Oury Clark Blog » Elliot Green

Insolvency Fees

Elliot Green — Wed, 08 Jun 2011 15:37:49 +0000

There is much discussion at the moment regarding the remuneration of insolvency practitioners with some commentators even suggesting an independent body to oversee and review the same.

Part of the problem appears to be that of perception, where an insolvency practitioner (“IP”) records time spent on an insolvent estate with the same subject simply to historical approval in principle from creditors. The IP is then able to write a cheque out accordingly for the time costs incurred. In reality there are procedures and checks which prevent it from being quite so straight forward but the apparent inability of the creditors (who are the ultimate clients) from in effect withholding the money because it is controlled by the insolvency practitioner does separate us from many other [...]

Green v Ireland [2011] EWHC 1305 (Ch) (20 May 2011)

Elliot Green — Tue, 24 May 2011 11:37:29 +0000

This is a case in which as Liquidator, I applied to the Court for relief that the granting of a charge at a relevant time in favour of the Respondent was a Preference under Section 239 of the Insolvency Act 1986. I succeeded in obtaining a declaration that a preference had arisen and compensatory relief accordingly was awarded.

The case was interesting in being consistent with the rationale in Re MC Bacon Ltd [1990] BCC 78, it was held that a preference occurred at the point in time when it was decided that the charge was to be granted, not when the charge necessarily was granted in favour of the Respondent.

The Respondent’s case in part relied upon an email exchange relating to the charge which did [...]

The end of the balance sheet test for solvency?

Elliot Green — Mon, 09 May 2011 09:09:14 +0000

Unless there is good reason shown to the contrary it was largely considered that Section 123(2) of the Insolvency Act 1986 was in effect a balance sheet test for solvency, being one of the two possible tests with the other being a liquidity test of whether you are able to discharge your debts as and when they fell due for paymennt.

The case BNY Corporate Trustee Services Ltd v Eurosail [2011] EWCA Civ 227 has thrown a spanner into the works in which it was held that Section 123(2) of the Insolvency Act 1986 cannot necessarily be based on an accounting excercise such as where financial statements have been prepared in accordance with UK GAAP. The test can now involve a degree of judgment in assessing [...]

Green v Bramston & Ors [2010] EWHC 3106 (Ch) (02 December 2010)

Elliot Green — Mon, 31 Jan 2011 08:19:03 +0000

In Green v Bramston & Ors [2010] EWHC 3106 (Ch) (02 December 2010) the principles set out in Berleley Applegate (Re Berkeley Applegate (Investment Consultants) Ltd [1989] 1 Ch 32) were considered.

The case was notable as a dispute between two insolvency practitioners and in which the Trustee’s investigation costs relating to the beneficial interest in trust assets did not form part of the order for indemnity granted by the court.

It was held that where trust assets were realised by the Trustee in Bankruptcy, that the costs and expenses incurred were recoverable from those trust assets.

The full judgment can been seen at http://www.bailii.org/ew/cases/EWHC/Ch/2010/3106.html

Litigation – is it worth it?

Elliot Green — Fri, 10 Dec 2010 13:43:53 +0000

A lawyer once said to me “there is a risk with any piece of litigation” and like death and taxes this is another of life’s certainties for those who embark upon or seek redress through the courts.

Article 6 of the Human Rights Act 1998 certainly provides us all with the opportunity of being able to use the courtroom to seek redress where we are aggrieved – but at what cost? If a claim is less than £5,000 then the risk is much reduced.

However, if you are pursuing a claim over £5,000 then the risk of adverse costs (having to pay your opponent’s legal costs) is very real, especially if you lose.

Many claims that end up in court are driven by us having a point of [...]

Should Insolvency Practitioners not go on fishing expeditions?

Elliot Green — Sat, 06 Nov 2010 05:24:15 +0000

As Liquidator or Trustee in Bankruptcy I enter my office as a stranger and I frequently encounter many bankrupts and former company directors (and sadly their professional advisers) who are not tremendously forthcoming with information that I reasonably require for the furtherance of my investigations into the insolvent’s affairs, dealings and property.

When seeking the files of accountants and even solicitors who the insolvent may have instructed, a not uncommon attempt to derail this process is for advisers to allege that I might be on something of a fishing expedition. Comments may even extend to you are looking for creatures in ponds that you do not even know exist! Naturally I do not know if those so-called creatures exist – I was not there at the relevant [...]

Hooper v Duncan Lewis (Solicitors) Ltd & Ors [2010] BPIR 591

Elliot Green — Sat, 06 Nov 2010 03:37:21 +0000

The ability of the Trustee in Bankruptcy or Liquidator to apply to Court for orders of disclosure and private examination is a powerful weapon in the armoury of an Insolvency Practitioner (“IP”), seeking to unravel the financial affairs of a bankrupt or a company particularly given an IP usually enters his or her office as a stranger.

