Insolvency Oracle

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Lessons from Comet: quality consultation with employees, not quantity

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So what is the truth about the Comet Tribunal? Could the IPs be facing prosecution? Is the problem simply that the consultation legislation is impossible to meet in most insolvency situations or are there lessons to be learnt for IPs faced with potential redundancies, massive or moderate?

It has to be admitted that Deloittes were handling a massive case – almost 7,000 employees scattered over 250 establishments UK-wide in a high profile company attracting enormous press and public attention at a time when the high street seemed to be suffering the loss of one big name after another. But isn’t that what the Big 4 get paid the big bucks for?

The dilemma for IPs has often been described as being faced with a plethora of tough consultation requirements whilst remaining ever conscious of the risk that the wildfire of rumour and defeatism could destroy whatever business may be left to sell (or at least threaten to derail an organised closure plan). How can IPs ever hope to make everyone happy all of the time? But is the fear of what might happen to the business – and thus to creditors’ returns – if the “R” word gets out, especially when redundancies are only a contingency plan, justification for playing cloak-and-dagger? Or, in this modern world where it seems that transparency outweighs costs and consequences, should employee consultation mean putting all one’s cards on the table even when it seems that there may be little on which to consult?

The sheer scale of this job compounded the problems, but I think that the judgment has some valuable points for IPs handling cases of any size and may present a paradigm shift, putting an end to an outdated attitude of how employees should be treated in insolvency situations.

I found the Tribunal judgment as a pdf on the USDAW website at: http://www.usdaw.org.uk/tribunal1102571

Cutting to the chase, the Tribunal found that Comet:
• “failed to begin consultation in good time;
• “failed to include the topics of avoiding, reducing, or mitigating the consequences of redundancy;
• “failed to consult with a view to reaching agreement;
• “failed to consult with appropriate representatives (either the Union or elected representatives); and
• “failed to disclose, in large part, the required statutory information” (paragraph 185).

Consultation “in good time”

It is worth remembering that the statutory 90 and 30-day timescales set out by the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”) are back-stops. S188 states that “Where an employer is proposing to dismiss as redundant 20 or more employees.., the consultation shall begin in good time and in any event…”

Interestingly, although the statutory timescale is what might come to most of our minds when we think about the consultation requirements, the judge said that, as in this case, “when the consultation that followed was with the wrong people, about the wrong issues, with misleading and incomplete information, then the time that consultation began, or should have begun, is not terribly important” and this issue was “by no means the most serious of [Comet’s] failings” (paragraph 203).

Comet was placed into administration on 2 November 2012. Prior to administration, Comet’s shareholder and secured creditor, Hailey Acquisitions Limited (“HAL”), had explored the company’s options and had instructed retail consultants, GA Europe (“GA”), to draw up a plan. The GA “Plan” as described by the Tribunal “involved the complete closure of the business. Although it related directly only to store closures, as the stores were closed, the rest of the business, all the other establishments, could be reduced proportionally; and once all the stores had closed, the rest of the business ceased to have a function and could be closed. Inherent to the adoption of that Plan is a ‘clear, albeit provisional, intention’ to make all the employees redundant” (paragraph 102). The Tribunal concluded that the arrival of GA consultants to the stores on 3 November “is clear evidence that the administrators had adopted the Plan… The plan was ‘to trade the stores for two weeks’. The first stores closed on 19 November. That was to be followed ‘by phased closure of the stores’… By 21 December, all the stores had closed and all employees dismissed as redundant, save for a handful” (paragraph 105).

But weren’t the administrators seeking to sell all, or part, of the business? Could it be said that the administrators “proposed” (per TULRCA) to make redundancies when they were actually trying to avoid that eventuality? Or does the “clear, albeit provisional, intention” phrase from the UK Coal Mining decision in 2008 apply in these circumstances and, by extension, perhaps to all insolvencies where a business sale resulting in the preservation of jobs is the primary intention? “The duty to consult arises when the proposal is still in its provisional stage; not when the decision has been taken. Once the decision has been taken, there is little to consult about” (paragraph 107).

The reality of any possibility of a sale “was hotly disputed” (paragraph 108) in evidence before the Tribunal. Comet’s Head of Finance “gave powerful reasons why the prospect of a sale was vanishingly small” (paragraph 109) and the judge stated that whatever the joint administrator’s “optimism may have been in the early days, sale of all or part was always an unlikely possibility, that quickly dwindled to a negligible one” (paragraph 111). In the judge’s view, “the administrators planned for closure from the outset” (paragraph 114).

As an aside, this is the origin of the criticism that has been Chinese-whispered by the press into the alleged possible ‘criminal offence’ in signing letters/documents to Vince Cable saying that there would be no redundancies. The administrators signed a Form HR1 (which, of course, whilst statutorily-required to be sent to the Secretary of State, never gets near to Dr Cable’s desk) on 5 November stating: “no proposed redundancies at present”. S194 TULRCA makes it a criminal offence to fail to notify the Secretary of State of proposed redundancies. The Tribunal “made no express finding beyond saying that we share Miss Nicolau’s (Comet’s Employment Counsel and General Manager for Employee Relations) surprise” (paragraph 34) at the contents of the Form. The administrators filed a second Form HR1 on 22 November stating that the proposed number of redundancies would be the full staff complement of 6,889, with an unknown date for the last dismissals and the reason for the redundancies as insolvency.

So what is “in good time”? The Tribunal illustrated that the statutory back-stop would be inappropriate in some cases. Some stores closed on 23 December. “To begin consultation 30 days before is to begin it after the key decisions have been taken, and after the store closure was in full swing. By then, the opportunity (if it had ever existed) to raise fresh working capital, to reassure suppliers and the public that Comet had a future, had passed. Closure was inevitable” (paragraph 121). “Consultation has to begin in good time in each establishment; and that means when the GA Plan… was adopted by the administrators and so became a proposal of Comet’s; and that was on 3 November, even if individual establishment closures were postponed for some time” (paragraph 122). Thus, the Tribunal concluded that “in no single instance, at no establishment, did consultation begin in good time in accordance with S188” (paragraph 123).

However, the judgment later seems to suggest that consultation might be achieved far quicker than the statutory timescales: “We accept that in Comet’s financial circumstances, there was never likely to be a 90 day consultation, or in many cases even a 60 day consultation… But in practice, given Comet’s financial situation, a full and frank consultation is unlikely ever to have required that period of time” (paragraph 199). This may be reflected in the Tribunal’s award, which was only 70 days for the employees dismissed early on (whereas those dismissed later were awarded 90 days): “For those [early-dismissed] employees, there was simply no consultation at all; but equally, there was simply no time for any meaningful consultation to be organised… There is some excuse in the early stages of insolvency” (paragraph 205, 207).

The Statutory Content of Consultation

S188(2) of TULRCA states that “the consultation shall include consultation about ways of: (a) avoiding the dismissals; (b) reducing the number of employees to be dismissed; and (c) mitigating the consequences of the dismissals”. But the Tribunal found that these statutory points were never referred to in meetings, agendas, or briefing notes to managers conducting meetings. The Tribunal also was critical of the company’s “limited” view of the consultation process as a means to provide information to employees and to receive their questions. The judge accepted that it may have been realistic for the company to fail to see the process as a way of consulting on how to avoid dismissals, as “by that stage the path to closure was clear and well on the way, even if not ‘a foregone conclusion’. But even if, in Comet’s view, inviting such suggestions would have been futile, the attempt should still have been made; the statute requires it” (paragraph 130).

The Tribunal acknowledged that, in this case, “proper consultation, had it occurred, may well have been nasty, brutish and short. The difficulties in the way of avoiding or reducing redundancies could have been set out: the absence of working capital, the requirement to repay the secured loan covering the existing working capital; the rationale for adopting the GA Plan could have been explained; that there was no money to keep paying wages or rent other than by liquidating the stock as quickly as possible; no money to pay for more stock; and that much of the stock was itself subject to retention of title” (paragraph 199).

The Tribunal recognised some of the issues facing the company/administrators in organising meaningful consultation. The process was “tightly controlled to ensure a consistent and uniform approach” (paragraph 66); managers in effect had been working to scripts, collecting – but prohibited from attempting to answer – questions, any answers being given via a centrally-issued document, for managers’ eyes only, at the next arranged meeting. “Such a process of question and answer, conducted over a number of meetings is inevitably cumbersome and slow, but could in principle amount to consultation… but in the short timescale allowed by the circumstances of administration, with a clear proposal to close the entire business before Christmas, it meant that meaningful consultation was most unlikely to be achieved through that model” (paragraph 126).

The Tribunal was critical of the “bland generality” of some of the answers provided. For example, “Why are we closing and why have certain stores been chosen?” was answered: “There are certain financial commitments at specific locations that we are unable to meet. We therefore have to close down that entity before these amounts fall due”. The judge felt that “a frank answer would have been: ‘There is no money to pay the rent for the next quarter. Therefore, your store is earmarked for closure two days before the next instalment of rent is due’… Without that information, it was not practicable for representatives to bring forward their own proposals” (paragraph 132).

But how practicable could any employee proposals hope to have been? The judge suggested that they could have tried to prolong the life of their store, say, at the expense of another in the locality. In one specific case, the judge suggested that it would have been useful for employees at the Service Centre to have learned that the services were to be placed with an alternative provider: staff could have been invited to work for the new provider “or indeed there might be a service provision change under TUPE” (paragraph 136).

Consultation “with a view to reaching agreement”

The Tribunal found on balance that there had never been any “intention to attempt to reach agreement through the consultation process” because of “the failure to provide key information: the existence of the GA Plan, for example; or to be frank about the number and timing of redundancies; to provide even basic information, such as store closure dates; … the failure ever to raise the key statutory issues [i.e. ways of avoiding dismissals etc.]…; the cumbersome structure adopted; and the willingness to ignore and by-pass the consultation process when it suited the administrators” (paragraph 145).

But what kind of agreement could ever be hoped to be reached in these circumstances? “We emphasise that we place no weight on the absence of actual agreement on the statutory items. Given the dire nature of the financial situation, the most that could ever have been hoped for by way of reaching agreement was a reluctant acceptance of the inevitable… But that is to look at the large national, overall picture. Within that picture, there was scope for meaningful consultation with the potential of reaching agreement at a local level on, for example, selection criteria where redundancies were phased over a period; alternative employment where establishments had the potential to transfer over or stand alone” (paragraphs 147, 148).

Employee representatives

Comet’s case was that it had consulted with representatives falling under S188(1B)(b)(ii) of TULRCA: “employee representatives elected by the affected employees, for the purposes of this section, in an election satisfying the requirements of S188A(1)”. However, the key issue was that there never had been any formal election process: some employees had put themselves forward for the job, others had been put forward by their colleagues (often, it seemed, when they were away on holiday!), and others had been asked by their managers to stand.

The judge concluded that the absence of a fair election – which could not be substituted by a fair selection – was fatal to Comet’s case in this regard. Although there had been no suggestion of abuse of the process, the judge noted that selection by managers could be abused: the manager could avoid selecting disgruntled employees, or such employees could conclude there was no point putting themselves forward if the manager made the ultimate decision.

The problem for Comet was that, since there was “no consultation with employee representatives elected for the purpose, there was no consultation at all within S188” (paragraph 177). Oops!

The Tribunal also commented that, given that Comet’s aim had long been a business sale or transfer and, failing that, redundancies, so that in either event consultation under TULRCA or TUPE would be necessary, Comet could have taken steps to put the machinery in place to elect representatives long before the administration began.

Disclosure of Statutory Information

S188(4) sets out a hefty list of information required to be disclosed in writing by the employer to the employee representatives. The judge found that Comet failed to address some of substance.

He felt that it had been “misleading to omit” (paragraph 151) the immediate reason for the administration – HAL’s demand for repayment of the loan – from “the reasons for his proposals” as regards redundancies. The judge noted that, given that he had found that the GA Plan had been adopted on 3 November, “that information could have been given to representatives from 3 November, as a firm, albeit provisional, proposal. The information provided at the first consultation meeting was completely misleading on this crucial point” (paragraph 152).

The judge observed that, although the GA Plan seen through would result in all employees being made redundant, the method of selecting employees for dismissal “was very significant in the short term” (paragraph 154) in these circumstances where the redundancies were staged. However, no information on the criteria or method of selection was shared, despite it being promised in a letter to representatives that itself was considered deficient by the judge, who suggested that the promise should have been “to share, discuss, and we hope, agree the criteria” (paragraph 155).

