Thursday, 16 June 2011

We have moved to Jordans Insolvency Law Online -

The bankruptcy blog has now moved to Jordans Insolvency Law Online. All future blog posts will be on the new site. Daily blog updates will continue but the site coverage will be more comprehensive as there are also case summaries from Guidhall Chambers, legislation updates from KPMG's Sue Morgan, practitioner interviews, and access to the Jordans stable on insolvency materials (BPIRs, Keay & Doyle's Annotated Guide, Keay & Walton, etc) on the new site

Thank you for visiting this site over the last three years. We have had 185,655 visitors from over eighty countries and have averaged around 600 visitors a day over the last year. Thank you for reading the blog and for your comments. See you at the new site! 

Wednesday, 15 June 2011

Insolvency items in the news: insolvency defined and the Duchess and bankruptcy

The Daily Mail and the Daily Telegraph are reporting that Sarah, Duchess of York (pictured) is constantly in a state of near bankruptcy. We have addressed the Duchess' liquidity issues before and the plight of some bankrupt peers. This latest twist in the Duchess's finances might see her name added to that of the Duke of Manchester and Duke of Leinster as a ducal bankrupt. The Telegraph note: 

"In the first episode of Finding Sarah, her new six-part documentary series for Oprah Winfrey's television channel, the Duchess said: "I don't really understand finances at all".
She is believed to be receiving £200,000 for taking part in the series, which sees her submit to a string of tearful therapy sessions with TV counsellors and experts.
US television analysts have said the figure is "very low" compared to the sums paid even to medium-profile personalities in mid-ranking American reality TV shows.
"At the moment I'm just worried about paying off people that need to be paid off," the Duchess said. "There's three firms and three personal friends"...

"I lost all my jobs, I lost all my staff, I lost everything," she said.
"I've tried very hard not to go into financial bankruptcy." The Duchess blamed her financial illiteracy on her years spent receiving an allowance from the Queen as the wife of the Duke. "When we got divorced I didn't know how to do anything," she said...

In other news Mr John Kay has published an interesting article in the Financial Times which carries an exposition of the insolvency rules. The article is entitled: "New rules to protect the many from the few." The piece notes:

"...But in the past two decades many corporate collapses involved businesses that were not fundamentally bad but whose financial structures could not accommodate even modest setbacks. Bankruptcy of a corporate entity in these circumstances may have large, adverse and avoidable consequences for people who were not party to the original agreements. These issues arise for any business with a dominant market position or engaged in the production of a key public service. Elderly people who find that the bed on which they lie has been the subject of a financial transaction on which the lessee has defaulted are just a particularly hard case. 

In 1986 Britain created a new insolvency regime, loosely modelled on the US Chapter 11, designed to make it easier to continue the business of a failed company. In many respects, this has worked well – perhaps too well. Pre-packed administration deals are marketed as a means of escaping liability for over-rented property, while US airlines fly in and out of Chapter 11 almost as often as they fly in and out of Chicago, waving creditors goodbye without changing the pilot. A recent Office of Fair Trading report highlighted the too common phenomenon of the administrator who remains in charge of the business for several years until his own fees have exhausted the assets.

General insolvency rules are inadequate when a care home, or a bank, or a water supply company fails. The first priority in these cases must be the residents, depositors and customers: creditors come after. We need special regimes for such businesses, which would limit gearing, without discouraging entrepreneurs looking to enter these sectors. 

A resolution authority, more powerful than the existing Insolvency Service, could not only protect unsecured creditors more effectively, but also balance the interests of creditors with those of the public at large. Without such an institution it is hard to see how we can ever take schools and hospitals out of direct state control. We are engaged in yet another round of reform which ducks the issue of what happens when these organisations fail. Failure is intrinsic to the market economy: but the legitimacy of capitalism depends in part on how it deals with the consequences of such failure. Recently, it hasn’t been doing too well."