What was interesting about this case was that such orders are more often than not utilised to seek information from a bankrupt or a former company director who have mandatory statutory obligations to assist the IP in the execution their duties.

In the matter of Hooper v Duncan Lewis (Solicitors) Ltd & Ors [2010] BPIR 591 (“Hooper”) the Trustee in Bankruptcy sought disclosure of solicitors’ files, not of the bankrupt [...]

Preference or invalid set-off: which is it?

Elliot Green — Sun, 31 Oct 2010 02:51:04 +0000

Preferences are defined in Section 239 of the Insolvency Act 1986 and arise when one creditor is placed into a better position to that of another, when an individual or a company enters into a formal insolvency procedure.

The precise timescales and circumstances for a Preference are outside the scope of this post but the leading case on Preferences is Re MC Bacon Ltd [1990] BCLC 324 for more detailed consideration of the rules.

This post is seeking to consider the relationship between a Preference and invalid set off for director’s loans in the context of an insolvent company.

A rather common preference scenario is where a company director lends a sum of money to fund their business which at some point enters into decline. Upon the realisation [...]

Liquidator’s entitlement to accountant’s files

Elliot Green — Tue, 20 Jul 2010 22:48:38 +0000

It never ceases to amaze me the number of professional qualified accountants who believe that the files that they create are their own property.

A company accountant is usually employed under a contract for services to enable the directors to comply with their statutory duties, to maintain proper books and records (Section 386 of the Companies Act 2006 – formerly Section 221 of the Companies Act 1985), prepare financial statements, for tax advice and compliance purposes such as for Part III if Schedule 18 of the Finance Act 1998. It may also be the case that a company accountant is also contracted as agent to be the company’s registered office and therefore receive all Companies House documentation and service of any legal documents upon the company.

The [...]

Mond and another v MBNA Europe Bank Ltd [2010] EWHC 1710 (Ch)

Elliot Green — Tue, 20 Jul 2010 07:57:41 +0000

This case highlights that the IVA Protocol which applies to the vast majority of consumer orientated IVAs, is a voluntary code of best practice without legal enforceability over creditors.

The IVA Protocol has been widely taken up and endorsed by many organisations, including the British Bankers Association, whose members are usually representative of the largest block of creditors in many consumer IVAs.

In this case the Court declined to exercise its discretion to grant declaratory relief in the terms sought; that MBNA had to give a good reason as to the basis of its rejection of the debtor’s proposed IVA. The Court submitted that creditors who are inclined to be bound by the IVA Protocol might need more guidance from the Protocol itself on what was a [...]

POSSESSION IS NINE TENTHS OF THE LAW, ISN’T IT?

Elliot Green — Mon, 19 Jul 2010 11:30:01 +0000

Well possession could indeed be said often to be 9/10s of the law because recovery from the possessor is no easy business, notwithstanding any legal remedies that are available, including those in statute such as the Torts (Interference with Goods) Act 1977 and common law.

For example only, professionally I frequently seek files as Liquidator from both solicitors and accountants who have historically been retained by the insolvent company, to assist my investigations into a company’s demise. Such fellow professionals have usually entered into contracts for services with the company and the files in relation to the same (in which they will often have acted as an agent) will usually contain documents to which a liquidator is legally entitled. However, it is not uncommon to meet [...]

The new insolvency rules – modernisation or just more bureacracy?

Elliot Green — Fri, 26 Mar 2010 14:23:58 +0000

The new insolvency rules seem to make a few changes to the Insolvency Rules 1986 but I wonder if they really provide value or even will afford creditors the alleged c.£48million in costs savings. I rather think not.

For those practitioners for example who specialise in court work (compulsory liquidations and bankruptcies), costs will rise with having to do annual progress reports which previously were not a requirement.

For example further, Rule 12A.12 is a rule which essentially is unlikely I think to be taken up by many smaller firms in its current construction. This is a pity as a practical construction of such a rule would be hugely beneficial to creditors and save costs.

For those of us who predominantly do court work and wanted to utilise [...]

Are you a company director?

Elliot Green — Wed, 17 Mar 2010 14:23:26 +0000

It is a widespread belief, that if you are not listed and registered as a Director at Companies House, that you are not a Director of a UK company.

This is simply wrong. In UK law there are essentially three types of director:

1. Registered Director

2. Shadow Director

3. De facto Director

In the Companies Acts “shadow director”, in relation to a company, means a person in accordance with whose directions or instructions the directors of the company are accustomed to act.

A de facto director is someone who holds themselves out as a director without being registered and who undertakes duties that should be undertaken by a person who is a director.