It seemed that employees, their representatives, and most of the managers tasked with the job of leading the consultation meetings, had been left in the dark as regards planned store closures and redundancies, where “it was generally possible to give employees notice of a day or two of the actual closure date” (paragraph 157), with dismissals generally occurring a day or two after closure. “Time and again we heard of redundancies being carried through immediately before and after consultation meetings at which those redundancies were never mentioned” (paragraph 142). “The failure of Comet to provide accurate information to representatives about this factor, the proposed method of carrying out dismissals, contributed more than any other to the widespread dissatisfaction and cynicism with which the consultation process came to be regarded” (paragraph 158).

“Special circumstances”?

Alright, so the Tribunal considered the consultation process a failure, but doesn’t TULRCA acknowledge “special circumstances which render it not reasonably practicable for the employer to comply with” (S188(7)) certain requirements? Does this apply in this case?

The judge referred to precedent that indicates that there is nothing special about insolvency. “What has to be established is that the insolvency is itself unexpected” (paragraph 180). In this case, because of HAL’s “sudden, unexpected and disastrous” withdrawal of working capital and demand for repayment, the judge found that the company’s administration did amount to special circumstances.

However, S188(7) continues to provide that the “special circumstances” factor falls away “where the decision leading to the proposed dismissals is that of a person controlling the employer (directly or indirectly)”. As “HAL controlled Comet” (paragraph 183) – although it is not clear whether the judge felt that this control was by reason of HAL being the shareholder or because it was the secured creditor and provider of working capital to Comet – the judge concluded that Comet could not rely on the “special circumstances” defence.

“Going through the motions”

Perhaps the administrators’ mindset towards the consultation process may be revealed by the contents of their letter to employees dated 12 November: “the company is proposing to commence a collective consultation programme with Comet staff. This is intended to offer a means to provide information about the company’s plans for the future, and for the representatives to raise questions, and air their views on any proposals” (paragraph 51). However, the judge summarised the aims of the statutory provisions as: “to require the employer to consult with elected representatives, once redundancies have been proposed, in good time and with a view to avoiding redundancies, reducing their number and mitigating their effects. To do that with authority, the representatives should be elected; and they should be provided with the necessary statutory information, including the reasons for the proposals and the scope of the proposals (numbers and descriptions of employees involved, the method of selection and the timescale). Since the consultation must be with a view to reaching agreement, it requires a serious engagement with the issues raised, conscientious consideration of questions and issues raised, an element of dialogue and mutual exchange” (paragraph 192).

Despite conducting over 600 meetings and identifying 572 employee representatives, the judge felt that “it is the quality and [the consultation’s] compliance with the statutory provisions that counts” (paragraph 191). He stated that this was “in essence a case of an employer going through the motions. This was the appearance of consultation, but not the reality. It is not just and equitable to give credit to an employer for going through the motions, without any intention of engaging meaningfully in consultation, however extensive the effort put into the consultation process” (paragraph 197).

Lessons to be learnt

This case reveals some relatively straightforward, but essential, checks that can be made as regards standard documents etc., for example:

• Ensure that all documentation around the consultation process covers the statutory points that must be addressed in consultation meetings and that case-specific disclosures of the statutory information are meaningful.
• Ensure that reference is made to consultation and agreement, not merely information provision.
• Ensure that the election process of employee representatives (where required, not forgetting recognised trade unions and other existing employee representatives) complies with statute and don’t be tempted to cut corners with a view to getting on with the consultation itself. Refer to the election process in pre-insolvency advice letters: after all, consultation is required under TUPE as well as TULRCA.
• Take care when completing Forms HR1 and remember to submit further forms in good time and where necessary.

However, perhaps more difficult but more vital lessons that arise from this judgment involve the seeming mindset change that appears to be required:

• Be as open as possible and as is sensible about the company’s situation and the business’ prospects, even if they are bleak. Avoid relying on vague statements about insolvent companies in general.
• Don’t get too hung up on the statutory consultation timescales, but rather concentrate on being honest about the situation when the prospect of redundancies is first contemplated. Keep in mind the aim of meaningful consultation with a view to agreement, however small the window of opportunity and inevitable the outcome, rather than ticking boxes as regards meetings held.
• Don’t treat all employees as one unit. If different circumstances and plans exist for different “pools”, tailor discussions accordingly and consider the smaller pictures. Even if the big picture is an inevitable close-down, there may be scope for meaningful consultation on parts of the plan.
• If you use separate staff, departments, or external consultants to deal with employee matters in insolvency cases, make sure that they are kept up to date and are given the assistance and authority needed to update and consult with employee representatives.
• Continue to update employee representatives as events move on.
• Make a serious effort to consult.

Am I forgetting how all this may impact on an administrator’s ability to meet his primary goal of achieving a Para 3 objective? Personally, I remain conscious of those tensions, but I do wonder if being entirely honest and upfront with employees can be constructive, rather than destructive. I’m sure that those more cynical than me, who continue to see the insolvency and the consultation requirements as mutually exclusive, will have opportunities to air their concerns, when the government’s eye turns again to IPs as it contemplates the RPS’ bill for the Comet protective awards.


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New SIPs 3 – are you ready?

5313 Sydney

As the new SIPs 3 come into effect in less than two weeks’ time, I’m guessing that few of you will be interested in reading my “yes, but what exactly does that mean?!” observations below. If VAs/Trust Deeds are your thing, you will have got going on bringing practices into line with the new SIPs (and you really won’t want to read any alternative interpretations). But it’s not all gripes; I have actually tried to include some points that may be of use!

SIP3.1 (IVAs) and SIP3.2 (CVAs)

Assuming that your practices already comply with (old) SIP3 and statute, what do you need to know to bring them in line with the new SIPs? I’m afraid I don’t think it’s about easy fixes. The new SIPs are so different from the 2007 SIP3 that I would recommend trying to take a fresh and objective look at the way VAs are conducted in the round in order to apply the new SIP principles and requirements.

The revised SIPs put great emphasis on there being “procedures in place to ensure…”, so it is not simply a case of getting standard templates compliant. In my view, the key seems to be more about making sure that tasks and considerations are prompted and carried out, not just marked “N/A” (or perhaps even “done”) on a checklist completed 6 months after the event. However, the vast majority of the steps required are not rocket-science and are probably being carried out already, so if any major changes are required, they will probably involve regularising processes and evidencing the steps taken.

Having said that, some obvious easy fixes may include:

• Ensure that letters to shareholders and creditors giving notice of the meetings explain the stages and roles associated with a VA (i.e. initial advice, assisting in preparing the proposal, acting as nominee, and acting as supervisor) – per the SIPs’ first principle.

• Ensure that initial advice includes explaining “the rights of challenge to the VA and the potential consequences of those challenges”.

• If you’re confident that there are systems in place to keep alert to signs that a meeting with an individual debtor is merited, SIP3.1 allows you to lighten up on SIP3’s requirement to meet with every “trading individual” (although a meeting needs to be offered in every case).

• Check that standard Proposals templates (and procedures/documents used in drafting Proposals) include all the items listed. Although the new SIPs are not as fulsome as the old SIP3, there are some curly additions, such as “the background and financial history of the directors, where relevant”.

• Ensure that post-approval circulars make clear the “final form of the accepted VA” where a proposal is modified, which to me suggests more than simply listing the approved modifications.

• Ensure that supervisors’ reports disclose fully the VA costs and “any other sources of income of the insolvency practitioner or the practice in relation to the case” (remembering that the Ethics Code prohibits referral fees or commissions benefitting the IP/firm as opposed to the estate) and any increases in costs, if these have increased beyond previously-reported estimates. Whilst the old SIP3 already requires disclosure of increases in the supervisor’s fees, “costs” of course are wider in scope and could include solicitors, agents etc.

Other fixes may not be so easy…

Huh? No. 1

For CVAs, “the initial meeting with the directors should always be face to face”.

But what is the initial meeting; is it the first meeting? What if progression towards a solution is an iterative process? And who are the directors? Does this mean that all the directors need to be present, even if someone is out of the country? And why face to face? Is this so that you can skype but a non-visible telephone conference won’t do; where’s the sense in that?

Yes, I know I’m being picky. Trying to look at this sensibly, presumably IPs are expected to ensure that the directors discuss face-to-face the information to enable them to decide on whether to propose a CVA and what that might look like. I could see that this discussion might occur after a period of information-gathering, so it may not actually be the very first meeting with the director/s. In addition, inevitably there will be occasions when it is difficult to meet physically with all the directors, so this might require some judgment on IPs’ parts as to whether the non-attendance “face-to-face” of a particular director falls foul of the need to meet with “the directors”.

Huh? No. 2

When preparing for a VA, the IP should have procedures in place to ensure that the directors/debtor have had, or receive, appropriate advice. “This should be confirmed in writing, if the insolvency practitioner or their firm has not done so before.” (This is repeated later in SIP3.1 where an IP first gets involved at the nominee stage, i.e. where someone else has helped to prepare the IVA Proposal.)

But what is “this” that should be confirmed in writing? Is it the appropriate advice itself or is it the fact that appropriate advice has been given? I assume this means that, if someone else has been involved in getting the directors/debtor to the point of deciding on a VA before introducing them to the IP, the IP needs to be satisfied that they have been properly advised previously and confirm in writing the advice behind the decision – not merely “I understand that you have received appropriate advice from X and consequently have decided to propose a VA” – but I could be wrong…

Huh? No. 3

In assessing the VA as a solution, the SIPs require IPs to obtain a variety of information, including: “the measures taken by the directors (debtor) or others to avoid recurrence of the company’s (their) financial difficulties, if any”.

Does the “if any” refer to financial difficulties or measures taken? Would there be any occasion to propose a VA where there are no financial difficulties (even if any current difficulties to pay debts had arisen from historic, now settled, events)? Consequently, I would have thought the SIPs refer to learning of any measures taken to avoid recurrence, rather than any financial difficulties, but that does not seem to be the case, as the SIPs state later that Proposals should contain information on “any other attempts that have been made to solve their financial difficulties, if there are any such difficulties”.

Huh? No. 4

The SIPs require procedures to ensure that the proposer’s consent is sought to any modifications put forward by creditors. The SIPs state that, where a modification is adopted, in the absence of consent (from the proposer and, if appropriate, the creditors), the VA “cannot proceed”. The proposer’s consent must be recorded.

Why seek the proposer’s consent to any modification, including those that will be voted out by the majority, especially if they run contrary to the wishes of the majority? I guess that this is only fair to the creditors, but it could be confusing especially to debtors faced with a whole host of potentially conflicting and futile modifications. And what would happen if a minority creditor, say, wanted the supervisor’s fees to be reduced below that required by the majority, and the proposer consented to the reduction? Where does that leave things?

And why state that a CVA cannot proceed in the absence of the proposer’s consent? As far as I am aware, the directors’ consent to modifications is not a statutory requirement (but obviously in certain circumstances this may be essential for the successful implementation of the CVA). I also wonder if, technically, an administrator or liquidator needs to consent to modifications to their Proposals…

How should a director’s/debtor’s consent be “recorded”? Will a telephone conversation note, or even merely minutes signed by the Chairman, suffice? Where ever possible, I would recommend continuing with the now-commonplace procedure of getting the proposer to sign contemporaneously a copy of the adopted modifications, but I do wonder whether the new SIPs are suggesting that a less robust record may suffice.

SIP3.3 (Trust Deeds)

I am in no position to pass comment on the technicalities of this new SIP – I did voice some “huh?”s whilst reading it, but I will resist the urge to put my foot in it!

Overall, I am heartened to see the lightening-up on much of the prescription and consequent rigidity of SIP3A. Personally, I do think the RPBs could have gone further, however, as there still seems to me to be a fair amount of unnecessary statutory, SIP9 and Ethics Code references. There also seems to be some particularly fruitless statements: my personal favourite is “Where the decision is to grant a Trust Deed and seek its protection, the insolvency practitioner will take the necessary steps” – duh!


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IP Fees & Regulation Consultation: Have Turkeys Voted for Christmas?

1037 EW2

Faced with an apparent government vision of heavy-handed oversight over the RPBs and some peculiar restrictions on the time cost basis for IP fees, how have the RPBs and R3 responded? Have they resisted the pressure to offer some kind of compromise? Have they offered anything that might “solve the problems”? Here I have attempted to compare and contrast the responses of ACCA, ICAEW, ICAS, IPA and R3 to the key proposals of the recent consultation.

