and an account with a UK regulated bank for the purpose of investing not less than £2 million in the UK. Applicants for leave to remain (with entry clearance in the previous 12 months) had to show they had invested not less than £2 million of their own money, under their control in the UK, in UK Government bonds or in share capital or loan capital in active and trading UK registered companies; such applicants could qualify for leave to remain in the UK and for indefinite leave to remain after 5 years (or sooner, if they could show higher levels of investment).

6. The service offered by the Company to applicants for Tier 1 approval was to provide them with evidence, or purported evidence, of their compliance with these financial requirements, including by arranging for them to receive bonds issued by UK registered trading companies.

7. The precise means by which this service was delivered by the Company (or at least what the JSAs have been able to find out about it) is set out in some detail in the evidence in support of the JSAs’ application (in particular, the fifth witness statement of Mr Stephens). There were several different schemes on offer but, to give a flavour as to how they worked, I can summarise the Company’s “Gold” service, as follows.

8. The bonds in question (“the Conflicted Securities”) were issued by a number of companies broadly connected with the Company or its directors but (in each case) without the kind of financial history or business which could give the bonds any real value. One of the issuers, Artek Group PLC (“Artek”), seems to have been ultimately controlled at different times by Mr Nagy and Mr Joukovski; its most recent accounts in evidence show it had net liabilities of over £2.6 million as at 29 December 2022, having made a loss of over £3.6 million in the year to that date. Another, Data Grid Solutions PLC (“Data Grid”), seems to have been controlled by business associates of Mr Nagy and Mr Joukovski; its most recent accounts in evidence show net liabilities of nearly £5 million as at 30 April 2023 with no operating income and a loss for the year of nearly £2 million. A third, Camsem Investment PLC (“Camsem”), used to hold a majority of the shares in a company which ran a private school in Cambridge offering A-level and University Foundation courses but seems to have relinquished its interest in that company on 3 November 2023; Camsem’s most recent accounts in evidence show net liabilities of £374,682 as at 31 March 2021 following a loss of £371,046 that year. The precise connection between Camsem and the Company is obscure. A fourth, Altafinch UK PLC (“Altafinch”), was part owned by Mr Nagy and Mr Joukovski, each of whom was recorded in the Companies Register as a person with significant control of the company. Altafinch’s most recent accounts in evidence show it to have made an operating loss in the year to 29 March 2023 of £578,756, with a small profit of £18,242 after taking into account interest receivable and payable (and other items); net assets were shown as £444,806 at that date but that was assuming the recoverability of a debt of £48,364,949 about which the auditors had no information, so that the auditors’ report was qualified accordingly.

9. The Conflicted Securities created by these companies were distributed for the benefit of the Company’s clients by two companies, RMS Global Investments Limited (“RMS Global”) and Intellect Lending Group Limited (“ILG”). RMS Global was a BVI company with one issued share, held by Mr Nagy. ILG was a Cayman Islands company whose ultimate beneficial owner was recorded as Mr Nagy’s father on documents exhibited by Mr Stephens, one of which bears a date in 2015; however in 2017, the only issued shares in ILG were transferred to a company acting as trustee “for the ILG Trust”, whatever that is; Mr (Denis) Nagy was and remained a director before and after this transfer.

10. Mr Stephens exhibits three agreements each entitled “Master Securities Lending [or Loan] Agreement”, between (i) Data Grid and RMS Global apparently dated 14 June 2017 (though perhaps back-dated from the summer of 2018) (ii) Altafinch and ILG dated 20 December 2017 and (iii) Camsem and ILG dated 23 September 2019. There were probably other such agreements which the JSAs have not been able to locate. These contained the terms which would apply if RMS Global and ILG were subsequently to request company bonds (i.e. Conflicted Securities) from these companies respectively which they would subsequently agree to provide. The general scheme of each agreement was that RMS Global or ILG would borrow the bonds for a limited time, title to the bonds would pass to the relevant borrower while in its hands, and each issuing company would receive a fee for lending out its bonds but not the price or nominal value of the bonds lent.

11. Following receipt from the issuing company, the Company would distribute the Conflicted Securities to the Company’s clients who were using its services in this respect in order to meet (or appear to meet) the investment requirements of the UK immigration rules. The Company records referred to in Mr Stephens’ evidence suggest the procedure (for the “Gold” service) was generally as follows: i) The client paid the Company £400,000 effectively as a non-returnable fee. The JSAs have not carried out a detailed investigation of the money flows (as Mr Davis KC confirmed at the hearing) but I will assume for the purposes of this judgment that much of the money received by the Company would have been disbursed to pay fees (a) to the companies issuing the Conflicted Securities and (b) to persons introducing the business (identified in Mr Stephens’ evidence and including the distributors, RMS Global and ILG). ii) The Company would arrange for a special purpose vehicle (“SPV”) to be set up, typically in the BVI, with a friend or family member of the Tier 1 client as the ultimate beneficial owner. ILG would transfer to the SPV ILG bonds or notes with a nominal value of £1.6 million in exchange for a promissory note from the SPV. The SPV would then purport to sell the ILG bonds to RMS Global for £1.6 million in cash and declare a dividend of £1.6 million in favour of the shareholder and ultimate beneficial owner; that person would, however, gift the money to the Tier 1 client under a Deed of Gift. The £1.6 million would then be credited to the Tier 1 client’s account with the Company (along with the £400,000 paid in cash, amounting in total to the required £2 million). Apart from the £400,000, no money was actually changing hands in this process. iii) The Tier 1 client would then instruct the Company to buy Conflicted Securities to the value of £2 million from ILG or RMS Global who borrowed them from (at different times) Artek, Data Grid, Camsem or Altafinch. iv) The Tier 1 client would also at the same time enter into a call option agreement with ILG, enabling ILG to call for the transfer to ILG of the Tier 1 client’s investment with the Company in exchange for delivery to the Tier 1 client of the promissory note. (The Tier 1 client would execute a power of attorney in favour of the Company to ensure the call option was carried out). The exercise of the call option would effectively collapse the structure: the ILG bonds or notes would be back with RMS Global (i.e back within the Company’s group); the various Conflicted Securities would be back with ILG or RMS Global, for return to the issuing companies from whom they had borrowed them; and the promissory note would be back with the client or the SPV. v) Nonetheless, the Company would write to the relevant immigration authorities purporting to verify that the Tier 1 client had met the financial requirements of the UK immigration rules. Examples of such correspondence in the evidence are addressed variously to the Home Office, the British Embassy in Beijing and the Consulate-General in Hong Kong.

12. I should make it clear that I am not making any findings in this judgment as to the nature, operation or legality of the Company’s Tier 1 scheme. My concern (and the JSAs’) is as to how to proceed in the circumstances.

13. The services offered by the Company to Tier 1 clients attracted the attention of the FCA who, in December 2019, invited the Company (which agreed) to enter a voluntary requirement to cease promoting or distributing Conflicted Securities. That effectively closed the Company’s Tier 1 business to new clients. Further investigation and enforcement action by the FCA led to a paper by the FCA’s Supervision and Enforcement teams which recommended that further enforcement action be taken on the basis that the Company had “operated a scheme designed to enable its clients to obtain a ‘Tier 1 investor visa’ in breach of the Immigration Rules. In the course of this business, [the Company] dishonestly or recklessly made false or misleading representations to the Home Office that applicants for a Tier 1 investor visa met the requirements under the Immigration Rules to invest a minimum of £2m in UK businesses.” The Company had also, it was concluded, given misleading information to the FCA, operated a business with an inadequate financial crime control framework and a high level of money laundering risk, with inadequately qualified personnel in key roles. It was also suggested that the Company may have committed an offence under section 25 of the Immigration Act 1971 by facilitating a breach by its Tier 1 clients of, for example, section 24A of the Immigration Act 1971 (obtaining leave by deception).

14. On the basis of this paper, the FCA decided to issue a First Supervisory Notice dated 12 March 2021 to the Company, the practical effect of which was to close down the Company’s business with immediate effect. The Company did not pursue any challenge to this action but instead proceeded with a managed wind-down of its business, with the JSAs’ firm (then called Smith & Williamson) engaged to advise the Board on its position and options.

15. The upshot was a transfer to Britannia Global Markets Limited (“Britannia”) of a majority of the Company’s clients (57%) and client money (72%) and a substantial proportion of the Company’s other client assets (36%). Negotiations for this transfer began before the Company was put into special administration on 30 June 2021 and were finalised by the JSAs after their appointment. The contract with Britannia was made on 5 July 2021 and completed on 12 July 2021, with the Company receiving £600,000 compensation (with further deferred consideration of up to £600,000 payable in due course). For the purposes of this sale, Britannia was allowed to select the clients it was prepared to take on. The remaining clients of the Company are therefore those Britannia had rejected in the course of negotiation for whatever reason (and there is no evidence before the court of Britannia’s reasoning in this respect).

16. This left the Company with a number of clients with client money and other client assets held by the company, now under the JSAs’ supervision. This “Residual Client Book” (“RCB”) as it is referred to in the evidence was the subject of further marketing efforts by the JSAs from August 2021 until April 2022 by when all interest had been withdrawn. The JSAs then sought to identify nominated brokers who could receive the whole or most of the client assets in the RCB (other than money); but negotiations for such a transfer had come to an end by February 2023 with the JSAs consequently having to deal with the clients and relevant assets on an individual basis. These residual clients include Firestone and DASL. Firestone

17. Firestone is a company incorporated in the BVI which acts as the investment vehicle for Mr Shiqi Xu (“Mr Xu”), who is a wealthy Chinese businessman now based in the UK. The JSAs’ formal position is that, as far as they know, Firestone did not use the services of the Company to participate in its Tier 1 scheme (as summarised above); that, at least, is what Mr Davis KC told Nicola Rushton KC, the learned deputy judge who gave procedural directions for the hearing of the applications now before me. Mr Stephens does suggest (in his eighth witness statement, para 25) that Firestone “ might fit [the] description ” of a “ person [who] may have knowingly engaged in an unlawful scheme to circumvent Immigration Rules by participating in [the Company’s Tier 1 scheme] ” but his evidence is really that the JSAs do not know and have not fully investigated the position.

