Dolfin Financial (in special administration): court refuses pre-approval of distribution protocol and endorses interim distribution

The High Court’s decision in Stephens and another (as Joint Special Administrators of Dolfin Financial (UK) Ltd) v Firestone Financial Assets Ltd and another company [2026] EWHC 41 (Ch)) acts as a reminder that the court will be reluctant to intervene in decisions which sit squarely within the commercial remit of administrators. The judgment shows the court’s preference for targeted relief over broader applications which delay distributions without advancing the relevant statutory objectives of the administration.

Key takeaways for office-holders

Unfocused “comfort” applications should be avoided – any application should be targeted and proportionate. Where uncertainty (including potential illegality) is genuinely blocking distributions, then relief in the form of a Benjamin order (discussed below) may be appropriate.
Avoidable delay in progressing the administration is unlikely to find favour. The court was prepared to support a high interim distribution where an appropriate buffer for costs could be retained, and it was plainly unimpressed by time spent on an application that did not advance the statutory objectives.
Conduct challenges will not be determined on a summary basis. The court was reluctant to entertain declarations about delay or inefficiency without full evidential testing, reinforcing that office‑holders retain a wide discretion provided decisions fall within a reasonable range.

Background

Dolfin Financial (UK) Ltd was an investment bank authorised and regulated by the Financial Conduct Authority (FCA). Among other services offered by Dolfin to its clients was a convoluted scheme which purported to enable clients to meet the financial requirements to obtain a UK “Tier 1 Investor visa” (the Tier 1 Scheme). The FCA instigated enforcement action in relation to the Tier 1 Scheme, on the basis (among other things) of potential illegality under the Immigration Act 1971. That FCA action led to Dolfin’s affairs being wound down and it entering special administration under the Investment Bank Special Administration Regulations 2011 (IBSA Regulations) in June 2021.

Following the appointment of the joint special administrators (JSAs), a substantial part of Dolfin’s client book (and related assets) were transferred to another authorised entity. What remained was a residual client book with large client‑money balances and problematic custody assets, including the bonds issued to investors in the Tier 1 Scheme and shares in a number of Russian companies.

The judgment dealt with two applications:

The JSAs sought directions as to the conduct of the special administration, specifically, court approval of a detailed “protocol” to govern distribution of client assets.
Firestone Financial Assets Ltd (a major client‑money beneficiary) sought:
1. A 90% interim distribution
2. A declaration that the JSAs had failed to perform their functions as quickly or efficiently as reasonably practicable, in accordance with the IBSA Regulations

The JSA’s application: no “pre‑approval” for a distribution protocol

As is well-established, the court is reluctant to “bless” a decision which is within an administrator’s powers. Administrators are expected to exercise their own judgment in commercial and administrative decisions and should not treat the court as a “bomb shelter” to protect them from liability (In re T & D Industries plc [2000] 1 WLR 646). The same principle applies in a special administration, even where the administrators are dealing with complex or significant issues (Re Sova Capital Ltd (in administration) [2023] 2 BCLC 547). That said, there are circumstances where it may be appropriate for office‑holders to seek the court’s approval – for example, where there are concerns about the legality of a proposed transaction or potential conflicts of interest.

Even then, court approval is not a blank cheque. Where an office‑holder does obtain approval, any immunity is limited to the scope of what the court actually approved; it does not provide blanket protection against later proceedings (see Denaxe Ltd v Cooper [2022] EWHC 764 (Ch), which we previously reported on here).

Against that backdrop, the JSAs’ concern was that the potential illegality of the Tier 1 Scheme prevented them from making distributions without further investigation or court approval. The proposed protocol set out how a distribution plan would be prepared, including mechanisms to deal with any potential illegality affecting the company’s assets.

The court, however, did not consider the application appropriate to deal with these concerns. The protocol unnecessarily complicated the statutory procedure for approval of a distribution plan under the Investment Bank Special Administration (England and Wales) Rules 2011 (SI 2011/1301) (IBSA Rules). The IBSA Rules provide that a distribution plan must be proposed by special administrators, and approved by the creditors’ committee, before an application for approval by the court. In the judge’s view, there was no proper basis for the court to “pre-approve” a protocol at an earlier stage, nor was it apparent what practical benefit such an exercise would serve. The creditors’ committee would not be bound by the decision of the court, the protocol would not prevent future challenge to the eventual distribution plan and, in any event, court approval could not cure any underlying illegality.

The alternative: a Benjamin order to unblock distributions

Rather than attempting to engineer a pre‑approval process, the judge indicated that targeted relief in the form of a Benjamin order (Re Benjamin [1902] 1 Ch 723) would address the JSAs’ concerns about illegality, and gave leave for the JSAs to apply for such an order in the existing proceedings.

A Benjamin order allows distributions to proceed on a defined factual footing where it is impossible or impracticable to establish all entitlements with certainty. In practical terms, the court authorises the office‑holder to distribute to the recognised beneficiaries, protecting the office‑holder from later claims. Here, this would mean that the JSAs could distribute on the basis of the entitlement to assets settled from company information, without further investigation into any potential illegality which might affect a client’s rights to the assets.

Benjamin orders sit comfortably alongside the bar‑date machinery set out in the IBSA Regulations and have been used in investment bank administrations to unblock client money returns when further investigation would be disproportionate (Re MF Global Limited [2013] 1 WLR 3874).

The Firestone application: interim distribution and alleged delay

The delay caused by the JSA application prompted Firestone to apply for a 90% interim distribution of client money. By the hearing, the JSAs did not contest an interim distribution in principle, but suggested the level should be 66%. However, the court was satisfied that a 90% distribution would leave the JSAs ample headroom to retain a sensible reserve for client money costs and remuneration.

Firestone also sought a declaration that the JSAs had failed to carry out their functions as quickly or efficiently as reasonably practicable, as required by the IBSA Regulations. The court refused this application. It held that a summary application was not an appropriate forum for such a declaration, which would require full argument and cross‑examination. More fundamentally, the JSAs have a wide discretion to act as they think best to achieve the relevant statutory objectives, and should not be found in breach of duty merely because someone else would have acted differently, or because (with hindsight) a quicker outcome could have been achieved.