The government consultation page is at: https://www.gov.uk/government/consultations/insolvency-practitioner-regulation-and-fee-structure

The bodies’ responses are located at:

• ACCA: http://www.accaglobal.com/content/accaglobal/zw/en/technical-activities/technical-resources-search/2014/march/cdr1267.html
• ICAEW: http://www.icaew.com/en/technical/insolvency/insolvency-reps
• ICAS: http://icas.org.uk/Technical-Knowledge/Insolvency-Technical/Submissions/
• IPA: in the members’ area>public consultations>other consultations
• R3: https://www.r3.org.uk/media/documents/policy/consultation_subs/R3_response_-_Strengthening_the_regulatory_regime_and_fee_structure_for_IPs.pdf

In particular, I would recommend reading the R3 response in full, as there is not the space here to do it justice and it includes some valuable member survey results.

Regulatory Objectives

The government has proposed regulatory objectives for the statute-books, “framed” as follows:

1. Protecting and promoting the public interest

2. Having a system of regulating persons acting as IPs that:
(i) delivers fair treatment for persons affected by their actions and omissions,
(ii) reflects the regulatory principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed, and any other principle considered to represent best regulatory practice, and
(iii) delivers consistent outcomes

3. Encouraging an independent and competitive IP profession whose members:
(i) deliver quality services transparently and with integrity, and
(ii) consider the interests of all creditors in any particular case

4. Promoting the maximisation of the value of returns to creditors and also promptness in making those returns

5. Ensuring that the fees charged by IPs represent value for money

ACCA seemed alone in considering most of the above to be “uncontentious”, even going so far as to suggest what it felt would be a useful addition to them. However, none of the proposed objectives avoided the other bodies’ critical eyes. Many of the comments revolved around the thought that any such objectives will need to be supported by detailed guidance so that everyone was clear on the standards by which IPs and the RPBs are being measured.

Here are some other fruitier comments:

• Why stop at “having a system of regulating IPs” that delivers fairness etc.? Aren’t some of these objectives appropriate to the insolvency regime itself? (ICAEW, IPA)
• Shouldn’t the regulation system “deliver fair treatment” also to IPs? (ICAEW)
• Fixing IP fees on a prescribed scale (reference to another of the consultation’s proposals) would not “encourage a competitive IP profession”. (ICAEW)
• Statute already sets out how office holders should consider creditors’ interests (ICAEW, R3), although not uniformly in all cases (IPA). Setting it as an objective may raise false hopes of some expecting greater weight to be given to their interests than provided by statute. (ICAEW)
• Promoting the “promptness of returns” could threaten consideration of longer term gains, thus encouraging a culture of “quick kills” rather than thorough investigation and pursuit of claims. (IPA)
• “You should recognise that to perform a ‘value for money’ assessment in a case will require a detailed audit… which will be a very time consuming (and therefore expensive) process.” (ICAEW)
• Setting “value for money” as a regulatory objective simply shifts the responsibility for finding a solution onto the RPBs, rather than helping to overcome the difficulties in ascertaining what actually represents value for money. (IPA)
• The regulatory process cannot alter the facts that creditors will suffer losses, but enshrining objectives 4 and 5 risks over-inflating creditors’ expectations and thus may have a detrimental effect on public confidence. (IPA)

R3 kicked back more robustly on the concept as a whole: “the proposals… prompt us to suggest that now is the time to look at, in a fundamental way, the role of the Insolvency Service, as presently structured, funded, resourced and whether it is the most appropriate body to direct and oversee as important a part of the UK’s financial support service sector as the insolvency profession”.

Oversight Regulator’s Statutory Powers over the RPBs

The government proposes to introduce statutory powers to enable the Insolvency Service/Secretary of State to take a variety of actions against RPBs and, in certain cases, to make their own enquiries of, and apply to court to decide sanctions on, IPs directly. Unsurprisingly, the RPBs – and perhaps a little surprisingly, R3 – expressed concerns over some of the proposals as well as questioning whether the powers were truly necessary (again with the clear exception of ACCA, which had few specific comments on the proposals).

• “The ‘oversight regulator’ should take care to avoid ‘micro-managing’ RPBs and their disciplinary processes. Effectively running a ‘shadow’ regulatory system on top of the existing established processes would be confusing and damaging for the insolvency profession and those it serves.” (R3)
• “The increased powers of sanction by the oversight body seem to be little more than window dressing to address non-existent illegal actions… In our view, the system of regulation operates at its most effective when the oversight regulator and the RPBs work together, as demonstrated through the introduction of the complaints gateway.” (ICAEW)
• “It is worrying that the Secretary of State would wish to acquire the ability to control individual enquiries, which could undermine the fairness of the procedure.” (ICAEW)
• “The fundamental problem… is that the proposed legislation does not envisage there being any stage at which a proper disciplinary hearing will be held to allow the IP to deal with and refute the findings of the Insolvency Service investigation and it is envisaged that the Secretary of State, through the good offices of the Insolvency Service would be investigator, prosecutor and judge (determining both guilt and sanction).” (ICAEW)
• “We wonder whether this process could be susceptible to challenge on the basis of human rights legislation given that there appears to be no provision for a fair trial by an independent tribunal.” (ICAEW)
• “Who picks up the likely significant costs?” If these are to be passed on to the RPBs, then licence fees will increase significantly, with the likely consequences of increased costs on insolvent estates and IPs leaving the market. (ICAEW and R3)
• “There are several proposals… that would see IPs potentially punished twice for the same transgression. It is both inequitable and a position that few other professionals could find themselves in.” (R3) The IPA also stated that such a process “would introduce a degree of double jeopardy and be contrary to principles of natural justice”. Although apparently the Service has clarified, in a meeting with the IPA, that it is not intended to subject an IP to a second disciplinary process, the IPA has questioned how, and in what circumstances, would the Service conduct such enquiries independent of the IP’s licensing body.
• “The power for the Secretary of State to sanction an IP directly calls into question the point of the regulation of the profession being delegated to RPBs in the first place.” (R3)
• As regards the proposed power to issue a direction to an RPB in the context of a disciplinary matter: “it would be wholly inappropriate for the Insolvency Service to mandate that a particular decision be reached.” (ICAS)
• Will the Service be adequately resourced – financially and with skilled staff – to exercise these new powers, particularly in regard to the proposed investigations and prosecutions? (R3 and ICAS)

A Single Regulator?

It seems that there has been a slight convergence of opinions of R3 and the RPBs on this question. Setting aside ACCA, which “endorsed” the proposal, the regulatory and trade bodies now seem united in their objection to the proposed reserve power to enable the Service to designate a single regulator.

However, whereas R3 brought attention to the “regulation gap” that would result as a single regulator got up to speed, the RPBs had other reasons for their objections:

• Whatever could be achieved by the Insolvency Service overseeing a single regulator equally should be achievable with multiple RPBs. Effective oversight is the key. (ICAS and ICAEW)
• “There seems to be a failure to recognise that many IPs are already members of bodies which operate with the best regulatory models for professionals.” (ICAS)
• “Competition between regulators has driven down licensing costs and led to improvements in RPBs’ offerings to their members. There would be no such incentive to innovate, were there to be a single regulatory body.” (IPA)
• The government is also proposing to introduce a formal process to de-recognise an RPB if it fails to perform, but how would that work with a single regulator? We could hardly be left with no regulator! (IPA)
• Providing even a reserve power “could be seen to demonstrate on the part of the Insolvency Service a lack of commitment to the changes proposed for the regulatory regime and a lack of confidence in its part in the RPBs.” (ICAEW)

R3 suggested a third way: a “Single Regulatory Process”, which “would reduce significantly the inconsistencies that currently exist in the insolvency profession’s regulation” and “would also be a chance to take a fresh look at the profession’s regulatory processes and standards”.

Restriction of Use of Time Cost Basis

I wonder if the Service had any inkling of the floodgate they were prising open with the suggestion that the option of seeking fees on a time cost basis be limited to certain cases. Even ACCA is opposed to this one!

The core objections will not come as a surprise:

• If the primary issue is lack of creditor engagement, then the solution should lie in improving creditor engagement, starting with the Crown creditors. (ACCA, ICAS, ICAEW)
• “Some IPs may feel minded for their own commercial protection to factor in more work than might in the event be necessary, in which case fees could end up being over-estimated.” (ACCA; similar comments made by R3)
• In 2013, only 2% of all complaints related to fees, so perhaps creditors’ concern is not so acute as perceived by the government, and any action taken to change the existing regime must be proportionate. (ACCA, R3, ICAEW, ICAS)
• Plenty of criticisms of the OFT study: out of date, limited scope (which is now being extrapolated far beyond its remit), confusion between fees and costs, assumption that engaged creditors are the only constraint on fees, etc… (primarily R3 and ICAEW)
• IPs will avoid small and risky cases, as a fixed/percentage fee would not be economical. (R3, ACCA) [Although I have heard this many times, personally I don’t get it (unless people have in mind a prescribed rate): for a case with assets of £10,000 (net of non-IP costs), how does an IP’s recovery differ, if he is paid on a time cost basis, a fixed fee of £10,000, or a fee of 100% of the first £10,000 (net) realised?]
• This would burden the public purse, as uneconomic cases will remain with the OR. Some IPs also would leave the market, resulting in reduced competition and fewer options for debtors seeking help, which would seem contrary to the public interest. (R3, ICAEW)
• Fixed fees do not incentivise IPs to pursue tricky assets or to carry out non-profitable tasks. What does an IP do when he reaches the limit but still has work to do; is he expected to work for no pay? (ACCA, R3, ICAS, ICAEW, IPA)
• As recommended by the Cork Report, percentage-based fees were largely dropped in the 1980s, as they were viewed as unfair and inequitable to creditors. (ACCA, R3) “There is nothing inherently fair in a basis of charging where the results depend upon the amount and quality of realisable assets, rather than the work required.” (ICAEW) Arguably, time costs are the fairest fees mechanism (ICAEW), whereas fixed/percentage fees will invariably result in an element of cross-subsidisation of cases. (IPA)
• There is no evidence – or reason – to support the assumption that adopting fixed/percentage fees will reduce fee levels (IPA) or creditors’ returns (ICAEW).

But here are some of the more impassioned and novel comments:

• This specific proposal has no grounding in the Kempson review nor has there been any evidence-based research. “The Insolvency Service has disclosed the rationale behind this decision is solely ‘because two methods of remuneration are simpler than three’.” (R3)
• “R3 is not aware of anywhere else in the world where fee restrictions as outlined in the consultation are in operation. In effect, the Insolvency Service proposes to introduce an untested system of IP remuneration in the UK.” (R3)
• Secured creditors have the power to negotiate discounts from IPs, but why must that mean that unsecured creditors are ‘over-charged’? If a large customer (such as the government via its own procurement policy) sought to obtain discounts, that does not mean that other buyers of the goods and services are automatically being ‘over-charged’. (R3)
• Is a 9% differential in costs (the OFT study’s conclusion) really concerning? “The differential, for instance, between prices charged for consumer goods to wholesale or retail customers could be expected to be much higher (and still not exploitative of consumers).” (ICAEW)
• Restricting fees could result in outsourcing of parts of the job to unregulated entities, shifting the cost rather than reducing it and resulting in less transparency and control. (R3)
• “It is simplistic to think that changes introduced in the personal insolvency market can be imported into the corporate sector; this view demonstrates a complete lack of understanding of corporate insolvency, This market cannot be ‘commoditised’ in the same way.” (R3)
• If creditors have difficulty assessing the reasonableness of fees based on time costs, they will have the same, if not greater, difficulty judging fixed/percentage fees, something acknowledged by Professor Kempson. (R3)
• There is no reason to believe that restricting the use of the time cost basis in this manner will impact on creditor engagement or complaints about fees. (R3)
• RICS abolished fee scales for valuations after the Monopolies and Mergers Commission concluded that “they restricted competition and worked against consumers and were against the public interest”. (ICAEW)
• It is difficult to reconcile the government’s apparent determination to improve public confidence in the insolvency regime with the World Bank’s report that shows the UK currently as one of the most effective jurisdictions for resolving insolvency. (ICAEW)
• “If the aim of the Insolvency Service is to reduce IPs’ fees in aggregate to a break-even level, it seems unlikely that a high quality profession will be sustained.” (ICAEW)
• The Impact Assessment identifies the risk that the OR might be left with more small-value cases, but the Assessment’s suggestion “that the concerns will be ‘overcome’ through regulatory objectives of RPBs and monitoring is fanciful. The consequences would result from a fee regime imposed upon the profession by the government and RPBs would not be in a position to do anything about it.” (ICAEW)
• Professor Kempson recommended greater use of mixed bases for fees, but the government is proposing to abolish this. (IPA) [Mixed bases were only introduced in 2010!]
• The government wishes RPBs to engage more actively in monitoring and assessment of fees, but this will be more difficult in non-time cost cases. (IPA)
• The 2010 reforms and revised SIP9 are still fresh, but “the Insolvency Service appears already to have concluded that those reforms failed.” (ICAEW)
• Proposals to provide different fee bases for different case types, recovery prospects, and UK jurisdictions will do nothing to clarify an already-confusing picture for creditors. (ICAEW)