18. Firestone’s evidence is to the effect that it (or Mr Xu) had no need of the Company’s Tier 1 scheme because substantial assets were placed into Firestone’s account by Mr Xu to be invested in the UK to meet UK immigration requirements. Mr Xu’s recent witness statement explains that in 2017 he was in the process of trying to move himself and his family to the UK and transferred substantial assets to the Company, as a regulated company he thought he could trust, for the purpose of (i) making legitimate investments in the UK and (ii) making legitimate qualifying investments for the purpose of the necessary visa applications for himself and those he wished to support (if necessary by providing them with funds). On the evidence before me, there is nothing to suggest that Firestone did participate in any potential illegality.

19. The state of account between Firestone and the Company is, on the latest figures (summarised in Mr Willson’s “Key Figures” document, with references to his sources), that Firestone is owed £12,287,066.52 of the Company’s client money totalling £44,894,422.67 (27.37%) and is entitled to £8,963,715.58 of the Company’s realisable client assets other than money totalling £33,284,610.39 (26.93%); Firestone is also entitled to a share of the income arising on client assets since the commencement of the special administration. DASL

20. DASL is an investment services company incorporated in Malta and regulated by the Malta Financial Services Authority (“MFSA”). It is licensed by the MFSA to provide custodian, depository and execution services to private and institutional clients. DASL is the largest remaining client of the Company following the Britannia transfer. On the figures (and references) given in Mr Willson’s “Key Figures” document, DASL is entitled to £14,265,249.34 of the client money (31.8%) and £12,269,019.87 of other realisable client assets (36.9%), as well as a substantial proportion of the income derived from client assets during the special administration. Much of DASL’s interest in the Company’s assets is as custodian for its own clients (formerly some 57 of them, now 42), the Company effectively acting as DASL’s sub-custodian; but DASL has a substantial interest of its own in the Company’s assets.

21. DASL was a member of the same group as the Company. Mr Nagy is, and has been since November 2017, a director of DASL as he was a director of the Company at all material times. On DASL’s evidence (second witness statement of Mr Bondin, para 32), 8 of DASL’s clients have a “connection” to Mr Nagy (defined broadly to include direct or indirect beneficial interests, trusts of which Mr Nagy is settlor, protector or trustee, and entities to which Mr Nagy (or entities associated with him) provides consulting and similar services). (Annex 1 to Mr Bondin’s third witness statement amends this to 7 clients with such a connection).

22. The JSAs observe that DASL appeared to be holding some client money and other client assets on behalf of RMS Global and ILG (i.e. the distributors of the Conflicted Securities) but the JSAs have not carried out any investigation or analysis of how these assets ended up with the Company or what, if any, connection they had to the operation of the Tier 1 scheme. DASL’s evidence (third witness statement of Mr Bondin, para 15e) is that none of the Company’s Tier 1 business originated from DASL and that “ there is no basis for suggesting that DASL was involved in any wrongdoing .” Special Administration – applicable rules

23. The Company’s special administration is governed by the IBSA Regulations, the Investment Bank Special Administration (England and Wales) Rules 2011 (“the IBSA Rules”) and the Rules and Guidance set out in the Client Assets Sourcebook (“CASS”) within the FCA Handbook. Without attempting an exhaustive summary, the following factors of the regime are worth noting for the purpose of this judgment: i) The Objectives of the special administration are Objective 1: to ensure the return of client assets as soon as reasonably practicable. Objective 2: to ensure timely engagement with [here] the FCA as the relevant authority. Objective 3: to either (i) rescue the [Company] as a going concern or (ii) wind it up in the best interests of the creditors. (IBSA Regulations, reg 10(1)). ii) The JSAs must work to achieve each objective according to the priority given to it “ as quickly and efficiently as is reasonably practicable ” (IBSA Regulations, reg 10(4)). iii) In addition to Objective 2, the JSAs must keep the FSCS informed of progress on Objective 1 (IBSA Regulations, reg 10(A)(b)). iv) Client money is held and administered pursuant to the statutory trust created by CASS 7.17.2R. That provides that, where client money is pooled, it is held for the clients for whom it is held, according to their respective interests in it, and subject to the costs properly attributable to the distribution of the client money (if such distribution takes place following the failure of the firm). Again, distribution of client money is to happen “ as soon as reasonably practicable ” (CASS 7A.2.4(2)(a)R), though a transfer to another regulated firm is an alternative allowed for (CASS 7A.2.4(4)R). v) If the JSAs think it necessary in order to expedite the return of (other) client assets, they may set a bar date for submission of claims to ownership of, security over or other entitlement to those assets (IBSA Regulations, reg 11(1)). Claims include contingent or disputed claims. After the bar date, the JSAs must return those client assets as soon as reasonably practicable in accordance with client money rules (IBSA Regulations, reg 12A(3)). Further claims may be allowed after the bar date if the court approves. However, the court may set a “ hard ” bar date under reg 12D if the JSAs have taken all reasonable measures to identify claimants and the court considers there is no reasonable prospect of further claims being made. vi) A client may disclaim all interest in an asset, whereupon the JSAs are not required to return it to that client (CASS 6.7.2(2)R). vii) Where a bar date has passed for the submission of claims to client assets other than money the JSAs “ shall ” draw up a distribution plan setting out (in summary) how the assets are to be returned (IBSA Rules, rule 144). The distribution plan “ shall ” include how the JSAs propose that the expenses of the special administration are to be allocated between assets (IBSA Rules, rule 137). The allowable expenses and order of priority are set out in IBSA Rules, rule 134 to 136. The distribution plan must be put before a meeting of the creditors’ committee (IBSA Rules, rule 145) after which the JSAs “ shall ” apply to the court for its approval of the distribution plan (rule 146). The JSAs’ application

24. As I have indicated, the JSAs seek directions from the court as to the future conduct of the special administration. More specifically, they are asking the court to order that they be at liberty to conduct the special administration in accordance with a so-called “Protocol” at Schedule 2 to the proposed order, with terms used in the Protocol being defined in Schedule 1. I append to this judgment a copy of Schedules 1 and 2 for ease of reference. Summarising broadly, the Protocol provides for the JSAs to proceed with the preparation of a distribution plan (para 1.4) with provision being made: - to handle any potential illegality suspected to affect the Company’s assets (paras 1.1 to 1.3) - to ignore the possibility of third party claims to the Company’s assets (paras 2.1-2.2) - to allocate costs and remuneration between clients entitled to client assets other than money (paras 3.1 to 3.3) - to deal with the costs attributable to the transfer to Britannia (paras 4.1 to 4.2) - to distribute client money as well as income received on client assets after the commencement of the special administration, less attributable costs and remuneration (paras 5.1 to 5.9) - to determine which of the Company’s assets are realisable or unrealisable, an exercise which affects the incidence of costs and remuneration (paras 6.1 to 6.7), giving clients the option of paying their share of costs out of their client money or by separate payment, and allowing for the possibility of the client disclaiming any asset (para 6.5) - to realise assets to pay costs (paras 7.1 to 7.3) - to allow costs and expenses to be paid from interest on client money and income from client assets, with provision for reimbursement to the House Estate in respect of such of those costs as have already been paid from that source (paras 8.1 to 8.3) - to communicate with clients appropriately (paras 9.1 to 9.9) and - to clarify the JSAs’ status (paras 10.1 to 10.2).

25. In essence, the JSAs are asking the court to approve the principles and some of the detailed terms upon which they are proposing to act in order to achieve a distribution of client assets and client money after payment of all costs and remuneration. They are also asking (by their draft order) for liberty to apply to clarify, vary or modify the terms of the Protocol; that seems, in effect, to be inviting the court to supervise the future working out of those matters upon further application. The JSAs are not, however, seeking to surrender their discretion to the court, nor are they seeking any further powers from the court which they do not already have, nor are they asking the court to clarify the terms of any of their powers.

26. Mr Amey, in his skeleton argument, and Mr Willson in his oral submissions, characterised the JSAs’ application as “ over-engineered ”, meaning, as I understand them, that it adds a layer of unnecessary complexity to what should be a more straightforward process based on the JSAs exercising their own discretion without reference to the court. I accept this criticism. Indeed, I would go further: it seems to me that there is no practical utility in this application and that there is nothing that the court can or should be doing at this stage to approve the decisions taken by the JSAs in relation to the terms of the distribution plan.

27. I recognise that the JSAs are officers of the Court and that, in the normal course, the court would be sympathetic to any request for its assistance in the discharge of their duties. I also take seriously the fact that the JSAs are experienced and competent administrators acting with the benefit of advice from first-class legal advisers and yet regard their proper way forward as sufficiently doubtful to require directions from the court. Nonetheless, it is not obvious how the court’s intervention at this stage is intended to assist matters.

