In brief
- Joint Special Administrators ("JSAs") failed to obtain approval for their proposed Protocol for conduct of the administration as it is not the courts' role to provide a "bomb shelter" for Insolvency Practitioners facing risky or difficult decisions.
- The court found that the JSAs' application had been ill-conceived and unnecessary. As a result, they were liable for the respondent creditors' costs on the indemnity basis.
- Further, the court declined to permit the JSAs to recoup either their own costs or the costs to be paid to the creditors from the estate. Instead they would have to pay those costs from their own pockets.
Introduction
For insolvency practitioners navigating complex or contentious administrations, knowing when to seek court directions - and when not to - is critical. It is one of the most consequential professional judgements they will face.
Over 25 years ago, Mr Justice Neuberger (as he then was) warned insolvency practitioners that the court's role is not to serve as a "bomb shelter". Writing in Re T&D Industries plc [2000], he said its role is not to protect practitioners from the difficulties inherent in their "responsible and potentially demanding" role.
Administrators, he emphasised, must make important and sometimes urgent decisions - and those decisions must be made in the best interests of creditors.
The phrase has since been adopted by the judiciary time and again to send the same clear message: the court is not a refuge simply because an office-holder has a tough call to make. The recent case of Re Dolfin Financial (UK) Limited shows just how costly ignoring that message can be.
Background
Dolfin Financial (UK) Limited (Dolfin), formerly authorised by the FCA as an investment bank, was shut down following FCA enforcement action. It was placed into special administration in June 2021 under the Investment Bank Special Administration Regulations 2011 (IBSA Regulations). The JSAs were duly appointed.
Dolfin's two principal remaining clients - Firestone and DASL - together accounted for approximately 59 per cent of the client money pool held by Dolfin. As a result, they were, in effect, the principal creditors in the Dolfin estate.
The JSAs' application and judgment
In January 2026, the court considered two competing applications: the JSAs sought court approval of a detailed operational "Protocol" for the future conduct of the administration; Firestone sought an interim distribution of 90 per cent of client money and a declaration of delay against the JSAs.
The court was unimpressed with the JSAs' approach. The application had taken so long to prepare that Firestone was forced to issue its own proceedings to achieve any progress. By the time of the hearing, the parties had produced around 5,000 pages of evidence, consumed three full days of court time, and achieved nothing of substance towards the administration's statutory objectives.
The court refused to approve the Protocol, and ordered the 90 per cent interim distribution. It also restated the bomb shelter principle in terms that left little room for doubt, citing both Neuberger J's original formulation and the more recent words of Miles J in Re Sova Capital Limited [2023] - approved by the Court of Appeal in Denaxe Limited v Cooper [2023] - that "the court is not a sanctuary or bomb shelter for office-holders."
Costs consequences: personal liability and denial of recoupment from the administration estate
With those cautionary words in mind, the follow-on costs judgment, handed down in April 2026, delivered the real consequences.
Firestone and DASL sought not only their costs against the JSAs personally, but also an order that the JSAs could not recoup the sums paid in respect of those costs - or their own costs - from the assets of the administration. They argued that allowing them to do so would be unfair in circumstances where, as Dolfin's principal creditors, Firestone and DASL would, in effect, end up paying for the very costs being awarded in their favour.
The court agreed. A special administrator has no automatic right of recoupment under the IBSA Regulations; it must be earned, and the touchstone is whether those costs were "properly incurred" - meaning reasonably as well as honestly incurred. The court found that the JSAs' application had been procedurally inept, contrary to authority, of no practical utility and wholly unnecessary. That was sufficient to amount to unreasonable conduct and to justify denying recoupment entirely.
The court also agreed that to permit the JSAs to dip into the estate to cover costs arising from an unnecessary application would be to make the very people who had won the litigation pay for it.
Firestone was awarded its costs on the indemnity basis. The JSAs' own costs of the application, including the JSAs' own remuneration, were similarly excluded from recoupment.
The lesson
This case is a sharp reminder that the courts' bomb shelter is not available on demand. The courts have said so consistently, and Dolfin shows what happens when that warning goes unheeded: a costly adverse order, indemnity costs, and no ability to recover any of those from the estate.
The temptation to seek court directions when a decision feels large or risky is understandable. But administrators are appointed precisely because they are professionals capable of making difficult commercial decisions. The court's role is supervisory, not protective. Where an application is unnecessary - however well-intentioned - the financial consequences are likely to fall squarely on the office-holder.
Before reaching for the court process, practitioners would do well to ask one simple question: is this application genuinely necessary, or am I just looking for shelter?