The bodies’ suggestions of alternative approaches are a mixed bag (some of which, personally, I find a bit scary! But hey, a bit of brain-storming is no bad thing.):

• Greater engagement by Crown creditors (pretty-much everyone’s idea).
• Reduce the constraints on creditors’ committees, e.g. smaller quorum. (ICAS)
• Encourage committee members, e.g. small payments for attending meetings. (ICAEW)
• Introduce a Scottish-style Reporter mechanism across the UK (the consultation stated that the Scottish system’s checks and balances appeared to work reasonably well). (ICAS)
• Require IPs “to justify to creditors and regulators their use of the hourly rate, by reference to prescribed criteria”. (ACCA)
• “More targeted support… to creditors to enable them to assess the reasonableness of the amounts being claimed.” (ACCA)
• “Improved management of creditor expectations, through creditor guides, fee estimates and estimated outcome statements.” (IPA)
• “Enhanced capital requirements and/or direct financial contribution by directors to the basic costs of insolvency processes.” (IPA) [Interesting idea, but isn’t there a risk of conflict with this..?]
• Fixing a minimum fee for those statutory elements of an insolvency administration that will generally not be of direct financial benefit to creditors.” (IPA, similar suggestion by R3)
• “Data collection and benchmarking of fee data.” (IPA) [And..?]
• “Guidance and/or compulsion of IPs to make greater use of mixed fee bases for different elements of the work involved within an insolvency administration. The onus could be put on the IP to justify why the basis sought is appropriate to the nature of assets, the complexity of the task and the value that it is estimated will result.” (IPA) [But does this follow, given some of the arguments against fixed/percentage fees..?]
• Better explanation by IPs up-front of the likelihood (or not) of dividends and of the work that will need to be carried out that will not generate direct financial benefits. (IPA)
• Adjusting the requisite voting majorities so that greater creditor participation is required. (IPA) [Why penalise IPs for creditors’ inactivity?]
• Encouraging cheaper ways of conducting “meetings”, e.g. by telephone, e-meetings, or resolutions by correspondence. (ICAEW)
• Drop the Red Tape Challenge proposal to remove the requirement to hold creditors’ meetings. (R3)
• More/better guides for creditors, similar to those that the Insolvency Service already provides for debtors facing bankruptcy. (ICAEW, R3)
• More transparency/information regarding the costs to insolvent estates by the Insolvency Service, as creditors/debtors often confuse these with IPs’ fees. (R3)
• Trade bodies should help members to understand insolvency – and how to avoid it or becoming a creditor in an insolvency – better. (ICAEW)
• All relevant Insolvency Service officials should work in an IP firm for a minimum of two weeks per year as ‘on the job/CPD training’ to plug the apparent knowledge gap, given the lack of understanding of the insolvency profession evidenced by the consultation proposals. (R3) [Ooh!]
• Greater use of cost-saving measures of 2010 Rules and more time to allow them to have effect. (R3)
• “IPs should also be required to report work with more transparency, e.g. break down time-use clearly into constituent parts such as ‘communicating with x number of creditors to establish a meeting’.” (R3) [Ooer! Can we try to keep it relatively simple and proportionate..?]
• “Introducing elements of a Code of Practice for IPs (based on the model in Australia) plus changes to SIP9 could be introduced to ensure that IPs’ records of time spent (and corresponding fees on a case) are transparent and accountable.” (R3) [In what ways is the current SIP9 deficient in this area..? R3 points to the Australian part of the MF Global case report as a good example; this report provides a fee estimate of $1 million for the first month – is R3 sure this is an appropriate model for typical (non-secured creditor) cases?] R3 suggests that in this way IPs would explain the work done “in more detail” and “reporting would be clearer”.

The most widely-made suggestion as regards fee-setting is the mandatory use of fee estimates (ACCA, IPA, ICAEW, R3), with some bodies suggesting express creditor approval for exceeding an estimate could be required (IPA, R3; ACCA: “perhaps”). I’m attracted to this idea as well, but, although I agree with the idea of seeking creditors’ approval for fees in excess of an estimate, I would hope that this could be done without necessarily positive creditor response; if creditors do not respond to an invitation to vote, then is it fair to penalise the IP? It could also impact on creditors’ returns, as silence may force the IP to take further measures, perhaps by court application, to achieve approval. It might also be more likely to encourage a poor habit of over-estimating fees in the first instance, so that IPs can avoid the hassle of seeking approval to more fees later. There are many issues with this suggestion – some will complain that it is well-nigh impossible to estimate fees with any degree of confidence at an early stage – but it has to be the lesser of several suggested evils, hasn’t it? In addition, isn’t it a standard and professional way of approaching fees? After all, don’t we usually seek fees estimates – with subsequent approval for uplifts – from many suppliers, from solicitors to garage mechanics?

Regulatory Intervention in Matters of Remuneration

The consultation also sought views on proposals to have the RPBs take a greater role in assessing and deciding on fees issues, via both enhanced monitoring and dealing with complaints about the quantum of fees. Most RPBs pointed out that IP fees are already considered to a significant extent; the ICAEW described it this way: “reviewers already look in detail at the insolvency practitioner’s time records. They will question the time recorded against specific tasks, where it doesn’t appear commensurate with the work evidenced on the case files; where it appears to have been carried out by a more experienced member of staff than we would consider appropriate; or where it appears excessive.”

As regards the suggestion that RPBs should do more than look at clear regulatory breaches:

• “To suggest that RPB bodies should step into the breach – even if one exists in relation to IP remuneration – will not address the issue without a sincere attempt by the UK Government to review the legislation. Regulators should not be asked to circumvent or overrule the law and to do so will inevitably expose the regulators to legal challenge.” (ICAS; ICAEW also highlighted the risks of Court challenge of RPBs’ judgments)
• “We are unclear on what basis an RPB could interject when the fee basis has been approved by a statutory process. This would be a usurpation of Court’s powers.” (IPA)
• “If 90% of creditors have approved as IPs fees, it does not appear reasonable to allow a minority financial interest to delay the administration of an estate.” (IPA)

Whilst the IPA is “opposed to routine regulatory involvement in fee assessment”, it seems more open to the idea that more could be done practically: it suggested that, if the idea of fee estimates were taken up, it could engage in “routine monitoring of practitioner performance” against these estimates. It also stated: “we can see no reason why, in a case of apparent excessive charging, the RPB could not direct the practitioner to repay such fees as exceed the original estimate provided or else direct the IP to have their fees assessed by a Court”, although the IPA does seem to be alone in this view.

It seems clear from the responses that there is much confusion amongst the bodies as to exactly what the government is proposing; simply dropping in a “value for money” regulatory objective and telling RPBs to get on with it will not work. The IPA remarked: “The regulatory challenges presented flow from the entirely subjective nature of establishing what value for money is and in whose opinion such value should be ascertained. The government has been singularly unable to define these concepts and appears now to expect the RPBs to be able to do so on their behalf… Will a full review of time spent and how this compares to the fixed or percentage fees charged be required? Will on-site visits to review practitioners’ files be expected?” The ICAEW also stated that, if the idea is for “RPBs to effectively conclude on each file reviewed that the IP’s costs represent value for money, we would expect there to be a significant impact on our monitoring costs; potentially doubling them.” However, the ICAEW seems to have been party to a meeting with the Consultation Policy Lead that has led them to conclude that all that is envisaged of RPBs as regards “enhanced monitoring” is pretty-much what they are already doing. One would hope that the Service could do better at communicating their desires to the bodies that they directly oversee!

In summary, I don’t think the turkeys have voted for Christmas. I think they have resisted well the pressure to seek a compromise, but have endeavoured to keep their eye focussed on what truly appears to be the issue – creditor engagement – and what practically might be done to improve the situation.


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A Collection of Two Halves – Part 2: Old Cases

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And here is the second half of my collection. They’re not exactly “old” cases, but merely ones that I’ve already seen pop up in case digests. But, in the interests of completeness:

• SoS v Knight – lack of salary in hard times is not fatal to sole shareholder’s/director’s redundancy claim.
• Enta Technologies v HMRC – petition for winding-up on appealed tax assessments is an abuse of process (UPDATE 13/02/2015: HMRC’s later appeal has been allowed – see below).
• Relfo v Varsani – convoluted transactions fails to thwart tracing and unfair enrichment claim.
• The Keepers and Governors of John Lyon School v Helman – tenancy vesting in trustee avoids receivers’ claim to freehold.

Sole shareholder/director’s choice to forgo salary in company’s hard times is not fatal to redundancy claim

Secretary of State for BIS v Mrs P Knight (9 May 2104) ([2014] UKEAT 0073 13)

http://www.bailii.org/uk/cases/UKEAT/2014/0073_13_0905.html
Sarah Rushton of Moon Beever pretty-much said it all (http://www.moonbeever.com/hr-blog/787-insolvency-service-redundancy-payment).

The sole shareholder and managing director of a company drew a salary sporadically in the years preceding the company’s insolvency and was paid no salary in the last two years of the company’s trading, her evidence being that, because times had been hard, she had forfeited her salary to enable the other employees and creditors to be paid.

The Appeal Tribunal found that the Employment Judge had been entitled to conclude that Mrs Knight’s agreement that she would be unpaid did not amount to a variation or discharge of her employment contract. The judge accepted that “the absence of payment under what is said to be a contract of employment is a factor which the tribunal of fact has to consider and take into account” (paragraph 23), but it does not necessarily mean that there is no consideration from the company. Consequently, Mrs Knight was entitled to a redundancy payment from the RPO.

Abuse of process to seek a winding-up order on appealed tax assessments

Enta Technologies Limited v HMRC (21 March 2014) ([2014] EWHC 548 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2014/548.html

I would recommend the summary by Nicholas Fernyhough of RPC (http://www.rpc.co.uk/index.php?option=com_easyblog&view=entry&id=1081&Itemid=129).

HMRC presented a winding-up petition on the basis of non-payment of a number of tax assessments, which were the subject of appeals. It was the judge’s view that, since April 2009 when VAT appeals moved to the First-Tier Tribunal, “the winding-up court should in my view now, post-2009, refuse itself to adjudicate on the prospective merits of the appeal and leave that question to be dealt with by the tribunal, either dismissing the petition or staying it in the meantime” (paragraph 11). The Tribunal had already ruled that the appeals were not ‘hopeless’ and thus “any attempt to revisit the tax judge’s ruling should be done by an application to the tribunal itself rather than by invitation to a winding-up court to second-guess that decision” (paragraph 12). The judge continued: “These matters are in themselves sufficient to lead me to the conclusion that the petition should be dismissed as an abuse of process and/or as a matter of discretion and the advertisement restrained” (paragraph 14).

(UPDATE 13/02/2015: on 28 January 2015, the Court of Appeal allowed HMRC’s appeal: Lord Justice Vos did not agree that the tax tribunal’s jurisdiction to decide on the validity of assessments abrogated the Companies court’s jurisdiction to decide on whether a company should be wound up.  In the circumstances of this particular case, Vos LJ felt that the judge should have concluded that the tax assessments were not disputed by the company in good faith and on substantial grounds and consequently he allowed the appeal and made an order for the company’s compulsory winding-up.  http://www.bailii.org/ew/cases/EWCA/Civ/2015/29.html)

An elaborate façade of transactions was insufficient to thwart a tracing claim

Relfo Limited (In Liquidation) v Varsani (28 March 2014) ([2014] EWCA Civ 360)

http://www.bailii.org/ew/cases/EWCA/Civ/2014/360.html

The summary by Lexis Nexis’ Anna Jeffrey at http://lexisweb.co.uk/blog/randi/how-will-the-court-approach-tracing-claims/ covers this case well.

Mr Varsani appealed an order, which had arisen from the liquidator’s claim of unjust enrichment. His appeal was dismissed.

The facts of the case had been unusual in that the funds had not be paid from the company’s account into Mr Varsani’s account either directly or via a chronological chain of transactions flowing through a number of accounts, but, in the words of Lord Justice Floyd, the transactions were “an elaborate façade to conceal what was in truth intended and arranged to be a payment for the benefit of Bhimji Varsani” (paragraph 121).