28. There are a number of points to make here. First, the preparation of a distribution plan is the subject of a statutory procedure. The administrator has a duty to draw up the distribution plan (IBSA Rules, rule 144(2)), which is then to be placed before the creditors’ committee (if there is one, as there is here) for approval (rule 145) and only then submitted to the court for its approval (rule 146). It does not seem to me to be appropriate for the court to be entertaining wide-reaching and detailed issues as to what should be included in the distribution plan (as is contemplated by the Protocol) before a full plan has been formulated and the creditors’ committee has had a chance to express its views. Nothing that the court says now would bind the creditors’ committee when its members come to consider their response to the proposed distribution plan after it has actually been formulated, so the court’s approval of a draft (or, as requested here, the principles on which the draft should be prepared) will add nothing. The correct procedure is for the court’s approval to be sought only after a distribution plan has been settled through discussion in this way.

29. The JSAs’ purpose in making this application is (I paraphrase) to save time and cost by ensuring that they are setting out on the right path before formulating the distribution plan: that, it is thought, reduces the chances of having to go back to the drawing-board if the court (or creditors’ committee) were later to require a different approach. That seems to me to be unnecessarily complicating the procedure set out in the IBSA Rules.

30. The JSAs’ approach has failed even on its own terms. The JSAs’ application is far too diffuse and unfocussed to allow specific issues to be identified and debated conveniently and at proportionate cost. The preparation of the application took so long that Firestone felt it had to make its own application for an order for an interim distribution of client money to achieve some progress in the distribution of assets. The material now before the court (on both applications) includes some 5000 pages of evidence (1 large file of witness statements and 7 files of exhibits, with 2 smaller supplementary bundles being lodged for the hearing), together with 3 files of authorities and about 200 pages of skeleton argument (including annexures) from the JSAs, Firestone and DASL; a full day was required (before Nicola Rushton KC) for directions as to the hearing of the applications, and the hearing before me lasted 3 full days with further argument to be expected when this judgment is handed down. My impression was that, even so, none of the parties felt they had had adequate time to make all the submissions they wanted to. I am not here objecting to the quantity of material (well, only mildly objecting); nor am I criticising the presentation of it (for example, each of the skeleton arguments, though long, was clear and helpful). My point is that there was never going to be any cost saving in applying to the court in this expansive manner, nor was it ever going to be a simple or convenient exercise which would ultimately save time. Well over a year has now been spent drafting and pursuing the JSAs’ application with no substantive progress in the meantime towards achievement of any Objectives of the special administration.

31. I note the observation of Vos LJ in Cotton v Earl of Cardigan [2015] WTLR 39, at [78], that this type of directions procedure “ is intended to be quick and accessible ”; and in the case of Re Sova Capital Limited [2023] Bus LR 779 at [184(h)], Miles J similarly observed that “[a] directions hearing should be comparatively short and contained ”. This application entirely fails to meet such expectations.

32. A separate point is that the court generally expects the special administrators, as the persons entrusted with the affairs of a company in administration, to exercise their own judgment as to how best to discharge their duties, without looking to the court for approval or protection. The special administrators are experienced professionals with access to all the relevant and available information. They are the persons charged with the duty to distribute client money, and to draw up and implement the distribution plan for other assets. Essentially these are commercial and administrative decisions, albeit that they may have a legal aspect. As Neuberger J put it in Re T & D Industries plc [2000] 1 WLR 646 : “ Commercial and administrative decisions are for him [the administrator], and the court is not there to act as a sort of bomb shelter for him ” (at p 675).

33. Similarly, in the case of Re MF Global UK Ltd [2014] EWHC 2222 (Ch) , an administrator applied for the court’s approval to a settlement agreement ending litigation involving the company in administration. David Richards J noted that, while the compromise of claims may not be on all fours with a purely business decision, administrators commonly exercise the power of compromise without recourse to the court and “ in general apply to the court for directions only if there are particular reasons for doing so ”. That is indeed the court’s expectation.

34. I also bear in mind the observations of by Miles J in Re Sova Capital Limited [2023] Bus LR 779 at [184] (in a passage approved by the Court of Appeal in Denaxe Limited v Cooper [2023] EWCA Civ 752 at [139]). These are expressed to apply commercial decisions but apply equally to administrative decisions such as the content of a distribution plan. “(a) Administrators are professionals who fulfil a commercial role in conducting the business and affairs of a company in administration. They are generally required to make their own commercial decisions and cannot expect to rely on the approval of the court in these respects. (b) There may in this regard be differences between trustees of private trusts and office-holders appointed under the insolvency legislation. Office-holders are required routinely to take momentous commercial decisions and to weigh up the risks and rewards of competing courses. As Snowden J observed in Nortel [2017] 2 BCLC 572 …the principles may be similar but they are not identical in all respects. (c) The question whether there are particular reasons for applying to the court cannot depend on whether the commercial decision is more or less difficult. Even hard commercial decisions are for the administrators, not the court. Nor can the scale of the transaction be the touchstone. Administrators should not assume that the court will entertain an application for directions simply because the matter is hard or large. (d) It may be appropriate to seek the court’s approval where doubts have been expressed about the administrators’ powers or there are potential conflicts of interest or where there may be potential issues as to the legality of a proposed transaction. This is not an exhaustive list but, putting it negatively, the court is unlikely to give directions in a case which is in truth seeking the blessing of a commercial decision. (e) The court may in an appropriate case also be asked to consider the rationality of the proposed course of action (for the purposes of the proper purpose rule). Where it does so, it does not necessarily follow from a ruling on rationality that the court is satisfied that there are no possible claims against the office-holder (for example in negligence) concerning the process which has led up to the relevant decision. The scope of any immunity will depend very much on the facts (see above). (f) The court is not a sanctuary or bomb shelter for office-holders. There is no blanket or automatic rule about the scope of any immunity for the office-holder. The scope of any immunity depends on what precisely the court decides. (g) What matters most for the office-holders and others interested in the estate is that the transaction covered by the approval is secure against future challenge (absent some flaws in the approval process). (h) On an application for directions, the court does not have the benefit of disclosure or cross-examination. The court depends on the administrators to make complete and candid disclosure of the necessary material but the court is not in the position of making a full investigation of the position. A directions hearing should be comparatively short and contained. It is not intended to be a trial, even a mini one. This is a further reason why the court will be cautious about reaching findings of fact going beyond those strictly required by the directions sought.”

35. Here the JSAs are not asking the court to approve a particular transaction because of an issue with, say, their powers to carry it out, or the legality of the transaction. They are asking the court to approve the decisions they have already made as to the terms upon which a distribution plan for the client custody assets should be formulated. Whatever the court decides at this stage will not settle anything because the statutory procedure provides (i) for a detailed distribution plan to be proposed (i.e. not just a Protocol containing indicative terms) (ii) for the creditors’ committee to approve or take issue with the plan and (iii) for a separate approval process to take place before the court, once the plan is finalised. Individual clients and the FCA may also want to challenge the proposal (see the summary of the procedure in Re SVS Securities plc [2020] EWHC 1501 (Ch) at [33] per Miles J). There is no question therefore of any approval by the court at this stage making the proposed contents of the distribution plan “ secure against future challenge ” as Miles J expressed it in Re Sova Capital, above.

36. The JSAs are also asking for the court’s approval to proposed distributions of client money (which do not require a distribution plan but are included in the Protocol) which they already have ample power, and indeed the duty, to carry out.

37. For both the distribution of client money and the distribution plan for the distribution of other client assets, the court is heavily reliant on the judgment of the JSAs in formulating the best way forward.

38. Three particular areas of concern have been raised before me as justifying the JSAs’ application. I deal with each of them in more detail below but they do not require the court to be approving the whole of the Protocol nor to be giving the JSAs leave to apply to clarify, vary or modify it as matters develop. The JSAs retain their full powers and discretion.

39. Two of the areas of concern involve possible consequences of possible illegality in the conduct of the Company’s Tier 1 business. I deal with these further below but I will state here that there is a particular difficulty (this time an evidential difficulty) in asking for the court’s assistance on these questions by this application. This is that the JSAs have not put any information before the court as to their dealings with the authorities on precisely these issues. I do not even know what authorities have been involved. I can see from the evidence (such as the progress reports and intermittent references in the minutes of the creditors’ committee) that the FCA has been closely involved in the progress of this special administration. Which other investigating or prosecuting authorities have been pursuing any interest in the Company’s affairs, and to what purpose, I do not know. There is no evidence as to the substance of any such involvement. Mr Davis KC confirmed at the hearing that the JSAs’ intention was to preserve confidentiality in such discussions as may have taken place, and there was also a suggestion that the JSAs might not want to risk personal liability for disclosing the existence of any ongoing investigation (the so-called “tipping off” offence in section 333 A of the Proceeds of Crime Act 2002 ). That was no doubt a considered and sensible approach from the JSAs’ own point of view but it follows that the court has no idea about the precise circumstances in which the JSAs have decided to progress the special administration now without reference to, or further investigation of, the possible illegality issues. That makes it rather difficult, and as I see it inappropriate, for the court to approve a particular course of conduct in relation to these issues.

40. The JSAs’ application faces the further difficulty that, even if the court were to approve the Protocol, or any part of it, and the JSAs were to proceed accordingly, it is impossible to see what benefit the JSAs would obtain from having received the court’s approval. The JSAs are not surrendering their discretion to the court; they are asking for the court’s approval to a course of action they themselves have already decided upon and which is within their power to decide. In such a case, the court is concerned only with the limits of rationality and honesty: in other words the court is concerned to establish whether the JSAs can properly form the view that the proposed course of action is for the benefit of the Company, its clients and creditors (rationality) and that they have in fact reached that view (honesty): see the passage from Lewin on Trusts (18 th ed) (2008) quoted with approval by David Richards J in Re MF Global UK Limited (No. 5) [2014] Bus LR 1156 at [32].

