Liquidators occupy a central and powerful role in insolvency, entrusted with acting impartially, efficiently, and in the interests of all creditors. But when concerns arise about a liquidator’s conduct, independence, or decision-making, the Companies Act 1993 offers two key avenues for court oversight: section 284 (supervision and directions) and section 286 (removal for non-compliance or disqualification).
Under section 284, the High Court exercises a general supervisory jurisdiction over liquidators. The threshold for intervention is deliberately high. As confirmed in the case of Re Trinity Foundation, applicants must show both a credible factual basis for their challenge and a reasonable likelihood that the court will consider the liquidator’s decision to be wrong or unreasonable. The court’s role is not to micromanage liquidations due to recognition they are faced with a difficult and specialise role, but to intervene only where there has been a serious lapse in judgment or process.
Common grounds for intervention under section 284 include a lack of independence, perceived bias, failure to consult, or acting without proper inquiry. Courts place particular emphasis on the appearance of impartiality. As established in Hyndman and Mason v Lewis, even the perception that a liquidator is favouring one group of creditors over another may justify removal. Concerns over unreasonable remuneration may also justify scrutiny, particularly where there is a lack of transparency or a clear mismatch between the fees charged and the work performed.
Importantly, misconduct is not a prerequisite for orders under section 284. The High Court has confirmed that this jurisdiction operates independently from section 286 and can be exercised to maintain confidence in the liquidation process.
Section 286, by contrast, provides a more targeted removal mechanism. The court may remove a liquidator without leave where there is a failure to comply with statutory duties or a disqualification under section 280(2). In Official Assignee v Norris, the court removed a liquidator who failed to comply with a notice, confirming that procedural non-compliance can justify removal.
The court’s discretion under section 286(3) is guided by a range of practical considerations, outlined in Newman v Norrie. These include the liquidator’s independence, competence, access to resources, familiarity with the case, and the views of creditors. In Just Beverages, the court removed a liquidator due to a conflict of interest arising from a close business relationship with a director, finding it compromised the objectivity required for the role. What we cans take away from this is that independence and impartiality of the liquidator is a paramount consideration.
While the legal tests differ slightly, the core principles under both sections converge around a liquidator’s duty to act fairly, competently, and without favour. The court’s powers under section 284 provide broad oversight and a mechanism to protect the integrity of the process. Section 286 provides a sharper tool for disqualifying or non-compliant liquidators.
Where the considerations discussed above are not met, the court has the discretion to intervene to ensure liquidators continue to act with independence and impartiality.