Lady Justice Arden felt that the judge had had plenty of material from which to draw the inference that the company’s money was substituted by payments used ultimately to make the payment to Mr Varsani. She said: “The decision in Agip demonstrates that in order to trace money into substitutes it is not necessary that the payments should occur in any particular order, let alone chronological order. As Mr Shaw submits, a person may agree to provide a substitute for a sum of money even before he receives that sum of money. In those circumstances the receipt would postdate the provision of the substitute. What the court has to do is establish whether the likelihood is that monies could have been paid at any relevant point in the chain in exchange for such a promise” (paragraph 63).

Tenancy vesting in Trustee breaks timeline for Receivers’ freehold claim

The Keepers and Governors of the Possessions, Revenues and Goods of Free Grammar School of John Lyon v Helman (22 January 2014) ([2014] EWCA Civ 17)

http://www.bailii.org/ew/cases/EWCA/Civ/2014/17.html
For a comprehensive summary, I would recommend that by Imran Malik of Muckle LLP: http://www.pmflegal.com/blog/index.php/2014/04/17/case-update-receivers-unable-to-claim-freehold/.

A tenant was made bankrupt and then the sub-chargee of the tenant’s house appointed receivers, after which the trustee in bankruptcy disclaimed the lease. The receivers then lined up a sale of the house and, the day before completing the sale, they served the landlords with a notice claiming the freehold of the house under the Leasehold Reform Act 1967.

The Act gives a tenant the right to acquire on fair terms the freehold where certain conditions are satisfied. Crucially, the server of the notice must have been a tenant of the house under a long tenancy for the last two years. The landlord challenged the validity of the notice on the basis that the appointment of the trustee in bankruptcy had resulted in the vesting of the tenancy in the trustee, who had not been in office for two years (and in any event the receivers did not purport to serve the notice on behalf of the trustee).

Lord Justice Rimer described the landlords’ submission as “not just simple, it is formidable” (paragraph 27). He considered that the ‘last two years’ condition was not met and thus the receivers’ claim to the freehold “was writ in water and signified nothing” (paragraph 34). The appeal judges unanimously allowed the landlords’ appeal.


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A Collection of Two Halves – Part 1: New Cases

0531 Caiman

It’s been a while since I blogged on case law, so I’ve divided my pile into two posts. In this one, I summarise some decisions that I’ve not seen covered widely elsewhere:

• Re Coniston Hotel – an Administration challenge, which may have stoked Tomlinson’s embers, fails to ignite.
• Holgate v Reid – more Administrators’ actions are challenged: dispute over a Para 52(1)(b) statement.
• Shaw v Webb – post-petition dispositions persuade the court to choose winding-up over Administration.
• Thomas v Edmondson – can an IPO be granted after a short IPA is completed?
• Barnes v The Eastenders Group – Supreme Court decides CPS must pay Receiver after failed restraint order.

West Registrar case hits a wall

Re Coniston Hotel (Kent) LLP (In Liquidation) (8 April 2014) ([2014] EWHC 1100 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2014/1100.html
The long-running claims of the members of the LLP that the Administrators, RBS, and property agents, had conspired to defraud came to a head in this application brought by the former Administrators in which they sought the striking-out of the members’ proceedings.

The judge’s summary of the members’ claims leaves the reader in little doubt as to what the punchline might be: “The Members’ criticisms are not about professional negligence by the Administrators or by the valuers whom they instructed or by the agents whom they instructed to sell the Hotel, nor are there criticisms about the mode of sale, nor the handling and outcome of the negotiations for the sale. Instead the Members have pleaded a very different kind of challenge to the sale… [They] say that the marketing process was a sham. They do not identify the respects in which it was a sham, but they say it was a sham. They say it was a pretence and they say that it was pursuant to a conspiracy to defraud… All the conspirators knew, so it is alleged, that the Hotel was worth £7 million. It is quite clear that the Bank’s duty and the Administrators’ duty would have been to get the open market value for the Hotel and to achieve the market value. However, so it is alleged, the Bank was not prepared to see the Hotel sold for its full value and the debt owed to the Bank paid. What the Bank wanted instead was that the Hotel should be sold at around 50 per cent of its true value and not sold in the open market to a fortunate purchaser, but sold to an associated company of the Bank, West Register Limited. In order to carry this fraud to fruition, it was necessary to have Knight Frank place a value on the Hotel, which was about 50 per cent of what Knight Frank fully appreciated was the true value, about 50 per cent of £7 million. Armed with that fraudulent valuation from Knight Frank, the conspirators would then pretend to market the hotel, there would be a sham marketing process and the Hotel would be sold to the predetermined purchaser, West Register. I suppose one can see what was in it for West Register. They would acquire something at half its true value. It is less obvious what was in it for the Bank, because their debt, which exceeded the sale price that came about, would not be paid in full, but, perhaps, the Bank would be content that its associate had profited in that way. It is difficult to see what Knight Frank’s motive for this very serious act of dishonesty and wrongdoing would have been. It is submitted to me that they had motive enough: they wanted to please the Bank. It is also difficult to see what the Administrators’ motive would have been for participation in this fraud. This fraud is of the gravest and most serious character. However, it is submitted to me that I should see the force of the point, that the Administrators simply wanted to please the Bank” (paragraph 28).

Nevertheless Morgan J acknowledged that “it is a strong thing for a judge to strike out a case or give summary judgment, particularly in a case where there is an allegation of serious wrongdoing” (paragraph 33) and he also noted “a most disturbing report” (paragraph 25) written by Lawrence Tomlinson, by which he was “sufficiently disturbed… to give the Members a chance to take legal advice as to whether they had a properly pleadable case at an undervalue” (paragraph 50).

In relation to the allegation that the marketing was a sham, the judge stated that it was “utterly fanciful. It is an allegation put forward by someone (the Members) who simply refuse to face up to the reality of what has happened here” (paragraph 43). In dealing with the allegations that the prospective Administrators’ communications with the Bank were improper, the judge noted that the letter of instruction was “really very clear indeed” as regards the relationships between the parties and there was a “complete lack of material to indicate that [the IPs] were guilty of this very serious fraud”. In view of this, Morgan J also had strong words for counsel for the members: “his professional duty was to decline to plead the allegation which he did plead, alternatively, to withdraw from the case” (paragraph 49).

Consequently, the judge dismissed the conspiracy to defraud or, alternatively, the undervalue claim, along with the members’ Para 75 claim, which was quickly dismissed on the basis that the members did not have a pecuniary interest in the relief sought.

(UPDATE: the judgment on the appeals was given on 13/10/2015 ([2015] EWCA Civ 1001).  The involvement of West Registrar made Lady Justice Arden “scrutinise what happened with scepticism, but at the end of the day it is impossible for the appellants to get round the evidence as to the way the respondents marketed the hotel”.  The appeals were dismissed.)

Another challenge of Administrators’ actions

Holgate & Holgate v Reid & Dawson (20 February 2013) ([2013] EWHC 4630 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2013/4630.html
This is a fairly old judgment, but it has only recently been published on BAILII.

The Holgates are creditors and members of a company over which Joint Administrators were appointed by the QFCH. The Administrators included a Para 52(1)(b) statement in their Proposals. Mr Holgate requisitioned a creditors’ meeting, but then withdrew his request, having received the Administrators’ request for an indemnity to cover the costs of convening a meeting, estimated at £21,900. Shortly thereafter, the Administrators issued notice that the Proposals were deemed to have been approved.

Some time later, the Holgates applied to court under Para 74 to order the Administrators not to sell the company’s business and assets as they planned; to revoke the deemed approval of the Proposals and the basis of the Administrators’ fees as fixed under R2.106(5A); and to require a Para 51 creditors’ meeting to be held. The Holgates submitted that the company could, and should, be rescued as a going concern by means of a CVA and thus the Administrators should not have made a Para 52(1)(b) statement. They also submitted that there had been a fundamental change of circumstances since the Administrators’ Proposals, because since then the FSA had announced that the major banks had agreed to provide redress on mis-sold interest rate hedging products and that such redress may well negate the bank’s claim against the company. The Administrators countered that the business had been trading at a loss both before and after Administration and that, whilst they had instructed solicitors to investigate the mis-selling claim, they were not in funds to pursue it. They were also keen to conclude the business sale for fear that it would otherwise fall away.

The Holgates failed to persuade Hodge HHJ that the Administrators’ evidence that the company could not be traded profitably was wrong. Thus the judge concluded that, on the evidence, it could not be said that the Administrators did not genuinely hold the opinion that the company had insufficient property to enable a distribution to be made to unsecured creditors other than out of the prescribed part and therefore they acted properly in dispensing with a creditors’ meeting by reason of the Para 52(1)(b) statement in their Proposals.

The judge found that the costs within the estimate of £21,900 in relation to a requisitioned meeting “may well have proved exaggerated; but I am not satisfied that they were deliberately exaggerated by the administrators with a view to deterring Mr Holgate from pursuing his requisition of a meeting. In my judgment, the administrators were acting cautiously in looking at a worst case scenario for the costs” (paragraph 38) and, in any event, the creditors’ meeting could have resolved that these costs be paid from the estate.

Hodge HHJ also considered the Holgates’ application in relation to Para 74(6)(c), i.e. that no order may be made if it would impede or prevent the implementation of proposals approved more than 28 days earlier. The judge felt that this applied as much to deemed approved proposals and that, as the Holgates were asking the court to resist the business sale, which was “the whole tenor of the proposals” (paragraph 44), he should dismiss the application. As an alternative, he was also not inclined to exercise the court’s discretion, as he felt that Mr Holgate had acted unreasonably in not pursuing the requisition for an initial creditors’ meeting and he pointed out that Mr Holgate had the right even then, under Para 56, to requisition a meeting given the apparent level of his claim as creditor.

As regards the suggestion that the FSA announcement supported a change in circumstances that might persuade the court to make a direction under Para 68, Hodge HHJ did not agree: “the existence of the FSA review merely relates to the means by which the mis-selling claim may be pursued. It is not clear whether it applies in the present case, or will secure sufficient satisfaction for the company even if it does. In any event, because I am not satisfied that the rescue of the company as a going concern is a viable proposition, it does not seem to me that there is any proper basis for the court to give any directions under paragraph 68 with regard to the holding by the administrators of a meeting of creditors” (paragraph 51).

Despite a consenting winding-up petitioner, the court declines to make an administration order and instead appoints a provisional liquidator

Shaw v Webb & Ors (10 April 2014) ([2014] EWHC 1132 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2014/1132.html
HHJ Simon Barker QC acknowledged that, “on paper the criteria or preconditions for making an administration order, which are set out at paragraph 11 of Schedule B1, are made out: (a) there is no question but that [the company] is unable to pay its debts, and (b) the evidence of Mr Webb points to it being reasonably likely that the purpose of administration (in this case a better result for the creditors than would be likely on liquidation) will be achieved if an administration order is made” (paragraph 18). In addition, neither the petitioning creditor nor the QFCH opposed the making of an administration order. Therefore, why did the judge decline to make the administration order, but instead appointed Mr Webb as provisional liquidator, allowing the winding-up petition to proceed?

The judge felt that the payment of £115,000 that occurred post-petition “cries out for satisfactory explanation and justification” (paragraph 23); he felt similarly concerning the purchase of the company’s sole share post-petition; and he wondered whether there were other dispositions that may be unjustifiable, expressing surprise that the bank statements for the post-petition period were not in evidence (another item to add to the administration order application shopping list?)

Consequently, in view of the fact that the making of an administration order would neutralise the effect of S127 in relation to post-winding up petition dispositions, Simon Barker HHJ felt that it was appropriate to call the winding-up petition on for hearing. A winding-up order has since been granted.

Can an Income Payments Order be made after a short Income Payments Agreement is completed?

Thomas & O’Reilly v Edmondson (12 May 2014) ([2014] EWHC 1494 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2014/1494.html

A bankrupt had entered into an Income Payments Agreement (“IPA”) with the Official Receiver, which effectively gave the OR the benefit of the bankrupt’s NT tax code up to the end of the tax year in which the debtor had been made bankrupt.

Later, Joint Trustees were appointed and, after failing to agree a further IPA with the debtor, they applied for an IPO in the amount of £10,000 per month for three years from the date of the IPO. The District Judge concluded that the Trustees were not entitled to an IPO on the basis that there had already been an IPA. The Trustees appealed.

Mrs Justice Aplin considered at length the effect of the introduction of S310A by means of the Enterprise Act 2002: were the intentions to limit the period of income payments to a maximum of three years and to provide that either an IPA is agreed or an IPO is sought?