41. The JSAs’ honesty is not in issue so the court is only concerned with the question of rationality.

42. Where, however, the court approves the rationality of the proposed course of action, it does not follow that the JSAs will automatically thereby be immune from further criticism or legal action in relation to that course of action: see the discussion in Denaxe , supra, per Snowden LJ, particularly at [127] to [142].

43. The court which is asked to give approval can, and perhaps should, state precisely for what purpose its approval is given and with what consequences for the JSAs’ protection from future challenge: see the Denaxe case at [165] to [166] per Snowden LJ. In a case such as this, the court would have to make it clear that its approval of the rationality of the JSAs’ course of action had no real practical consequences for the JSAs’ protection. The court cannot cure any underlying illegality. It is not approving any particular transaction. It is not approving a distribution plan or the terms of any distribution of client money. At most, the court is approving only the terms upon which the JSAs should propose a distribution plan (including some terms affecting the distribution of client money). But given that there is a statutory procedure which needs to be followed before a distribution plan can become effective, involving input from the creditors’ committee and later approval by the court, any approval the court may give at this stage does not prevent anyone interested from, say, objecting to any terms of the final form of the distribution plan, or seeking earlier distribution of client money. If the approval is to be so circumscribed, it is difficult to see any practical utility in approving the JSAs’ proposed way forward at a time when the distribution plan has not even been drafted.

44. As I understand it, what the JSAs are really concerned about, particularly as regards the illegality issues, is whether they should be carrying out any further investigation of the potential illegality of the Company’s Tier 1 business, and giving any more consideration to the consequences of any such illegality, before proceeding to make distributions of client money and other assets. Currently, the JSAs intend to distribute on the basis of the entitlement to assets they have settled from Company information; they have not investigated (a) whether any illegality could be proved or (b) what effect any such illegality would have for any of the clients’ apparent rights. In other words, in so far as the JSAs are concerned about the illegality issues, they are not really asking for the court’s approval of the exercise of their discretion as to how to proceed (with the potential limitations that process may have for their protection) but rather were seeking something like a Benjamin order (after Re Benjamin [1902] 1 Ch 723 ). Such an order would enable them to proceed in the special administration on a particular factual footing (i.e. here, that there were no proprietary or other claims by or against the Company or in respect of the client assets which would affect the distribution of the client assets in accordance with the JSAs’ proposals). An order of this kind would provide protection for the JSAs if they were to distribute in accordance with it, while not excluding genuine claimants from making claims to the distributed assets.

45. I note that a Benjamin order has been made in an administration like this: see Re MF Global Limited [2013] 1 WLR 3874 . There, David Richards J made an order enabling the administrators of a company to distribute client money to known and recognised clients notwithstanding (a) that there may have been claimants of whom the administrators were unaware and also (b) that there were claims which were known about but had been rejected, without appeal to or adjudication by the court. The basis for making such an order was whether “ it is impossible or impracticable to establish the fact one way or the other ” (i.e. in that case, the fact of who were the correct claimants): see [29]. As David Richards J explained at [32]: “… the purpose of the client money trust established by the CASS rules and the purpose of the client money distribution rules in CASS 7A is to protect the position of clients and to facilitate the timely return of client money in the event of failure of the firm. These purposes are not well-served by long delays while at considerable expense claims, which have been made but not pursued, are finally determined through the court proceedings.” The administrators were therefore allowed to proceed on the footing that their settled list of beneficiaries of client money was final, subject only to known but rejected claimants being given an opportunity to have their claims determined by the court: see [21] and [32]. There is no reason in principle why such an order could not be made in relation to the distribution of client assets under a distribution plan as much as to the distribution of client money.

46. The jurisdiction of the court to make a Benjamin order is not ousted by the provisions of IBSA Regulations 11 and 12A, which allow special administrators to set (soft) bar dates for the submission of claims to client assets and client money respectively, nor by IBSA Regulations 12B and 12C for “ hard ” bar dates. These provisions offer a convenient mechanism for affording further protection to the JSAs in their dealing with unknown or unresolved claims. (Presumably these bar dates offer more certainty and more convenient protection than the so-called Alpari order (after Re Alpari , unreported, 29 th September 2016) whereby the beneficial interests in client assets are varied to exclude non-responsive potential claimants: see Re Pritchard Stockbrokers Ltd (in special administration) [2019] 2 P&CR DG5, per Norris J at p D11). Bar dates, however, affect claims by clients: they do not apply when the effect of the illegality of a client may be that the Company itself may withhold payment.

47. A Benjamin order could well be appropriate here. However, this is not the occasion to be considering whether or not a Benjamin order, or something like it, should be granted on the JSAs’ application. For one thing, that is not what is asked for by the JSAs on this application and the evidence is not specifically directed to the issues that would arise on an application for such an order. More importantly, and consistently with what I have set out about the relevant procedure, a Benjamin order seems to me to be a potential feature of a distribution plan, which will require discussion with the creditors’ committee and the court’s approval in due course, and is not a matter to be debated at this stage before the distribution plan has even been drafted. The point could arise now however in the context of Firestone’s application for an interim distribution of client money, and I return to it below.

48. Though I therefore decline to make any order on the JSAs’ application, I will add the following on the particular issues which the JSAs regard as significant and which have been the subject of extensive submissions before me. The three issues are (i) the illegality issue (ii) the claim made by Trowers’ clients and (iii) the allocation of costs and remuneration. I will add some further brief comments at (iv) as to the rest of the Protocol. (i) The Illegality Issue

49. The JSAs have expressed their concern that, because the Tier 1 business arguably involved the commission of criminal offences and perhaps other illegality, they should not proceed to finalise a distribution plan without the approval of the court. The criminal offences are said to include: - offences by the Tier 1 clients to the extent that they knowingly sought to obtain leave by deception, contrary to section 24A of the Immigration Act 191 (which was the FCA’s provisional conclusion, above) - offences by the Company or its officers, employees and agents in facilitating the commission of a breach or attempted breach of immigration law, contrary to section 25 of the Immigration Act 1971 . The consequences are said to include the possibility of the authorities seeking an order under the Proceeds of Crime Act 2002 and perhaps a freezing order in support. Practical issues for the JSAs include the need to avoid concealing or dealing with potential “ criminal property ” (sections 327 to 329) and the need to avoid tipping off any person that an investigation is being carried out ( section 333 A).

50. It is not clear to me how far the JSAs are still concerned about the possible criminal liability of anyone. As I have already noted, the JSAs do not feel able to inform the court of any of the discussions they have been having with relevant authorities about the commission of any offence so I have no idea what investigations may have taken place or may still be taking place. So far as I know, no prosecutions have resulted and no claims have been made under the Proceeds of Crime Act. Mr Davis KC rather cryptically invited me to take into account the fact that the JSAs now feel free to make this application and proceed to a distribution, so perhaps any criminal investigation is over.

51. What are the potential consequences of any illegality which may theoretically have taken place? Dealing first with the JSAs’ own position, there seems to be no serious issue. I have no qualms in relying on their own knowledge and expertise (supported as it is by their access to legal advice) to remain within the bounds set by the criminal law.

52. Furthermore, the Proceeds of Crime Act contains its own route for the JSAs to avoid liability by making the appropriate disclosure under section 338 and obtaining appropriate consent. This is the so-called defence against money laundering or “DAML”. The Protocol (para 1.1) contains a term for the JSAs to act only in accordance with a DAML where they suspect that any client assets are criminal property within the Proceeds of Crime Act. The court’s approval adds nothing to this proposed course of action so I am not clear why it is thought appropriate to ask for it.

53. Similarly, some of the client custody assets are Russian and any dealing with them may be caught by the Russian sanctions regulations. But the JSAs can avoid committing any breach of those regulations by obtaining appropriate consent or licence from the Office of Financial Sanctions Implementation (OFSI). The Protocol (para 1.2) contains a term for the JSAs to act only in accordance with such a licence or upon confirmation from the court that no licence is required. It is not clear to me why the court is asked to approve this paragraph, which simply describes what the JSAs will be doing anyway. There is no issue before the court as to any current difficulty in relation to sanctions which cannot be resolved by obtaining the relevant licence.

54. Para 1.3 of the Protocol takes matters no further: it simply adverts to the possibility of further applications to clarify the JSAs’ powers and duties.

55. Apart from these specific points affecting the JSAs’ own position, the JSAs raise a more general issue arising out of the potential illegality of the Company’s Tier 1 business. Essentially, the JSAs are asking for the court’s approval to proceed to a distribution plan even though they are or may be said to be on notice that there may have been offences committed by the clients to whom the assets are to be returned. (The point is implicitly raised by paras 1.4 and 2.1 of the Protocol). This raises a number of problems.

56. To begin with, the JSAs have much more knowledge than they have felt able to share with the court as to the likelihood of any criminal prosecutions being brought or, more pertinently, of the likelihood of anyone being convicted. I have no sense therefore of how serious a practical issue this might be.

57. However, I note that the JSAs have already made their own decision, with the benefit of their knowledge of matters which they have not shared with the court, not to investigate any potential criminal conduct on the part of the Company’s Tier 1 clients or the Company’s officers, employees or agents. I can assume, I think, that they cannot see any potential advantage to the Company, or to the achievement of the Objectives of the special administration, which would justify the expense which such investigations would entail; and there is some evidence that the Company’s records are such that it may not even be possible to carry out a full investigation of such matters. That is the decision of the special administrators which does not need the court’s approval.

