High Court judge rules 'no substance whatever' to telecom administration case
Cadwalader Wickersham & Taft has received a searing rebuke over its role in the Colt Telecom administration case after being accused of pressuring the company's directors and failing to adequately brief an expert witness.
In a strongly-worded judgment, Mr Justice Jacob ruled in the High Court that the case brought by Cadwalader on behalf of client Highberry "should never have been launched".
Highberry, a hedge fund owned by the US-based Elliott Group, which holds £75m face value worth of bonds in Colt, had sought to put the company into administration, claiming that it was heading for insolvency due to a decline in its share price, substantial operating losses and negative cashflows. Judge Jacob's conclusion was somewhat different. "There is not, and never has been, any substance whatever in this petition," he ruled.
Cadwalader London managing partner and insolvency expert Andrew Wilkinson and litigation partner Michelle Duncan ran the case for Highberry.
Judge Jacob accused the firm of bringing pressure to bear on Colt after it sent a letter to each director's home in October last year.
Wilkinson said: "On that point we were concerned that the correspondence we had sent to Colt's offices was not getting to the directors."
The judge also said the firm failed to send Richard Heis, an insolvency practitioner at KPMG and expert witness for Highberry, rules on the practice and procedure of the High Court, the Practice Direction or the Code of Guidance.
Heis was brought in to present a report under Rule 2.2 of the Insolvency Rules, in which an independent person outlines why it is necessary that a company be put into administration. During the case, Heis maintained that he had a general knowledge of the duty of experts and had read the rules. Duncan admitted that Heis had not been sent the rules or the code, but maintained that he was a very experienced practitioner who had presented many Rule 2.2 reports in his career. "He was very aware of his obligation," she said.