The judge’s conclusion was that the court remains entitled to grant an IPO notwithstanding the previous IPA. She said: “It seems to me that the plain and ordinary meaning of section 310 is clear and that there is no reason to go beyond it. Furthermore, had the legislature intended that jurisdiction be limited in the way which is suggested, it seems to me that it would have said so at the time of the express amendments made by sections 259 and 260 of the Enterprise Act 2002” (paragraph 25).

As regards the issue of whether the combined maximum of income payments is three years, the judge said: “It seems to me that even if the Respondent is correct and it was Parliament’s intention that a bankrupt should not be required to pay part of his income to his trustee in bankruptcy for more than 3 years, the potential for an anomaly if there is jurisdiction to make an Income Payments Order despite an Income Payments Agreement having already been entered into is met by the existence of the discretion of the judge when exercising the jurisdiction whether to make the subsequent order and if so, the length of the order in question” (paragraph 28)… so I guess it remains to be seen whether the Trustees will be granted a full 3-year IPO on top of the 5-month IPA.

The Supreme Court upholds a Receiver’s right to be paid notwithstanding a quashed restraint order

Barnes v The Eastenders Group & Anor (8 May 2014) ([2014] UKSC 26)

http://www.bailii.org/uk/cases/UKSC/2014/26.html
I summarised the lead up to this Supreme Court appeal in an earlier post (http://wp.me/p2FU2Z-1H). Briefly, a Receiver was appointed over third party assets along with the CPS’ application for a POCA restraint order, which subsequently was set aside. The outcome of earlier court decisions was that the Receiver was not permitted to draw his fees and costs from the third party assets on the basis that the party’s right to peaceful enjoyment of its possessions under Article 1 of Protocol 1 of the European Convention of Human Rights (“A1P1”) took precedence, but also there was no basis under the POCA or the Human Rights Act 1998 for the CPS to be required to pay the Receiver’s fees and costs. The Receiver appealed to the Supreme Court.

In a unanimous judgment, the Supreme Court supported the previous decision that, as in this case there was no reasonable cause to regard the third party’s assets as the defendant’s at the time of the order, it would be a disproportionate interference with the third party’s A1P1 rights for the Receiver’s fees to be drawn from that party’s assets.

However, the judges felt that to leave the Receiver without a remedy would be to substitute one injustice for another and violate the Receiver’s A1P1 rights: “a receiver who accepts appointment by a court is entitled to know that the terms of his appointment will not be changed retrospectively. Moreover it is an ordinary part of receivership law that a receiver has a lien for his proper remuneration and expenses over the receivership property. To take away that right without compensating him would violate the receiver’s rights under A1P1” (paragraph 96). However, Lord Toulson agreed that there was no power in the POCA to order the CPS to pay the Receiver’s fees and costs.

The judge considered that the solution lay in the concept of unjust enrichment. The IP had agreed to act as Receiver on the basis that his agreement with the CPS provided for him to be paid from the defendant’s assets over which he would be entitled to a lien. The enrichment arose from the CPS’ perception that there would be a benefit to the public in the party’s assets being removed from its control and placed in the hands of the Receiver whilst its investigations were proceeding, but it was unjust enrichment as there was a total failure of consideration in relation to the Receiver’s rights over the assets, which was fundamental to the basis on which he was to act. Thus, the Receiver was entitled to look to the CPS for payment of his fees and costs.

Lord Toulson had some “lessons for the future” for the CPS. He noted that in the Court of Appeal judgment, the judge had “deplored the fact that the original application was made at short notice to a judge who was in the middle of conducting a heavy trial with only a limited time available for considering it” (paragraph 118) and stressed that, in view of the fact that such serious applications are made ex parte, the CPS had a special burden of candour and, because of the potential to cause serious harm, a material failure to observe the duty of candour could be regarded as serious misconduct.


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The Perilous Neglect of the Fragile Insolvency Service Enforcement Directorate

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“Trust is essential to every commercial transaction. We neglect its fragility at our peril”, says Vince Cable in his foreword to the “Transparency & Trust” Government Response. Having read the Government’s proposals, I am inclined to repeat the often-cried warning that we neglect the ever-decreasing resources of the Insolvency Service at our peril. Although some of the Government’s proposals have the veneer of reducing the costs of disqualifying directors, whatever small gains are achieved will be wiped out by the hidden burdens that look to be added the Directorate.

It’s not all about the Insolvency Service, however. The Government has tagged on what appear as afterthoughts some ideas that will impact on IPs’ approaches to antecedent transaction challenges. These ideas are poorly covered in the Government Response – they escape all the Impact Assessments – and thus it is not surprising that R3 immediately commented on its “specific concerns” regarding these proposals (http://www.r3.org.uk/index.cfm?page=1114&element=19780).

The key objective of Cable’s “Transparency & Trust” drive is the creation of a public register of beneficial owners, but in this post I have summarise the more material plans that will affect insolvency work. The Government’s full response can be found at https://www.gov.uk/government/consultations/company-ownership-transparency-and-trust-discussion-paper.

Changes to the CDDA

The original proposals suggested that Schedule 1 of the CDDA, Matters for Determining Unfitness of Directors, might be added to in order to ensure that the following are taking into account in relation to disqualification orders and undertakings:

• Material breaches of “sectoral” regulation (especially the banking sector);
• The “wider social impacts” of a failure;
• Whether vulnerable creditors or those who had paid deposits had lost out in particular; and
• The director’s previous failures, possibly with a finite number of failures being allowed before unfitness is presumed.

The Government response accepts that simply adding to the Schedule 1 is not the solution, as directors might conclude that any factor not explicitly listed will not be taken into account. The response states: “we will recast a more generic set of factors that the court must take into account” (paragraph 222), although it also lists pretty-much the items described above, but with the exception of the X strikes and then you’re out idea, which does not appear to have made it through.

However, the paper does state that the court (or the Insolvency Service) will need to take into account “any previous positions as director of a company that has become insolvent and any relevant aspect of the director’s track record in running these companies… We are sympathetic to concerns we heard about the possible unwanted effect the inclusion of a ‘track record’ could have on those involved with early stage companies, or in rescuing companies that are in difficulties”, although I wonder at the depth of their sympathy: “We are clear that a director will, of course, be able to present any argument he or she might have (for instance as a business rescue professional or that the insolvency was not due to any element of unfit conduct on the director’s behalf)” (paragraph 225).

The consultation also sought views on whether – in fact, the consultation asked which – other “sectoral” regulators (again, looking mainly at the banking sector) should have the power to apply to court, or accept an undertaking direct, to disqualify a director. Although the ICAEW felt that this was appropriate, the Government’s response aligns more closely with R3’s response: disqualifications will remain with the Service, but the CDDA and gateways will be amended so that information might be exchanged more effectively, and there might be greater collaboration, between regulators. It has also suggested that expertise might be shared between regulators, which might include secondments.

The consultation proposed that the time period within which disqualification proceedings need to be commenced be increased from two years to five. The response explains that “views were mixed” (paragraph 279). However, I note that there was no support for any extension of the time period from R3, ICAEW or ICAS (the IPA did not respond – well, not the Insolvency Practitioners Association, but the Institute of Practitioners in Advertising did) – all three bodies noted that the BIS consultation document had stated that the two year timescale did not pose a barrier in the vast majority of cases and that the court can consider extensions. R3 also observed that five years would be a long time for an investigation to ‘hang’ over an individual and the ICAEW noted the potential difficulties if office holders needed to keep a case open for a long period. Despite these views, the Government proposes to increase the time limit to three years.

“Better Compensating Creditors for Director Misconduct”

The Transparency & Trust paper runs to 283 paragraphs, but this section, which contains the meaty proposed changes for IPs, runs to only 17 paragraphs! I don’t like that heading either…

The Government has expressed dissatisfaction with the fact that so few actions have been taken to challenge antecedent transactions. “Since 1986, there have only been

• around 30 reported wrongful trading cases;
• around 50 preference claims; and
• around 80 reported cases arising from undervalue transactions” (paragraph 260).

However, the response does not acknowledge that, as R3 pointed out in its response, many more cases are settled out of court. Neither does it acknowledge in any meaningful way that, in a great deal of other cases, the disqualified director simply has no money!

The Government’s proposed remedies are:

• To allow such causes of action to be sold or assigned to a third party “to increase the chances of action being taken against miscreant directors for the benefit of creditors” (paragraph 272); and
• To empower the Secretary of State to apply to court for a compensation order against, or to accept a compensation undertaking from, a director who has been disqualified.

The Government response barely makes a passing comment at some of the objections to these proposals raised by R3, the ICAEW, and ICAS, such as:

• Insolvency practitioners already have the means – and the duty and expertise – to pursue monies from errant directors, although the future of these is at risk when the insolvency exemption from the Jackson reforms ends.
• Why would a third party be any better equipped to take action than a liquidator?
• The possibility of a liquidator assigning their right to a claim already exists in Scotland.
• IPs are also limited in what they can achieve, as too few cases are being passed to IPs from the OR.
• Creditors’ returns may end up being lower, because a third party would only buy a claim in the expectation of making a profit.
• Third parties will not have the same investigative powers as liquidators.
• It would be impossible to prevent directors – or a friend etc. – from acquiring a claim with the intention of quashing it.
• It is difficult to see how assigning claims away from a liquidator to a third party intent on making a profit would increase confidence in the insolvency regime.
• It is difficult to see how compensation might be paid to anyone other than the company’s creditors via the office holder.
• If the Service were to distribute monies to creditors, it could duplicate the work done by the IP in adjudicating on claims, and the costs to the Service would be prohibitive. “The Insolvency Service would be better focusing its resources on disqualifying more directors rather than seeking to take on new activities such as distributing monies, which is already performed efficiently by insolvency practitioners” (R3).
• A compensatory award could prejudice civil claims being brought by the office holder (and, in my personal view, I could see a race develop between the IP and the Secretary of State, to see who gets their hands on the director’s limited purse first).
• “We do not think that the Insolvency Service has the resource to provide the evidence required to ensure a fair compensatory award upon which the Court can rule” (R3).
• The Service’s costs for bringing disqualification actions likely will increase substantially, and with fewer undertakings offered, given that directors will risk being pursued for compensation.

Despite these concerns, the Government is going to bring in these two remedies “when Parliamentary time allows”. Sales or assignments will be allowed of the following causes of action: fraudulent and wrongful trading – both of which will be extended to administrators to pursue (per the Red Tape Challenge outcomes); transactions at an undervalue; preferences; and extortionate credit transactions. The compensation awards/undertakings will be allowed by the court or the Secretary of State “to a particular creditor or group or class of creditors, or the creditors as a whole” (paragraph 274), although there is no mention as to how this may work in practice.

I shall leave the final word to the ICAEW, which, in its response to the consultation question on whether the proposal would improve confidence in the insolvency regime, stated: “We consider that confidence would be more likely to be improved if the Insolvency Service were resourced adequately to take disqualification action in every case where it appears to be justified.”


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And now for a qualitative review of the IP Regulation Report

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Having explored the statistics, I thought I’d turn to the Insolvency Service’s 2013 IP regulation report’s hints at issues currently at the top of the regulators’ hit list:

• Ethical issues;
• Consultation with employees;
• SIP16; and
• Dodgy introducers;

All the Service’s regulatory reviews can be found at http://www.bis.gov.uk/insolvency/insolvency-profession/Regulation/review-of-IP-regulation-annual-regulation-reports.

Ethical Issues

The Insolvency Service has “asked that regulators make ethical issues one of their top priorities in the coming year, following concerns arising from both our own investigations and elsewhere” (Dr Judge’s foreword). What might this mean for IPs? Personally, I find it difficult to say, as the report is a bit cloudy on the details.

The report focuses on the fact that 35% of the complaints lodged in 2013 have been categorised as ethics-related. On the face of it, it does appear that ethics-categorised complaints have been creeping up: they were running at between 10% and 20% from 2008 to 2011, and in 2012 they were 24%. Without running a full analysis of the figures, I cannot see immediately which categories have correspondingly improved over the years: “other” complaints have been running fairly consistently between 30% and 40% (which does make me wonder at the value of the current system of categorising complaints!) and the other major categories – communication breakdown, sale of assets, and remuneration – have been bouncing along fairly steadily. The only sense I get is that, generally, complaints were far more scattered across the categories than they were in 2013, so I am pleased that the Insolvency Service reports an intention to refine its categorisation to better understand the true nature of complaints made about ethical issues. Now that the Service is categorising complaints as they pass through the Gateway, they are better-placed than ever to explore whether there are any trends.

In one way, I think that this ethics category peak is not all bad news: I would worry if some of the other categories – e.g. remuneration, mishandling of employee claims, misconduct/irregularity at creditors’ meetings – recorded high numbers of complaints.