58. Mr Davis KC has cited to me a number of authorities on illegality in civil disputes, including Patel v Mirza [2017] AC 467 , Grondona v Stoffel & Co [2021] AC 540 and Henderson v Dorset Healthcare University NHS Foundation Trust [2021] AC 563 . These are cases where the issue of illegality has arisen as a defence to a possible claim. For example, in Patel v Mirza a claim in unjust enrichment for the return of money transferred in pursuance of a criminal scheme was met with the defence of illegality (which failed); in Grondona , a claim in negligence against conveyancing solicitors was met with the defence that the transaction in which the solicitors were instructed was illegal because it was part of a mortgage fraud (again, the defence failed); in Henderson , a claim in negligence for failure to provide adequate care was met with a defence of illegality in that the damages claimed arose from the claimant’s own criminal actions (the defence succeeded). In each case, the court applied the threefold test set out in Patel v Mirza by Lord Toulson at [120]: “The essential rationale of the illegality doctrine is that it would be contrary to the public interest to enforce a claim if to do so would be harmful to the integrity of the legal system (or, possibly, certain aspects of public morality, the boundaries of which have never been made entirely clear and which do not arise for consideration in this case). In assessing whether the public interest would be harmed in this way, it is necessary (a) to consider the underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim, (b) to consider any other relevant public policy on which the denial of the claim may have an impact and (c) to consider whether denial by the claim would be a proportionate response to the illegality, bearing in mind that punishment is a matter for the criminal courts.”

59. It is quite impossible to attempt any sensible analysis of how this principle might apply to any relevant claim in the Company’s special administration. To begin with, one cannot assume that any Tier 1 client of the Company has committed an offence. While the artificiality and deceptive nature of the Tier 1 scheme seems pretty obvious now to an English administrator or regulator (or judge), it is not clear that a client who signed up to the scheme, possibly with no knowledge of the English language let alone English law, and possibly on receipt of assurances from a regulated investment bank like the Company that the service was all perfectly proper, would have intended any deception of the immigration authorities or understood that the scheme had that effect. The evidence does not address the knowledge or intentions of any of the clients nor what they were individually told by the Company. If the clients can escape criminal liability, the Company (and its officers, employees and agents) may not in consequence be guilty of facilitating a breach of immigration law.

60. Even if a criminal breach is proved, what is the claim to which any defence of illegality applies? As I have summarised above, the net effect of the Tier 1 scheme (on the “Gold” service) was that the client would pay £400,000 and also receive Conflicted Securities with a nominal value of £1.6 million. But the likelihood on the (admittedly limited) evidence so far is that the £400,000 was not received by the Company (as opposed to, say, RMS Global) and was not treated as client money, as opposed to money of the Company; on the contrary, the money seems to have been treated as the Company’s (or the group’s) own money and disbursed on Company or group obligations (such as payment to introducers or to the companies issuing the Conflicted Securities). The JSAs have carried out no investigation of the money flows (as Mr Davis KC specifically confirmed to me at the hearing) so the exact position remains opaque but one can conclude that it is not established on the evidence that any current claimants to the client money are in essence claiming back some share of their original £400,000 payment (which may theoretically be caught by a defence of illegality). By the same token, it is not established that there is any financial benefit to the Company or its creditors for the JSAs now to be raising any question of illegality in relation to what remains of this money in the Company’s hands.

61. The JSAs do, of course, hold and are required to distribute (or otherwise deal appropriately with) the Conflicted Securities. But these are either of no value or of very limited value and are currently categorised by the JSAs as unrealisable. So whatever the strict legal position, there is no commercial benefit to the Company or its creditors in the JSAs expending time and money on raising an illegality defence in relation to them (and thus perhaps claiming them as part of the Company’s House Estate). It may be that many of the clients who are entitled to the Conflicted Securities will disclaim any interest in them; if they do, that would render moot any illegality issue in relation to these assets.

62. To recap, the real issue here (rather hidden behind para 1.4 and para 2.1 of the Protocol) is whether the JSAs should be carrying out any further investigation to establish whether the Company’s (or anyone else’s) position could or would be improved or affected by challenging claims to client assets on the part of Tier 1 clients that the JSAs would otherwise, on current evidence, be minded to accept. As I see it, that is entirely a matter for the JSAs’ discretion and judgment and needs no approval from the court. At this stage the JSAs have rather more information than does the court on which to assess (i) the likelihood of establishing criminal conduct by any of the Company’s clients and (ii) the potential benefit to the Company or anyone else of raising an illegality defence to any client claims to client assets.

63. To be clear, in withholding the court’s approval at this stage, I am not suggesting that I have any criticism on the evidence before me of the JSAs’ decision to proceed without further investigation; and I am emphatically not suggesting that I disagree with the JSAs’ approach. I am simply leaving the decision to the JSAs. If there is any criticism to be advanced by anyone, on substantial grounds, to the course of action proposed, the point can be revisited when the full terms of the distribution plan are in place and the court is asked to approve it. (ii) The Claim by Trowers’ Clients

64. A different type of possible illegality has been raised in correspondence by a group of potential litigants represented by Trowers & Hamlins (“Trowers”). This is in the nature of hostile litigation i.e. a potential claim against the Company or its representatives and others in respect of the operation of the Tier 1 scheme. This does not directly affect the JSAs, save to the extent that it may raise proprietary claims against the Company’s assets (money or other assets) which would otherwise be the subject of distribution to the Company’s clients. The issue therefore is whether Trowers’ clients have raised a proprietary claim or whether the JSAs can proceed to settle a distribution plan without allowing for it. This appears to be the main point of para 2 of the Protocol.

65. The claim by Trowers’ clients was originally put forward in a letter from Trowers to DWF (the JSAs’ solicitors) dated 18 July 2023. The thrust of this letter was that the Company’s Tier 1 scheme was a fraud perpetrated by Mr Nagy and entities controlled by him (“the Nagy entities”) on their Tier 1 investors who included Trowers’ clients; particular complaint was directed at the introducing agents (“Astons”) who received secret commissions from the Nagy entities in alleged breach of fiduciary duty; the Trowers clients therefore had potential priority and tracing claims against the Nagy entities (including the Company) and “ may seek an injunction to prevent the distribution of [the Company]’s assets, as otherwise, the real risk of dissipation post distribution to any offshore Nagy Entities would make any future enforcement against those entities impossible ”. The immediate concern of Trowers’ clients at that stage was to investigate their claims through the documents held by the JSAs.

66. The JSAs’ response was to engage with the request for documentation (and later requests). The correspondence on this has been extensive and has been one of the factors delaying the distribution of client assets. Trowers eventually wrote to the Company (c/o the JSAs’ solicitors) on 12 August 2025 to explain their claim more fully. As now formulated, the claim was by Trowers’ clients (as Tier 1 clients of the Company) against the Company, Mr Nagy, Mr Joukowski, RMS Global, ILG, DASL and others for unlawful means conspiracy, deceit and bribery (that is, secret commissions) as a result of which (it was said) the claimants had lost the fees they had paid and the contribution they had put into the Tier 1 scheme (e.g. under the Gold service, the £400,000) as well as interest and loss of opportunity to invest the contribution elsewhere. The claimants reserved all their rights to all remedies they may have as a result of the secret commissions and “ all of their rights in respect of any potential proprietary claims against ILG and/or RMS Global BVI (and any other parties) ” but did not specifically make any proprietary claim against the Company or to client assets held by the Company.

67. By a letter dated 3 October 2025 from Trowers to Norton Rose Fulbright (who were at that time jointly instructed alongside DWF by the JSAs), Trowers wrote further to set out its position on the JSAs’ current application (amongst other things). Trowers pointed out that, on DASL’s own evidence, there were 8 (now 7, I think) clients of DASL with a connection to Mr Nagy (defined to include entities in which Mr Nagy has a direct or indirect beneficial interest) and stated that it is “ reasonable to assume the other Defendants (including Nagy, ILG, RMS Global BVI) have accounts with [the Company] which contain Client Money .” On that footing, they reserved their right to “apply for a freezing injunction in respect of any accounts under [the Company]’s control which contain Client Monies that belong to, or are being held on trust for, the Defendants .” Trowers had no objection to an interim distribution of client money to these clients who were not Defendants (providing those moneys were not being held for the prospective Defendants); and they suggested that the JSAs should proceed by providing an undertaking not to distribute any funds held on behalf of Defendants (as co-conspirators).

68. Trowers’ clients have not appeared on the JSAs’ Application, though I understand they have been given access to a livestream of the hearing and will in due course no doubt be concerned to consider how this judgment affects them.

69. I do not think their proposed way forward has any merit for the following reasons: (a) The court does not have any evidence from Trowers’ clients as to important aspects of their claim; for example, the unlawful means said to have been employed, the deceit alleged to have been practised on them, the fiduciary duty said to be owed and so on. I do not think it right effectively to freeze client moneys in the JSAs’ hands without Trowers’ clients providing to the court the same evidence they would need to prove if they were seeking a freezing injunction. (b) Trowers’ proposal would freeze client money in the JSAs’ hands without any cross-undertaking in damages as would be required on an application for a freezing injunction. Trowers’ letter does not offer any such cross-undertaking (or show why it should not be secured). (c) Trowers’ proposal puts the onus on the JSAs to work out who are the ultimate beneficiaries of client moneys, so as to be able to identify from whom to withhold distribution. This is quite wrong: it is for Trowers’ clients to prove what client money should be frozen and on what evidential basis. (d) It is not clear to me how Trowers’ clients can be said to have a beneficial interest in client moneys i.e. a proprietary claim which takes priority over the beneficial interest of any particular client. Again, if that is their claim, it is for Trowers’ clients to prove to the court that the money standing to the credit of a client account is actually theirs (by reason of some tracing remedy or constructive or other trust). If Trowers’ clients cannot prove that, their claim for a freezing injunction is not a proprietary claim but a claim to freeze assets for enforcement purposes if they should ultimately achieve a judgment. There is no reason why the mere possibility of an injunction of that latter kind should interfere with the distribution of client moneys pursuant to the statutory trust or with the drafting or implementation of a distribution plan in accordance with the prescribed procedure. There is no sufficient evidence before the court at the moment which could justify an interference with the distribution process in the interests of Trowers’ clients.