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Tuesday, 14 June 2011

New Museum Acquisition: Thomas Davies, The Laws Relating to Bankrupts..., London, 1744

The Muir Hunter Museum of Bankruptcy has aquired another interesting item. The collection now contains Mr Thomas Davies' "The laws relating to bankrupts, brought home to the present time : with several special cases, modern determinations, and precedents relating thereto, and directions for creditors and debtors : also a list of the fees in bankruptcy, and the method of proceeding therein", printed in London by Henry Lintot MDCCXLIV (1744).

The book (pictured) measures 8.5 x 13". The leather binding is in good condition with only slight wear and rubbing. Internally the text is very good, with only slight worming to the upper right corner of the last several leaves. There are two previous owner signatures, an undated Samual Sedgwick and what appears to be a 'Dan Jones', Lincoln's Inn, dated November 20th 1765.  This is a rare work and scholars are welcome to use by appointment.

Monday, 13 June 2011

Insolvent: some definitions

Building on our last post on bankruptcy definitions I thought it might be useful to include some definitions of the term insolvent in this jurisdiction and elsewhere. 

England and Scotland
"A person is deemed to be insolvent within the meaning of this Act if he has either ceased to pay his debts in the ordinary course of business, or he cannot pay his debts as they become due. (Sale of Goods Act 1979, s 61(4) (as amended by the Insolvency Act 1985, s 235, Sch 10, Part III, and the Bankruptcy (Scotland) Act 1985, s 75(2), Sch 8)

"'I admit that a man is not insolvent, because he postpones the payment of a demand for a week or ten days, during which the creditor consents to wait, or renews a bill; and yet these are indications of a want of present power to fulfil his engagements. These, however, are cases to be decided by a jury upon the whole matter. My understanding of insolvency is a man's not being in a condition to pay 20s [now 100 pence] in the pound, in satisfaction of all demands.'" Teale v Younge (1825) M'Cle & Yo 497 at 506, per Garrow B

"The ordinary import of the word insolvency is an incapability of paying the party's just debts.'" Parker v Gossage (1835) 2 Cr M & R 617 at 620, per Parke B

"[By a marriage settlement real property was vested in trustees upon trust for the wife for life, and after her death to pay the rents to the husband, until he should be bankrupt or 'insolvent', with a gift over to the children.] 'The settlement here creates a series of vested estates, the interest of the children taking effect in remainder upon the bankruptcy or insolvency of their father. On his becoming bankrupt in the lifetime of his wife, his interest in remainder, unless it went over, would have passed to his assignees, and the intention of the gift over was to preserve the property to the children in the event in which it would otherwise pass to the assignees. Neither can there be any question that what took place was an insolvency within the meaning of the settlement. The word insolvent has no technical meaning in such cases, but simply means incapable of paying debts that are due…. It is impossible to say that there was not an insolvency in this case, although no doubt a mere request for time, or a compromise of disputed claims, would not amount to an insolvency.' Re Muggeridge's Trusts (1860) John 625 at 627, per Page Wood V-C

'I cannot help thinking it quite clear that the term “insolvent” means public insolvency; not necessarily the taking the benefit of, or being made liable to, the Insolvent Act, but being incapable to pay his debts in ordinary course; or, in other words, having “stopped payment”…. It may at least mean “not paying” as well as “being incapable of paying”.' R v Saddlers' Co (1863) 10 HL Cas 404 at 463, per Lord Wensleydale

'There are decisions as to the meaning of the word “insolvent”. They all state that “insolvency” means commercial insolvency, that is to say, inability to pay debts as they become due.' London & Counties Assets Co Ltd v Brighton Grand Concert Hall & Picture Palace Ltd [1915] 2 KB 493 at 501, 503, per Buckley LJ