Do the complaints findings give us any clues as to what these ethical issues might be about? Briefly, the findings listed in the report involved:

• Failing to conduct adequate ethical checks and a SIP16 failure;
• Failing to pay a dividend after issuing a Notice of Intended Dividend or retract the notice (How many times does this happen, I wonder!) and a SIP3 failure regarding providing a full explanation in a creditors’ report;
• Three separate instances (involving different IPs) of SIP16 failures;

Unfortunately, the report does not describe all founded complaints, but it appears to me that few ethics-categorised complaints convert into sanctions. However, it is interesting to see that some of these complaints don’t seem to go away: two of the complaints lodged with the Service about the RPBs, and which are still under investigation, involve allegations of conflict of interest, so it is perhaps not surprising that the Service’s interest has been piqued. The report describes a matter “of wider significance which we will take forward with all authorising bodies”, that of “concerns around the perceived independence of complaints handling, where the RPB also acts in a representative role for its members” (page 6). Noisy assumptions that RPBs won’t bite the hands that feed them have always been with us, but there were some very good reasons why complaints-handling was not taken away from the RPBs as a consequence of the 2011 regulatory reform consultation and I would be very surprised if the situation has worsened since then.

So, as a profession, we seem to be encountering a significant number of ethics-related complaints, few of which lead to any sanctions. This suggests to me that behaviour that people on the “outside” feel is unethical is somehow seen as justified when viewed from the “inside”. It cannot be simply an issue of communicating unsuccessfully, because wouldn’t that in itself be a breach of the ethical principle of transparency that might lead to a sanction? The Service seems to be focussing on the Code of Ethics: “we are working with the insolvency profession to establish whether the current ethical guidance and its application is sufficiently robust or whether any changes are needed to further protect all those with an interest in insolvency outcomes” (page 4). Personally, I struggle to see that the Code of Ethics is somehow deficient; it cannot endorse practices that deviate from the widely-accepted ethical norm, because it sets as the standard the view of “a reasonable and informed third party, having knowledge of all the relevant information”. I guess whether or not disciplinary committees are applying this standard successfully is another question, which, of course, the Service may be justified in asking. However, I do hope that (largely, I confess, because I shared the pain of many who were involved in the years spent revising the Guide) the outcome doesn’t involve tinkering with the Code, which I believe is an extremely carefully-written, all-encompassing, timeless and elevated, set of principles.

Consultation with employees

This topic pops up only briefly in relation to the Service’s monitoring visits to RPBs. It is another matter “of wider significance which we will take forward with all authorising bodies”: “regulation in relation to legal requirements to consult with employees where there are collective redundancies” (page 4).

Although I’ve been conscious of the concern over employee consultation over the years – I recall the MP’s letter to all IPs a few years’ ago – I was still surprised at the number of “reminders” published in Dear IP when I had a quick scroll down Chapter 11. On review, I thought that the most recent Article, number 44 (first issued in October 2010), was fairly well-written, although it pre-dated the decision in AEI Cables Limited v GMB, which acknowledged that it may be simply not possible to give the full consultation period where pressures to cease trading are felt (see, e.g., my blog post at http://wp.me/p2FU2Z-3i), and it all seems so impractical in so many cases – to engage in an “effective and meaningful consultation”, including ways of avoiding or reducing the number of redundancies – but then it wouldn’t be the first futile thing IPs have been instructed to do…

If this is a regulator hot topic going forward, then it may be beneficial to have a quick review of standards and procedures to ensure that you’re protecting yourself from any obvious criticism. For example, do your engagement letters cover off the consultation requirements adequately? Does staff consultation appear high up the list of day one priorities? If any staff are retained post-appointment, do you always document well the commencement of consultation, ensuring that discussions address (and contemporaneous notes evidence the addressing of) the matters required by the legislation?

SIP16

Oh dear, yes, SIP16-monitoring is still with us! It seems that 2012’s move away from monitoring strict compliance with the checklist of information in SIP16 to taking a bigger picture look at the pre-pack stories for hints of potential abuse has been abandoned. It seems that the Service’s idea of “enhanced” monitoring simply was to scrutinise all SIP16 disclosures, instead of just a sample. In addition, unlike previous reports, the 2013 report does not describe what intelligence has come to the Service via its pre-pack hotline, nor does it mention what resulted from any previous years’ ongoing investigations. Oh well.

I guess it was too much to ask that the release of a revised SIP16 on 1 November 2013 might herald a change in approach to any pre-pack monitoring by the Service. Nope, they’re still examining strict compliance, although at least there has been some progress in that the Service is now writing to all IPs where it identifies minor SIP16 disclosure non-compliances (with the serious breaches being passed to the authorising body concerned). I really cannot get excited by the news that the Service considered that 89% of all SIP16 disclosures, issued after the new SIP16 came into force, were fully compliant. Where does that take us? Will IPs continue to be monitored (and clobbered) until we achieve 100%? What will be the reaction, if the percentage compliant falls next time around?

Dodgy Introducers

The Service has achieved a lot of mileage – in some respects, quite rightly so – from the winding up, in the public interest, of eight companies that were “wrongly promoting pre-packaged administrations as an easy way for directors to escape their responsibilities”. Consequently, I found this sentence in the report interesting: “We have also noted that current monitoring by the regulators has not picked up on the insolvency practitioner activities that were linked to the winding up of a number of ‘introducer’ companies, and are in discussions with the authorising bodies over how this might be addressed in the coming year” (page 6). Does this refer specifically to the six IPs with links to the wound-up companies who have been referred to their authorising bodies? Or does this mean that the Service will be looking at how the regulators target (if at all) IPs’/introducers’ representations as regards the pre-pack process on IP monitoring visits?

Having heard last week a presentation by Caroline Sumner, IPA, at the R3 SPG Technical Review, it would seem to me that regulators are, not only on the look-out for introducers of dodgy pre-packs, but also of dodgy packaged CVLs where an IP has little, if any, involvement with the insolvent company/directors until the S98 meeting. Generally, IPs are vocal in their outrage and frustration at unregulated advisers who seek to persuade insolvent company directors that they need to follow the direction of someone looking out for their personal interests, but someone must be picking up the formal appointments…

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Unfortunately, the Insolvency Service’s report has left me with a general sense that it’s all rather cryptic. The report seems to be full of breathed threats but nothing concrete and, having sat on the outside of the inner circle of regulatory goings-on for almost two years now, I appreciate so much more how inactive that arena all seems. It’s a shame, because I know from experience that a great deal of work goes on between the regulators, but it simply takes too long for any message to escape their clutches. It seems that practices don’t have to move at the pace of a bolting horse to evade an effective regulatory reaction.


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A Closer Look at Six Years of Insolvency Regulation

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Have you ever wanted evidence-based answers to the following..?

• Which RPB issues the most – and which the least – sanctions?
• What are the chances that a monitoring visit by your authorising body will result in a sanction or a targeted visit?
• How frequent are monitoring visits and is there much difference between the authorising bodies?
• Do you receive more or less than the average number of complaints?
• Are there more complaints now than in recent years?

Of course, there are lies, damned lies, and statistics, but a review of the past six years of Insolvency Service reports on IP regulation provides food for thought.

The Insolvency Service’s reports can be found at: http://www.bis.gov.uk/insolvency/insolvency-profession/Regulation/review-of-IP-regulation-annual-regulation-reports and my observations follow. Please note that I have excluded from my graphs the three RPBs with the smallest number of IPs, although their results have been included in the results for all the authorising bodies combined. In addition, when I talk about IPs, I am looking only at appointment-taking IPs.

Regrettably, I haven’t worked out how to embed my graphs within the text, so they can be found here. Alternatively, if you click on full article, you will be able to read the text along with the graphs.

Monitoring Visits

How frequently can IPs expect to be monitored and does it differ much depending on their authorising body?

The Principles for Monitoring set out a standard of once every three years, although this can stretch to up to six yearly provided there are satisfactory risk assessment processes. The stated policy of most RPBs is to make 3-yearly visits to their IPs. But what is it in reality and how has it changed over time? Take a look at graph (i) here.

This graph shows that last year all RPBs fell short of visiting one third of their IPs. However, the Secretary of State fell disastrously short, visiting only 8% of their IPs last year. I appreciate that the Secretary of State expects to relinquish all authorisations as a consequence of the Deregulation Bill, but this gives me the impression that they have given up already. Personally, I would expect the oversight regulator to set a better example!

Generally-speaking, all the RPBs are pretty-much in the same range, although the recent downward trend in monitoring visits for all of them is interesting; perhaps it illustrates that last year the RPBs’ monitoring teams’ time was diverted elsewhere. Fortunately, the longer term trend is still on the up.

What outcomes can be expected? The Insolvency Service reports detail the various sanctions ranging from recommendations for improvements to licence withdrawals. I have amalgamated the figures for all these sanctions for graph (ii) here.

Hmm… I’m not sure that helps much. How about comparing the sanctions to the number of IPs (graph (iii) here).

That’s not a lot better. Oh well.

Firstly, I notice that the IPA has bucked the recent downward trend of sanctions issued by all other licensing bodies, although the longer term trend for the bodies combined is remarkably steady. I thought it was a bit misleading for the Service report to state that “the only sanction available to the SoS is to withdraw an authorisation”, as that certainly hadn’t been the case in previous years: as this shows, in fact the SoS gave out proportionately more sanctions (mostly plans for improvements) than any of the RPBs in 2009, 2010 and 2011. Although ACCA and ICAS haven’t conducted a large number of visits (30 and 25 respectively in 2013), it is still a little surprising to see that their sanctions, like the SoS’, have dropped to nil.

However, the above graphs don’t include targeted visits. These are shown on graph (iv) here.

Ahh, so this is where those bodies’ efforts seem to be targeted. Even so, the SoS’ activities seem quite singular: are they using targeted visits as a way of compensating for the absence of power to impose other sanctions?

Complaints

The Insolvency Service’s report includes a graph illustrating that the number of complaints received has increased by 45% over the past three years, with 33% of that increase occurring over the past year. My first thought was that perhaps the Insolvency Service’s Complaints Gateway is admitting more complaints into the process, but the report had mentioned that 22% had been turned away, which I thought demonstrated that the Service’s filtering process was working reasonably well.

Therefore, I decided to look at the longer term trend (note that the number of IPs has crept up pretty insignificantly over these six years: a minimum of 1,275 in 2008 and a maximum of 1,355 in 2014). Take a look at graph (v) here.

So the current level of complaints isn’t unprecedented, although why they should be so high at present (or indeed in 2008), I’m not sure. It also appears from this that the IPA has more than its fair share, although the number of IPA-licensed IPs has been growing also. Let’s look at the spread of complaints over the authorising bodies when compared with their share of IPs (graph (vi) here).

Interesting, don’t you think? SoS IPs have consistently recorded proportionately more complaints. Given that the SoS has no power to sanction as a consequence of complaints, I wonder if this illustrates the deterrent value of sanctions. Of further interest is that the proportion of complaints against IPA-licensed IP has caught up with the SoS’ rate this last year – strange…

Moving on to complaints outcomes: how many complaints have resulted in a sanction and have the RPBs “performed” differently? Have a look at graph (vii) here.

At first glance, I thought that this peak reflected the fact that fewer complaints had been received – maybe the actual number of sanctions has remained constant? – so I thought I would look at the actual numbers (graph (viii) here).

Hmm… no, it really does look like the number of sanctions increased in years when fewer complaints were lodged. However, I’m sceptical of this apparent link, as I would suggest that, in view of the time it takes to get a complaint through the system, it may well be the case that the 2012/13 drop in sanctions flowed from the 2010/11 reduction in complaints lodged. I shall be interested to see if the number of sanctions pick up again in 2014.

Going back to the previous graph, personally I am reassured by the knowledge that in 2013 the RPBs generally reported a similar percentage of sanctions… well, at least closer than they were in 2010 when they ranged from 2% (ICAEW) to 38% (ICAS).

The ICAEW’s record of complaints sanctions seems to have kept to a consistently low level. However, let’s see what happens when we combine all sanctions – those arising from complaints and monitoring visits, as well as the ordering of targeted visits (graph (ix) here).

Hmm… that evens out some of the variation. Even the SoS now falls within the range! Of course, this doesn’t attribute any weights to the variety of sanctions, but I think it helps answer those who allege that some authorising bodies are a “lighter touch” than others, although I guess the sceptic could counter that by saying that this illustrates that IPs are still more than twice as likely to receive a sanction from the IPA than from ICAS. Ho hum.