70. In the circumstances, there is nothing in Trowers’ clients’ claim to hold up the drafting of a distribution plan for submission to the creditors’ committee and subsequently to the court. The position can be reviewed by the court at the proper time.

71. As for distributions of client money, I am going to order an interim distribution on Firestone’s application (see below) which will benefit Firestone and DASL and others. This is on the basis that the JSAs have themselves determined that they can now proceed with distributions of client money without taking account of the possible claim by Trowers’ clients (which is the decision they want the court to approve). If the JSAs want the court’s protection before the interim distribution is made, I have left open the possibility of their applying for a Benjamin order (see below). That seems to me a more appropriate means of resolving the question than approving the Protocol.

72. Para 2 of the Protocol refers to proprietary claims of “ another Client or other third party ” (other than someone with a Security Interest). I have not been told that any particular issue arises in relation to anyone other than Trowers’ clients but, if there are any other issues, they can be addressed when the JSAs return to court for the approval of the distribution plan. (iii) The Allocation of Costs, Expenses and Remuneration

73. An issue that has loomed large in this special administration is the proper allocation of costs, expenses and remuneration among the Company’s clients. An initial problem for the JSAs is that the FSCS has refused to offer the kind of blanket support for the costs of the special administration which the JSAs would have hoped for. The FSCS has a discretion to provide appropriate compensation in cases where (so far as material) a firm is unable, or likely to be unable, to satisfy a claim made against it. The compensation scheme is established under section 213 of the Financial Services and Markets Act 2000 and the rules of the scheme are made by the FCA under 213(1). The FSCS takes the view that compensation is not available under the rules because the Company was not carrying out “ designated investment business ” in relation to “ designated investments ” in respect of all of its clients. The FSCS is prepared to consider claims by individual clients of the Company, including for any costs they have had to pay in connection with the special administration, if they can prove they can satisfy the eligibility requirements for compensation; but that is a consideration for later, when the special administration is (more or less) complete.

74. The JSAs have not formally challenged the FSCS’s position, whether on this application or otherwise.

75. It follows that the JSAs are concerned to establish (a) that there will be sufficient assets available in the special administration to cover their remuneration and the costs and expenses of the special administration and (b) that they will be fairly allocating the aggregate of these liabilities between the remaining clients of the Company (i.e. remaining after the Britannia transfer).

76. Point (a) does not represent any real problem. The client money still held by the JSAs is £44,894,422.61. That is a fixed figure. The JSAs can look to that sum for payment of all of “ the costs properly attributable to the distribution of the client money ” in accordance with the statutory trust created by CASS 7.17.2R. The JSAs also, incidentally, claim that the Company is entitled to all interest accruing on the pool of client money under the Company’s terms and conditions; if they are right on that (and I am not determining the point on this application) the accrued interest must by now be a substantial further source of money to meet relevant costs.

77. The remaining client assets other than money create a few more difficulties. The JSAs have sought to establish which of these assets are realisable and which are unrealisable and to give a value to those that are realisable. The Conflicted Securities would appear to have no actual value (or very limited actual value) whatever their nominal value. There are also some assets which are said to create problems for realisation, notably the shares in a number of Russian companies; Mr Stephens thinks these may be difficult to transfer as it is likely that no readily available market exists for them (eighth witness statement, para 192); a transfer of these assets may also need to be the subject of a licence from the OFSI which the JSAs will apply for, if necessary. For the time being, the JSAs have classified these shares as unrealisable (though Firestone has criticised that approach). Even so, the realisable assets are said to have had a value of £30,412,448.37 as at 31 December 2024 (Mr Stephens’ eighth witness statement, para 41). A more recent attempt to put a value on these assets, following the JSAs’ loss of access to Bloomberg data which had been an important source of valuation evidence, suggests a total of £33,284,610.39 (see the letter from the JSAs’ solicitors to Firestone’s, dated 22 October 2025) though Firestone has some criticism of the details of that valuation.

78. In addition, Corporate Action Income (“CAI”) has been received in the special administration from client assets other than money in a total amount of £10,525,343.30, according to the letter of 22 October 2025 (up from £8,999,628.24 as at 31 December 2024, as per Mr Stephens’ eighth witness statement para 41).

79. So there are assets of substantial aggregate value to pay the costs of the special administration.

80. As to point (b), the issue is how to allocate the costs of the special administration between the 150 remaining clients of the Company (following the Britannia transfer). Many of the clients are entitled to Conflicted Securities which they are likely to disclaim as having no value (particularly if they attract cost); some clients (possibly only one) are entitled to other assets so far deemed to be unrealisable (the Russian assets) though having some potential for realising value in due course. The major clients are Firestone and DASL who between them, are entitled to around 60% of the client money and realisable assets (using the figures on Mr Willson’s Key Figures document).

81. In these circumstances, the JSAs’ Protocol puts forward a scheme or model for ensuring payment of the costs of the special administration but seeking to achieve fairness of allocation among clients. This involves the following: (a) for client money, approved remuneration in pursuit of Objective 1 and properly payable expenses of the special administration in relation to client money will be allocated pro rata to the value of client money held for each client (para 3.2.2); (b) for CAI, remuneration in pursuit of Objective 1 and properly payable expenses of the special administration in relation to CAI will be allocated pro rata to the value of CAI held for each client (para 3.2.3); (c) for client custody assets, remuneration in pursuit of Objective 1 and properly payable expenses of the special administration in relation to client custody assets will be allocated to the client custody assets on an “ amount per client custody asset ” basis, capped at the value of the relevant asset (para 3.2.1.1) with reallocation among realisable assets, if a client disclaims an unrealisable asset or does not respond to communications (para 3.2.1.3). The “ amount per client custody asset ” basis is intended to reach a fair result for the reasons explained by Mr Stephens in paras 292-319 of his fifth witness statement; (d) clients will be given the option of paying their share of Objective 1 costs from their share of client money or CAI (para 5.7 and 5.8). If they so elect, the JSAs will hold back an appropriate sum from any distribution of client money and CAI (para 5.9); (e) a procedure is to be set up for establishing whether an asset is realisable or unrealisable (para 6). This involves the JSAs making a determination (para 6.1) based on such evidence as they consider it appropriate and economic to take into account (para 6.2) with clients being notified of the decision and its consequences (paras 6.4 and 6.5) and having the right to challenge the determination (para 6.6) if necessary by application to court (para 6.7); (f) costs allocated to realisable assets may be paid by realising the assets (para 7); (g) an interim distribution of client money and CAI will be made as soon as reasonably practicable (para 5.2), withholding an amount to meet Objective 1 costs attributable to each client’s client money, other assets and CAI (para 5.5).

82. In my judgment, it is far too early to be asking the court for its approval to this proposed allocation of costs. I note the following: (a) The whole scheme is expressed in the Protocol (para 3.2) to be “ Without prejudice to the requirement in rule 137 of the Rules to set out in the Distribution Plan the special administrators’ proposals for allocation between client assets of the expenses to be paid, for review at that stage by the Committee and approval if seen fit at that stage by the court. ” It seems to me to be wrong in principle for the court to be giving early approval to a particular proposed allocation before the creditors’ committee has considered it in detail and before the court can assess the operation of the scheme as a whole thereafter. (b) The practical outcome of the proposed allocation depends on identifying the number of clients who wish to give up their interest in unrealisable assets. This is entirely unknown until the JSAs start to put their proposals on a more detailed footing and write to the clients to ask them what they want to do. The court needs to see the detailed distribution plan and have some idea of its practical consequences (not least from the reaction of the committee) before approval can sensibly be considered. The Protocol itself acknowledges (para 3.2.1.4) that “ the fixed sum to be paid on a per Client Custody Asset basis will therefore only be able to be ascertained after the JSAs have determined how many Clients with Unrealisable Custody Assets wish to retain their Custody Assets and will pay their share of the Objective 1 Costs to do so ”. By the time the court is asked to approve the distribution plan, there is likely to be more information than I have before me to assess this aspect of the proposal. (c) Firestone has raised issues as to the fairness of the proposed allocation. In particular, Firestone points out that it is unfair that clients who disclaim their unrealisable assets should escape liability for the costs associated with these assets if they have other assets (i.e. realisable assets and even client money) from which those costs could be paid. The JSAs’ answer to this is in their solicitors’ letter of 22 October 2025 which (in summary) argues that Firestone’s suggestion would lead to a shortfall in the payment of costs. It seems to me that I should at this stage leave issues of this kind open, without comment from the court, to be given further consideration, both by the JSAs in formulating the distribution plan and the creditors’ committee when considering it, before the court is asked for its approval to the actual plan. I can certainly understand Firestone’s frustration that it is in effect being required to pay a substantially greater share of the costs of the special administration than clients who actively participated in the Company’s Tier 1 scheme even though, on its case, it has done nothing equivalent to cause such heavy expense for this special administration. If Firestone had been accepted as a client by Britannia (as Firestone says it should have been), it would not be facing such cost. (d) Firestone has also raised issues as to the JSAs’ categorisation of certain assets as realisable or unrealisable. I appreciate that the JSAs have recently lost access to the Bloomberg data they had previously relied upon and are now having to use alternative sources of data to establish the realisability of individual assets; but it would be helpful for the court to have a more settled picture as to what is and is not realisable than I have on the evidence before me before being asked to approve a proposed allocation of costs. That includes having a clearer picture of what issues are raised by the Russian assets: are these in fact caught by the sanctions regime, do they in fact require a licence to transfer, what is the likelihood of such a licence being granted and (whether a licence is required or not) how can value be realised for these assets? The current evidence is unhelpfully inconclusive. When the distribution plan comes before the court for approval, it would be helpful to have as clear a picture as is then possible of what assets are available for the payment of costs. (iv) Other points

83. The Protocol raises some other issues which have not been fully explored before me.

84. It is suggested that the costs of the Britannia transfer be treated as incurred in pursuit of Objective 3 rather than Objective 1 and therefore paid out of the House Estate rather than client assets (para 4). That does not seem to be controversial among the parties before me but I will not approve it now, pending further consideration in the distribution plan and the consideration of the creditors’ committee.