'“Insolvent” is a word that has no technical meaning in the law of England; it simply means “unable to pay debts”. In this State [South Australia], in consequence of the laws for the relief of insolvent debtors using the term insolvent where in England the term “bankrupt” is used, the word has, in my opinion acquired, in addition to its primary meaning, as above, the technical meaning of subject to legal process under those laws…. So well established has this meaning become in popular usage in this State that if anyone were told that a certain individual—I am not speaking of companies, which are not subject to the Insolvent Acts—had “become insolvent”, he would, I believe, understand by that expression not that he was merely unable to pay his debts, but that he had become subject to the process of the Court of Insolvency.' Re Salom, Salom v Salom [1924] SASR 93 at 95, 97, per Murray CJ

'The question … is, was the debtor “in insolvent circumstances” or “unable to pay his debts in full” when he executed the mortgage in question? The authorities shew that these two phrases denote the same financial condition…. Various tests of insolvency have been from time to time formulated and applied, but the one which has been received with most favour in this province is that given by Vice-Chancellor Spragge in Davidson v Douglas [(1868) 15 Gr 347 at 351]. He there says that in considering the question of the solvency or insolvency of a debtor the proper course is “to see and examine whether all his property, real and personal, be sufficient if presently realised for the payment of his debts, and in this view we must estimate his land, as well as his chattel property, not at what his neighbours or others may consider to be its value, but at what it would bring in the market at a forced sale; or at a sale when the seller cannot await his opportunities, but must sell”…. The Spragge test seems to me the proper one as applied at least to a non-trader.' Trotter v Pedlar [1921] 1 WWR 233 at 235–236, per Mathers CJKB

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Friday, 10 June 2011

Bankruptcy - some definitions

We have discussed the historical derivation of the term bankruptcy before. I thought it might be useful in this post to include some further definitions of the term. These examples are drawn from both primary and secondary sources in this jurisdiction and elsewhere. This post will be updated with further definitions as and when the shelves (pictured) bear fruit.


"Bankruptcy is a proceeding by which the State takes possession of the property of a debtor by an officer appointed for the purpose, and such property is realised and, subject to certain priorities, distributed rateably amongst the persons to whom the debtor owes money or has incurred pecuniary liabilities." (2 Bl Com 472)

'"Bankrupt' includes any person whose estate is vested in a trustee or assignee under the law for the time being in force relating to bankruptcy." (Bills of Exchange Act 1882, s 2)

"'Bankruptcy' includes liquidation by arrangement; also in relation to a corporation means the winding up thereof." (Law of Property Act 1925, s 205)

'That section [the Bankruptcy Act 1869, s 72 (repealed; see now the Insolvency Act 1986, s 363)] enacts that “Every Court having jurisdiction in bankruptcy under this Act shall have full power to decide all questions of priorities and all other questions whatsoever, whether of law or fact, arising in any case of bankruptcy coming within the cognizance of such Court, or which the Court may deem it expedient or necessary to decide for the purpose of doing complete justice” under the provisions of the Act. It appears to me very clear that “bankruptcy” does in this section include “composition.” The word “bankruptcy” is a general term, and is used to include all the three modes of settling the debts of a debtor with his creditors which are included in the Act; and the words, “Every Court having jurisdiction in bankruptcy,” include, surely, every court having jurisdiction in a composition. In my opinion, therefore, bankruptcy does clearly include composition.'" Re Thorpe, ex p Hartel (1873) 8 Ch App 743 at 745, per Mellish LJ

"[By a codicil to a will a testator bequeathed a sum of money, upon trust to pay the income thereof to his son 'during his life, or! until he shall become bankrupt'.] 'He has become bankrupt according to the law of Scotland…. In default of evidence I shall assume that bankruptcy in Scotland is a bankruptcy within the meaning of the words “shall become a bankrupt”…. We all know what a bankruptcy means. It means shortly a cessio bonorum for the benefit of all the creditors of the person who makes that cesser, and unless it were proved to me that by the municipal law of a particular country there was some such unfairness or some such departure from what is sometimes called “natural law” that I ought not to regard it as a bankruptcy within our law, and within the meaning of this clause, I should certainly regard bankruptcy according to the law of any civilised country as a bankruptcy within the meaning of the instrument before me.'" Re James, Clutterbuck v James (1890) 62 LT 454 at 455, per Kekewich J