Overview

To round things off, here is a summary of all the sanctions handed out by all the authorising bodies over the years (graph (x) here).

This suggests to me that targeted visits seem to have gone out of fashion, despite monitoring visits generally giving rise to more sanctions than complaints… but, with the hike in complaints lodged last year, perhaps I should not speak too soon.


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The case of the missing…

0922 Dune 45 (2)

The case of the missing: (1) Declaration of Solvency; (2) “physical control”; (3) post-IPO income; (4) successful defence; (5) agency relationship; and (6) application to set aside a default judgment.

1. Re Wesellcnc.com Limited – what happens when a Declaration of Solvency is not made by the time the winding-up resolution is passed?
2. Your Response Limited v Datateam Business Media Limited – can a common law lien be exercised over an electronic database?
3. OR v Baker – can an Income Payment Order attach to income received by the bankrupt before the date of the IPO?
4. Appleyard v Reflex Recording Limited – who pays for the company’s legal costs in failing to resist freezing and administration orders?
5. Bailey & Anor v Angove’s Pty Limited – is an insolvent agent and distributor entitled to collect and retain customer payments despite termination of the agreement with supplier?
6. Power v Godfrey – could a doubtful default judgment be successful in extinguishing a bankruptcy petition debt?

When is an MVL not an MVL?

Re Wesellcnc.com Limited (12 December 2013) ([2013] EWHC 4577 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2013/4577.html
A compliance review revealed that a declaration of solvency (“DoS”) had not been made at the time that the members had passed a resolution for the company’s winding-up. Therefore, even though a DoS was made a little later, the consequence under S90 was that the winding-up was a CVL, not an MVL. The liquidator sought the court’s directions, as required under S166(5).

Purle HHJ considered that he had the power to extend the time for holding a S98 meeting, but he decided against it on the basis that in this case it would be pointless: the liquidation had been going for ten months, all creditors had been paid, and, having made distributions to the shareholders, the liquidation effectively was complete. Although the judge declared that the liquidation were a CVL, he dispensed with the requirement for a S98 meeting and the Statement of Affairs. He granted the liquidator’s wish that he “continue to administer the liquidation on the basis of [an MVL]” (paragraph 14) (so presumably the liquidator was not required to submit a D-report/return) and he sanctioned the liquidator’s use of his powers, which under S166(2) technically, in the absence of the S98 meeting, he may not have exercised without the court’s sanction.

Can a lien be exercised over an electronic database?

Your Response Limited v Datateam Business Media Limited (14 March 2014) ([2014] EWCA Civ 281)

http://www.bailii.org/ew/cases/EWCA/Civ/2014/281.html

This case does not relate directly to an insolvency, but it still caught my eye as of potential interest in insolvency situations. It centred around the question of whether it is possible to exercise a common law possessory lien over an electronic database.

A publisher had instructed (albeit there was no detailed written contract) a data manager to hold and maintain its database of subscribers. The publisher ended the relationship and asked for the release of the database, but the provider refused until its outstanding fees were paid. At first instance, the judge decided that the data manager was entitled to withhold the data until its fees were paid and he rejected the argument that it is not possible to exercise a lien over intangible property, in this case electronic data.

At the appeal, Lord Justice Moore-Bick rejected the argument that the database be regarded as a physical object, as it is not “capable of possession independently of the medium in which it is held” (paragraph 19). He also considered whether it was nevertheless possible to “possess” a database in the sense that the data manager was able to exercise effective control over it as against the publisher. He stated: “Possession is concerned with the physical control of tangible objects; practical control is a broader concept, capable of extending to intangible assets and to things which the law would not regard as property at all… In the present case the data manager was entitled, subject to the terms of the contract, to exercise practical control over the information constituting the database, but it could not exercise physical control over that information, which was intangible in nature” (paragraph 23).

The judge seemed to acknowledge the limitations in the current law. In considering the opinion set out by Sarah Green and John Randall QC in The Tort of Conversion that the essential elements of possession can be exercised over electronic data, he stated: “In my view there is much force in their analysis, which, if accepted, would have the beneficial effect of extending the protection of property rights in a way that would take account of recent technological developments. However, to take the course which they propose would involve a significant departure from the existing law in a way that is inconsistent with the decision in OBG v Allan. That course is not open to us – indeed, it may now have to await the intervention of Parliament” (paragraph 27).

Although the judge was content, on the facts of this case, that the data manager had not exercised the degree of control necessary to entitle it to exercise a lien – amongst other things, it had freely allowed the publisher access to the database by means of a password – he also seemed concerned at where a common law lien on electronic data might lead: “I cannot see any basis on which the extension of the right to exercise a lien over intangible property could rationally be confined to electronic databases and for my own part I am not persuaded that it is necessary or desirable to extend this form of self-help, based on control rather than possession, to intangible property generally” (paragraph 32).

Lord Justice Davis reflected on possible unintended consequences of such a decision: “the right to such a possessory lien, if it exists, could have an impact on other creditors of the company (or individual) concerned and could confer rights in an insolvency which other creditors would not have. Further, the position of lenders could be affected: for they may well have ordered their lending arrangements and drafted their securities on the law as it is currently understood to be. Overall, given the number of IT companies and businesses in existence and the number of IT contracts being made the impact of the respondent’s arguments – if accepted – could therefore be significant” (paragraph 39) and Lord Justice Floyd suggested that it would come close to treating information as property.

Consequently, the publisher’s appeal was allowed to the extent of holding that the data manager was not entitled to refuse to provide the publisher a copy of the database.

“Twilight period” – between bankrupt receiving income and an IPO being granted – closed

Official Receiver v Baker (29 November 2013) ([2013] EWHC 4594 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2013/4594.html
Although this case follows several precedents, not least Raithatha v Williamson, I have to say that, when I first looked at the IA86 reference, I was surprised at the outcome. As Mr Justice Warren said, the alternative “would leave a possible and possibly serious lacuna” (paragraph 46).

The story was that the OR had applied for an Income Payments Order for a single sum of £9,415, which was the sum held in Baker’s bank account, received by him after bankruptcy, less one month’s estimated essential outgoings. The deputy district judge had dismissed the application on the basis that, under S310(1), the court was being asked to make an order “claiming for the bankrupt’s estate so much income of the bankrupt during the period which the order is in force as may be specified in the order”, but in an attempt to catch income received before the date of the order. The deputy district judge decided that an IPO can only catch income received by the bankrupt after the making of the order.

At the OR’s appeal, Warren J was persuaded by the case precedent, but he also observed that, if the deputy district judge were correct, then, given that the bankrupt has 21 days in which to tell his trustee of an increase in income and that it takes at least 28 to obtain an IPO, “the bankrupt in some circumstances might quite properly be able to arrange that some income received in this twilight period, which could be a substantial amount when it is remembered that one-off payments can be income within section 307(5), could not be made the subject of an IPO and nor would they fall within section 307” (paragraph 46). He also felt that no distortion of the language of statute were necessary to lead to a conclusion that it is the claim to income, and not the receipt by the bankrupt of the income, which is the subject of the phrase “during the period for which the order is in force”. Therefore, he allowed the OR’s appeal.

Court allows company to settle legal costs of failed attempts to resist freezing and administration orders

Appleyard v Reflex Recording Limited (18 December 2013) ([2013] EWHC 4514 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2013/4514.html
A company incurred legal costs in relation to a freezing injunction made against it. The company was not successful in resisting the freezing order and the court was asked to make an administration order.

David Cooke HHJ felt it was inappropriate to order that the company’s costs be paid as expenses of the administration, as the company had not been successful in its representations. However, he stated: “It does seem to me right, if it is possible to do so, to try and rectify the prejudice that the company’s solicitors have suffered through being willing to provide their services on credit for purposes for which it was anticipated the company would need to give them instructions and for which they have not been able to be paid for as a consequence of the court’s order itself” (paragraph 4). He allowed “the proper costs of the company in considering the administration order and whether the company can properly respond to or resist the administration order. Secondly, the proper costs to the company of complying with the terms of the freezing injunction and, again, considering whether the company can properly respond to the freezing injunction or seek to resist it or to argue that it should not have been made” (paragraph 5) to be paid from the company’s bank balance, treating them as having been transferred to the solicitors prior to the administration order.

Contract terms permit agent and distributor to retain customer payments

Bailey & Anor v Angove’s Pty Limited (7 March 2014) ([2014] EWCA Civ 215)

http://www.bailii.org/ew/cases/EWCA/Civ/2014/215.html
D & D Wines International Limited (“D&D”) acted as the sole agent and distributor of wine supplied by Angove’s Pty Limited (“Angove”). Angove terminated its agreement with D&D two days after D&D was placed in administration, the notice expressly terminating D&D’s authority to collect any further payments from two customers, who had received wine from Angove through D&D. The dispute centred around entitlement to payments made by these customers after the agreement had been terminated.

At first instance, the judge viewed the relationship between Angove and D&D as that of principal and agent, not buyer and seller, and he ordered that the sums, held in escrow, received from the customers after termination of the agreement be paid to Angove. The (now) liquidators of D&D appealed, arguing that after termination D&D remained entitled to collect payment from the customers in order to recoup its commission due under the agreement and the intervening administration then prevented it from accounting to Angove for the balance.

The difficulty for Angove was that the agreement provided that D&D should pay Angove for wine supplied to the customers regardless of whether D&D was able to recover payment from the customers. Thus, whilst at termination of the agreement D&D was required to settle its account with Angove, it did not mean that D&D was not able to pursue monies owed to it by the customers. Therefore, Lord Justice Patten decided that the escrow monies be paid over to the liquidators.

Angove sought to argue that “it would be unconscionable for the liquidators, as officers of the court, to accept payment of the Fund but not to pay in full to Angove what is due to it” (paragraph 31). However, Patten LJ stated: “Although the insolvency of D&D had unfortunate consequences for Angove (as for all its other creditors), that fact alone is insufficient to make it unconscionable for D&D to receive payment of the Fund. It is simply the product of the contractual arrangements which both parties agreed to” (paragraph 42).

(UPDATE 13/11/2014: permission to appeal to the Supreme Court was granted on 30 October 2014.)

(UPDATE 22/08/16: on 27/07/16 – http://www.bailii.org/uk/cases/UKSC/2016/47.html – the Supreme Court unanimously allowed Angove’s appeal on its first question: D&D’s agency was revoked by Angove’s termination notice. An agreement only provides for an agent’s authority to be irrevocable where (i) it states so and (ii) it secures an interest of the agent. The earlier Court of Appeal had not addressed the second criterion. In this case, the agreement allowed customers to pay Angove direct: it was D&D’s “responsibility” to collect the customers’ payments (and from it draw commission), not their “right”. Although not necessary for deciding the appeal, Lord Sumption’s comments on the second question, whether a constructive trust arose because the payee knew at the time of the agent’s imminent insolvency, were interesting: he considered such payments simply “adventitious timing”.)

Lack of action against “obviously tainted” default judgment scuppers bankruptcy petition

Power v Godfrey (5 December 2013) ([2013] EWHC 4359 (Ch))

http://www.bailii.org/ew/cases/EWHC/Ch/2013/4359.html
Power appealed his bankruptcy order on the ground that he had obtained a default judgment (over two years ago) against Godfrey that was substantially greater than the debt on which he was made bankrupt. On that basis alone, it would seem that there ought not to have been a bankruptcy order made, so how then had the Deputy Registrar come to a different conclusion?

Mr Justice Morgan considered the Deputy Registrar’s decision and noted that it was apparent that he had gone behind the default judgment and assessed the underlying claim, which resulted in him effectively treating the judgment as non-existent. The Deputy Registrar had described the default judgment as “so obviously tainted and so obviously would have been set aside, that it would be bizarre if I were to adjourn this matter to give Mr Godfrey an opportunity to have it set aside” (paragraph 23). However, the questions Morgan J felt were more relevant were “whether Mr Godfrey would apply to have the default judgment set aside and if he did apply, how he would fare in relation to the question of promptness in Rule 13.3” (paragraph 26), a factor which he said is given “considerable weight at least in many such cases”. Faced with Power’s “trump card” of the default judgment and the fact that, despite the significant time that had passed, Godfrey had made no move to seek to have it set aside, the judge decided to dismiss the bankruptcy petition.


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IP Fees Consultation: a case of failing to see the wood for the trees..?

1525 Sequoia

Unfortunately, my case law reviews have become a bit log-jammed, so I’m afraid all I can offer at present is my response to the Insolvency Service’s IP fees and regulation consultation: MB IP fees response Mar-14

Normal service will be resumed as soon as possible.