85. Interest on client money has been used to pay expenses (on the basis that the Company’s terms and conditions appoint interest to the Company rather than the client) so provision is made for the JSAs to reimburse to the House Estate any expenses which should properly be paid from client money, assets or CAI (para 8). This seems uncontroversial but, again, I will not approve it pending the production of a detailed plan and the consideration of the creditors’ committee.

86. Further provisions are included about client communications to aid finality in the JSAs’ decision-making (para 9) and to confirm the JSAs’ status (para 10). These do not call for comment at this stage. I have some evidence about the difficulties of communication with clients (see, in particular, Mr Stephens’ fifth witness statement at para 369 onwards), which includes the fact that the JSAs have been liaising with the FCA about how to deal with non-responding clients. That process can be left to continue for the moment, pending settlement of a distribution plan and consideration by the creditors’ committee. Firestone’s Application

87. I turn then to deal with Firestone’s application, which is for two forms of relief: an order for an interim distribution of client money and a declaration in respect of the JSAs’ alleged delay. The actual relief claimed by the application notice is as follows: “1. In light of the delays by the JSAs – which include making no distribution to the holders of Client Money (despite there being no reasonable basis for their not having done so) – a direction that the JSAs forthwith make an interim distribution to the holders of Client Money of at least 90% of the Client Money claims.

2. In light of the above-mentioned delays of the JSAs in relation to the conduct of the special administration – which has been ongoing for 3½ years [now 4½] – and the continuing delay in the JSAs making a direction application to the court, a declaration under paragraph 74(2) of Schedule B1 that the JSAs have not performed their functions as quickly or as efficiently as is reasonably practicable (and consequential relief) .”

88. A draft order served with the application seeks first, a direction that the JSAs “ shall make an interim distribution to the holders of Client Money of [at least] 90% of their Client Money claims within [21] days of this Order ” and, secondly, a declaration that the JSAs “ have not performed their functions as quickly or as efficiently as is reasonably practicable .” I will take these issues in reverse order. (1) The Declaration as to the JSAs’ Delay

89. There are a number of preliminary issues arising under this part of Firestone’s application.

90. First, a dispute has unhelpfully arisen between the parties as to what was the effect of the procedural order made by Nicola Rushton KC on 10 June 2025 as to the hearing of these applications. In particular, the JSAs question whether the deputy judge intended this aspect of Firestone’s application to be dealt with at this hearing; Firestone contends that it was always clear that this part of their application was to be before the court. The parties have exchanged and filed supplementary submissions on this point after the hearing before me.

91. As I see it, it was clearly part of the deputy judge’s order that this aspect of Firestone’s application be before this court. Paragraph 2 of that order orders this hearing to take place, at which “ the Court shall determine … (b) the substance of the Firestone Directions Application ” (defined to include both aspects of Firestone’s application).

92. It does not follow that I am obliged to deal with the substance of this part of the application if I do not think it appropriate to do so. For the reasons I give below, I do not think it appropriate to make any substantive decision on this aspect of Firestone’s application, even if it is formally before me. To put it another way, dealing with the “ substance ” of this issue does not preclude making further directions or requiring it to be dealt with in some other way.

93. A second preliminary issue is as to the ambit or reach of paragraph 74(2) of Schedule B1 to the Insolvency Act 1986 (as applied to investment bank special administrations by reg 15(4) of the IBSA Regulations). Paragraph 74(2) is the paragraph pursuant to which this part of Firestone’s application is expressly brought.

94. Paragraph 74(2) provides “ A creditor or member of a company in administration may apply to the court claiming that the administrator is not performing his functions as quickly or as efficiently as is reasonably practicable .” Mr Davis KC submits that this paragraph is not an appropriate gateway for what is in essence a personal claim against the JSAs for relief in respect of past misconduct. He cites Re Coniston Hotel (Kent) LLP [2015] BCC 1 in which Norris J expressed the view (admittedly in the context of a claim under paragraph 74(1) rather than 74(2)): “ It is quite plain that for the purposes of para. 74 of Sch. B1 the application is brought by reference to the applicant’s standing as a ‘creditor or member’ and is directed to the protection of his interests as such. The primary relief is directed to regulating the conduct of the administration itself ” (at [35]) and again: “ Paragraph 74 is about management and para. 75 is about misconduct ” (at [69]).

95. Mr Willson responds that, on the language of paragraph 74(2), it would in many cases (including this one) be impossible to decide whether an administrator “ is not performing his functions as quickly or as efficiently as is reasonably practicable ” without going into the history of his performance to date; it follows, he submits, that a member or creditor should be able to bring a claim for compensation under paragraph 74(2) where past failures have caused loss to a member or creditor. That view appears to be supported by the editors of Lightman & Moss, Law of Administrators and Receivers of Companies, 6 th ed, paras 12-031, 12-043 and 12-062.

96. It is not necessary for me to decide this point because, for the reasons I am about to explain, it seems to me to be wholly inappropriate to be considering Firestone’s application for declaratory relief on this application.

97. So the third (and, in my judgment, crucial) preliminary issue is: assuming a claim for a declaration can be brought under paragraph 74(2), should the court entertain Firestone’s claim on this application? My answer to that question is: emphatically not.

98. I note at the outset the rather vague terms of the declaration sought, which is not anchored in any particular claim for compensation or other substantive relief. I asked Mr Willson to clarify what is specifically in issue here by formulating a more precise form of words and he proposed a declaration as originally drafted but with the following specific refinements: “1. The JSAs ought to have finalised the process for marketing the Residual Client Book (“RCB”) by much sooner than March 2023.

2. Without prejudice to 1, the JSAs ought to have made an interim distribution of Client Money by, at the latest, March 2023 (alternatively August 2023).

3. Without prejudice to paragraph 1, the JSAs ought to have applied to Court to approve a Distribution Plan by, at the latest, August 2023.

4. Without prejudice to the foregoing, the JSAs ought to have made an interim distribution of Client Money before seeking to fix their own remuneration in respect of Custody Assets. ” Such wording at least focuses on where the real criticisms lie. But it also serves to underline how inadequate the current application is for a decision on such issues.

99. Mr Willson explained to me that Firestone was seeking the declaration (and specific declarations) to enable it to progress its position on two fronts. First, a declaration or declarations would assist in a claim by Firestone against the JSAs for compensation for the failure to act with greater urgency. To take an example of the kind of claim which Firestone has in mind, the failure to effect an earlier distribution of client money has (it is said) lost Firestone the interest it would have received had the JSAs acted more timeously. Secondly (it is said) the declaration or declarations sought would assist in the resolution of the section 202 applications still outstanding (which call into question the JSAs’ remuneration and expenses). In my judgment neither route can sensibly be assisted by the declaration or declarations sought on this application.

100. As for the prospective claim for compensation for delay, it is important to note that this would be a claim for breach of duty by the JSAs (i.e. the duty under reg 10(4) of the IBSA Regulations to act as quickly and efficiently as reasonably practicable and maybe other duties). That would usually require a proper statement of case, setting out (at least) the duty or duties relied upon, the particular breaches complained of, the damages caused by the breach and the quantum.

101. Given that the JSAs have at all times had to act in accordance with what is “ reasonably practicable ”, it would be necessary to set out in a statement of case why it was not reasonable to take so long and why it was in fact reasonably practicable to act with greater urgency. This is not necessarily a simple or straightforward exercise. The JSAs have a wide discretion to act as they think best to achieve the relevant Objectives efficiently and they are not to be found in breach of duty merely because someone else would have acted differently or because in hindsight a quicker outcome could have been achieved.

102. A properly pleaded case would define the areas of criticism. A trial could then take place where the JSAs could answer those criticisms by giving evidence about their reasoning from time to time (which may include waiving privilege in any legal advice that guided them or introducing other confidential material which the JSAs have felt unable to share with the court and the parties on this application). There may conceivably be scope for expert evidence to be adduced at trial as to what could have been achieved had the JSAs expedited certain courses of action.

103. None of this can be properly examined on a summary application of the sort that is before me. Even limited to the particular concerns highlighted by Mr Willson’s revised form of relief, it is quite impossible to make sensible declarations along the lines proposed without a fuller examination of what took place and why, and whether that was within the bounds of what is reasonably practicable, than is possible on the (voluminous but) unfocussed evidence before me on this application and without the issues being defined by statements of case.