With any type of director, the question often is [...]

Bad debts are a fact of life or are they?

Elliot Green — Wed, 10 Mar 2010 14:22:49 +0000

Well dependent upon the business within which you are engaged it may be the case as certain industries appear to encounter bad debts more than others. However the extent to which bad debts are a fact of your life will depend upon your attitude to extending credit to your customers.

For many of us we suffer bad debts without much thought until the debt really hurts or when we suspect misconduct by the party who has caused our loss.

However, it does seem that many of us trade with people at some point who appear incapable of distinguishing us from a bank. This is of course notwithstanding that very few of us have a banking licence. So why do some of our customers or clients treat us [...]

Casino Banking

Elliot Green — Thu, 04 Mar 2010 14:22:17 +0000

The credit crunch hit us largely due to casino banking operations, over leveraging and speculation.

In the US, the sub prime property market collapsed due to the extensive lending to those who could not afford to sustain their mortgage payments.

The banks have been involved in the sale and purchase of over valued mortgage securities resulting from the over-valued property markets. This resulted in trading activities whereby banks obtained portfolios whose values were supported in some instances more by speculation rather than substance.

You only have to look back to the last bubble that burst to consider how substance matters far more than speculation in the longer term. The dotcom boom was a drop in the ocean compared to this credit crunch but it demonstrated how speculation is [...]

Remuneration or Russian Roulette?

Elliot Green — Fri, 26 Feb 2010 14:21:47 +0000

Directors of owner managed businesses often draw money out of their companies, intending it to be remuneration without apparently realising the gamble they may have taken when things go wrong. The punt is that when remuneration is wrongly drawn they may at sometime in the future have to pay these drawings back to the company, for example on the request of a future Liquidator or some other successor.

The incorrect belief of many directors is that they have an absolute entitlement to the monies they draw from their companies. However, unless express provision has been made within the company’s Articles of Association for the directors to be remunerated, then the case of Guinness plc v Saunders [1990] 2 AC 663 evidences that they have no entitlement [...]

It’s ok to take money off people isn’t it?

Elliot Green — Mon, 22 Feb 2010 14:21:14 +0000

Well as ever it depends!

It would be impractical in a blog such as this one to consider all the circumstances in which you could receive money from someone but to pick a few examples from an Insolvency Practitioner’s and Accountant’s perspective, the below will give you an idea of when it might not be such a straightforward matter.

If you are in receipt of a gift, the question is whether or not it really was a gift. The question of the intentions of the parties is at the heart of the matter and also the subsequent conduct of the parties following on from those intentions could be relevant to determination.

If it is a temporary gift then it might be a gift with reservation whereby for Inheritance [...]

Cash is king isn’t it?

Elliot Green — Sat, 13 Feb 2010 14:20:34 +0000

For businesses cash is king. If you drained the blood out of your body, your cells would become starved of oxygen and they along with you would depart from this world. Cash is the lifeblood of any business and without it they cannot survive.

However, there is another side to cash which instead of being king, might for some be associated with corruption. Cash is a commodity capable of breeding suspicion.

Now I do not mean that any cash transaction is inherently suspicious, far from it, given it would be impractical to undertake all transactions electronically or by debit and credit card. Imagine turning up to buy the morning paper and saying to your local newsagent, do you take Mastercard – they’d rightly wonder what you were [...]

Should creditors be obliged to approve IVAs?

Elliot Green — Fri, 12 Feb 2010 14:20:06 +0000

The short is no, but why not?

In the majority of cases where an IVA is proposed to creditors by a debtor, it is more likely than not that the IVA will produce a better result for them when compared to bankruptcy.

IVAs are intended to be an option for a debtor to propose to his or her creditors, but creditors should not be obliged to accede to the proposal. They should not have their existing freedoms further restricted and consequently legislation currently does not obligate creditors to approve an IVA.

In seeking to strike a balance between what the majority of creditors wish for and what the legislation imposes on creditors, an IVA needs 75% of those creditors who vote to approve it. If any creditor objects [...]

Insolvency Practitioners are servants of the creditors, not slaves…

Elliot Green — Tue, 09 Feb 2010 14:19:34 +0000

Many creditors are surprised that they receive little or nothing from the insolvency process when an individual goes bankrupt, into an IVA or a company goes into liquidation.

Whilst I have a great deal of sympathy for the position of creditors, I wonder how many creditors have asked themselves the question as to what they did to engage in the process. More often than not creditors leave matters to the insolvency practitioner (”IP”) and arguably hope for the best.

Whilst many creditors maybe unfamiliar with the process there is a great deal of information which they are given by the appointed IP and there is more online to review.

Would they have instructed their own advisers in such a fashion or would they scruitinise their own advisers [...]