104. The parties have tried to give their respective positions a little more coherence by furnishing me with their respective timelines of relevant events. But in my judgment these documents serve only to highlight that this is not an inquiry I should attempt on a summary application like this, without proper pleading, cross examination and full argument. The theme of Firestone’s timeline is the number of missed opportunities for swifter action; the theme of the JSAs’ timeline is the number of issues which kept arising to derail progress towards distribution. The documents do not engage with each other, nor set them in the context of what was reasonably practicable at any material time.

105. Mr Willson’s other route forward – that the declaration would assist in the section 202 applications challenging the JSAs’ remuneration and expenses – lacks logic. Mere delay may or may not be a factor in the level of remuneration and expenses claimed. Some tasks may need to be carried out in the course of the administration and the costs of doing so are not necessarily increased by a delay in their completion (whether or not the delay was for good reason); it may even be that getting a task completed more quickly incurs greater cost so that a delay saves overall cost. It seems to me quite pointless (and probably unhelpful) to be considering questions of mere delay without at the same time considering what impact each alleged failure could have had on the remuneration and expenses claimed. I recognise that a section 202 application is likely to result in a more summary process than would be expected for a claim for breach of duty but, even on a section 202 application, a case must be put forward which ties any delay complained of to likely savings of cost or remuneration. Free standing declarations on delay, as currently sought by Firestone, are not going to advance, and may even confuse, the issues in the section 202 applications.

106. I will therefore make no order on Mr Willson’s claim for declaratory relief. To be clear, this is not a judgment on the merits and Firestone is free to bring a claim for compensation for breach of the JSAs’ duty without falling foul of any principle of issue estoppel or the principle raised in Henderson v Henderson (1843) 3 Hare 100, per Wigram VC at p115 or the like. Indeed, if Firestone want to advance the breach of duty claim in these proceedings, I am prepared to consider making orders for statements of case, disclosure, witness statements and so on to enable the claim to be brought on a proper footing (though I have not given Firestone any encouragement to bring their claim solely under paragraph 74(2)). The correct way forward is a matter for Firestone to consider. (ii) Interim Distribution

107. That brings me to the final issue before me, which is whether I should order the JSAs to make an interim distribution of client money.

108. There is less in this issue than might be thought. Whatever their position may have been earlier, the JSAs do not now oppose, and indeed are intending to make, an interim distribution in fairly short order. The only issues I need to determine are (a) whether the amount of the interim distribution should be 90% (as Firestone claims) or 66% (as the JSAs suggest) and (b) when the interim distribution should be made, within 21 days (as Firestone claims in its draft order) or as soon as reasonably practicable following approval of the Protocol, as part of the general working out of the distribution of client assets (as the JSAs proposed by the Protocol, para 5.2). Mr Davis KC indicated in oral submissions that the JSAs were expecting to need weeks rather than months to put the distribution plan in place so it does not seem that there is much between the parties even on the timing of any interim distribution.

109. As to the amount of any interim distribution, it is important to keep in mind that the regime for the distribution of client money is different from that for the distribution of other client assets, with these separate classes of asset bearing only the costs and remuneration properly attributable to their own distribution. The JSAs specifically recognise that they cannot force any client to pay its share of the costs and remuneration attributable to the distribution of client custody assets from the client money owed to that client: such an outcome can only be achieved with that client’s consent. Hence the provisions in the Protocol for the JSAs to offer clients the opportunity to agree to meet their apportioned share of the Objective 1 costs attributable to client custody assets to be paid from client money or CAI (para 3.3(c)).

110. As I understand it, Firestone does not want to pay any such costs from the client money to which it is entitled, so there is no point in going through such a procedure in its case. So far as Firestone is concerned, the JSAs simply need to be satisfied that any interim distribution to Firestone leaves them with enough in hand to be able to pay the appropriate costs, remuneration and expenses attributable to Firestone’s share of client money. On the most recent figures (summarised, with references, in Mr Willson’s Key Figures document) this does not present a problem. Firestone is entitled to £12,287,066.52 of the client money (some 27% of the total) with its share of the applicable costs, expenses and remuneration being £980,863.28. If an interim distribution of 90% is paid to Firestone (being a sum of £11,058,359.87 on my calculation), the JSAs would be left with over £1.2million of Firestone’s share of client money to pay its share of the costs properly attributable to client money. That seems ample to protect the JSAs while the final amount of the properly attributable liabilities is settled.

111. I am not aware of any reason why the costs properly attributable to the distribution of client money should increase dramatically from now on. The JSAs are of course facing the continuing section 202 applications in respect of their remuneration and expenses but they will either win those proceedings and recover most of their costs (in which case their overall cost exposure will worsen only by the amount of their unrecovered costs and will be borne by client custody assets as well as client money); or they will lose, in which case their claims for remuneration and expenses will decrease, giving further headroom for the share of remuneration and expenses required from Firestone’s share of client money.

112. DASL supports Firestone’s application for an interim distribution of 90% of client money. The figures in DASL’s case are that it is owed £14,265,249.34 of the client money (some 31.77% of the total). Its contribution to the relevant costs, expenses and remuneration is £1,138,779.48. An interim distribution of 90% would give DASL (on my calculation) £12,838,724.41 and would leave the JSAs with over £1.4 million of DASL’s share of client money in hand to cover its share of the relevant costs. Again that seems ample in the circumstances.

113. At the time of the hearing before me, I did not have specific confirmation from DASL that it did not want to pay remuneration and expenses attributable to client custody assets from the client money to which it is entitled (as the JSAs will propose when they draft their distribution plan). So DASL was not then in the same position as Firestone. Following circulation of this judgment in draft, DASL has now given that confirmation. There is therefore no reason to withhold payment of a 90% interim distribution from DASL any more than Firestone.

114. An interim distribution has to be decided upon for all clients equally. It does not follow that it has to be paid to all clients if there are grounds to withhold payment in specific cases or circumstances. So, here, it should be part of my order that the JSAs will be at liberty to withhold payment from any client who, on the JSAs’ current assessment, may wish to exercise the opportunity the JSAs intend to give them to use client money to pay their share of the costs, expenses and remuneration attributable to the distribution of other assets. That will not include Firestone and DASL. The amount of any “hold-back” will have to be estimated at this stage but that does not seem an insuperable difficulty. The matter can be kept under review as progress is made with finalising the distribution plan and the JSAs’ costs, remuneration and expenses.

115. Mr Stephens has explained the JSAs’ caution hitherto in making interim distributions in his eighth witness statement (paras 124 to 127). In summary, the JSAs are concerned that the potential illegality of the Company’s Tier 1 business prevents them from distributing assets without either a full investigation of who is entitled to the client money or the court’s approval of their proposed way forward. The outstanding and unresolved issues raised by Trowers’ clients add to their concerns, even though the recent correspondence does not, as I read it, seem to be asserting a proprietary claim to any of the assets.

116. In my judgment, these concerns are not resolved by seeking the court’s approval of the Protocol for the reasons I have explained above. They may however be allayed by the court making a Benjamin order of the kind and for the reasons I have explained above. At this stage, all that would be needed to protect the JSAs in making an interim distribution is for the court to direct that the JSAs proceed on the footing that there are no proprietary claims to the client money which need to be taken into account on the interim distribution other than those the JSAs have already recognised (and possibly any Security Interest which is mentioned in para 2.2 of the Protocol). If the JSAs wish to apply for such an order they should do so when or after this judgment is handed down (and at any rate before the interim distribution is made).

117. Any such application can be made within the current application (i.e. without issuing a new application notice). The court would need to see (at least) evidence of how the JSAs’ current list of recognised clients has been settled and evidence that further investigation is impossible or impracticable (to meet the test for a Benjamin order set out in Re MF Global , above). That would include evidence of whether further investigation is possible on the material available to the JSAs, whether any other material is conveniently available, the cost likely to be involved in further investigation, the prospect of being able to reach any firm conclusions even after further investigation and the potential benefits (if any) which could be achieved for the Company or any of its clients from such an investigation. Some of this evidence is already contained in the material before me but without being complete or focussed on this question. It is for the JSAs to consider how best to bring any such application before the court.

118. Subject to these considerations, I would order an interim distribution to be made of 90% of client money claims, as sought by Firestone.

119. In the meantime, I accept the submissions of Firestone and DASL that no criminal or illegal conduct has been proved against either of them on the evidence currently before the court.

120. As for Trowers’ clients, nothing I say in this judgment would prevent them from commencing proceedings to freeze assets otherwise payable to the Defendants they are seeking to target, if they have the evidence to support such a claim.

121. The JSAs will have liberty to apply not only for a Benjamin order but also if any such proceedings by Trowers’ clients (or any other circumstances) should be thought to affect the course I am proposing to take.

122. It remains to consider the timing issue. If the Benjamin order provides sufficient protection for the JSAs to proceed, or if, on reflection, there is no need to apply for one, or even if it is refused, I see no reason why an interim distribution should not happen promptly. Given that at the time of my circulating a draft of this judgment the holiday period is about to start, I am minded to set a date early in the new year for the payment of an interim distribution at least to Firestone and DASL. I would therefore direct the interim distribution to be declared and (in the case of Firestone and DASL, carried out) on or before 31 January 2026. That should also give time for the JSAs to apply for a Benjamin order before the distribution is made, if they so wish.

123. I would be grateful if Counsel could endeavour to agree a minute of order to give effect to this judgment.