"'Bankruptcy is a well understood procedure by which an insolvent debtor's property is coercively brought under a judicial administration in the interests primarily of the creditors. To this proceeding not only a personal stigma may attach but restrictions on freedom in future business activity may result. The relief to the debtor consists in the cancellation of debts which, otherwise, might effectually prevent him from rehabilitating himself economically and socially…. Insolvency, on the other hand, seems to be a broader term that contemplates measures of dealing with the property of debtors unable to pay their debts in other modes or arrangements as well. There is the composition and the voluntary assignment, devices which, in appropriate circumstances, may avoid technical bankruptcy without too great prejudice to creditors and hardships to debtors. These means of salvage from the ravages of misfortune are of the essence of insolvency legislation, and they are incorporated in the Bankruptcy Act."' Canadian Bankers Assocn and Dominion Mortgage & Investments Assocn v A-G of Saskatchewan [1956] SCR 31 at 46, SCC, per Rand J

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Thursday, 9 June 2011

Statutory Demands and set-aside applied: Mahon & Anor v FBN Bank (UK) Ltd [2011] EWHC 1432 (Ch) (06 June 2011)

HHJ Simon Barker QC has handed down his decision in Mahon & Anor v FBN Bank (UK) Ltd [2011] EWHC 1432 (Ch) (06 June 2011). The case concerns an interesting discussion of the courts ability to set-aside statutory demands. On set-aside the learned judge notes:

"...IR 6.1 concerns the form and content of a statutory demand and IR 6.1(5) provides :
(5) If the creditor holds any security in respect of the debt, the full amount of the debt shall be specified, but—
(a) there shall in the demand be specified the nature of the security, and the value which the creditor puts upon it as at the date of the demand, and
(b) the amount of which payment is claimed by the demand shall be the full amount of the debt, less the amount specified as the value of the security.

A set aside application is not a trial, and there is no jurisdiction to make binding findings of fact or a substantive determination of issues on the merits. This is emphasised by the language of IR 6.5(4) under which the discretion is permissive and the tests do not envisage a final determination. The court is engaged in a summary process requiring consideration and some evaluation of the available evidence, but not a conclusive or final determination.

Although the court may give directions under IR 6.5(3), there is no automatic requirement for disclosure; and, oral evidence would be unusual, except to the extent that litigants in person may be allowed the indulgence of supplementing their written evidence by oral statements during the hearing.

As is implicit in IR 6.5(3), fresh evidence may be admitted up to and during the hearing. The exercise of this procedural discretion will be governed by the court's duty to comply with and further the overriding objective (the CPR being generally applicable to insolvency proceedings), and although an appeal, unconstrained by the Ladd v Marshall[2] criteria.

IR6.5(4) confers a discretion on the court, which is, of course, to be exercised judicially, that is in accordance with established principles of law, having regard to the circumstances of the case, and also bearing in mind the CPR. Sub-rules (a), (b) and (c) address particular grounds for the exercise of the discretion. Subparagraph (d) provides a residual ground, expressed openly and without qualification (save that "other grounds" obviously means that (a), (b) and (c) as individual grounds are excluded from or fall outside (d)).

First instance decisions to the effect that subparagraph (d) is designed to deal with procedural flaws in a demand and inappropriate for consideration of substantive matters have been criticised by the Court of Appeal, Budge v A F Budge Contractors Ltd [1997] BPIR 366, in which extensive reference was made to the Court of Appeal decision in Re a Debtor [1989] 1 WLR 271.

In Budge, Peter Gibson LJ, with whom Balcombe and Hutchison LJJ agreed, observed that it is "quite impossible to foresee all the circumstances which may arise and which may justify the proper application of that subparagraph. But … there is no point in setting aside a statutory demand for defects in the statutory demand which are not so substantial as to leave the debtor truly perplexed by its contents … [or … to require a creditor] to litigate his claim that he is owed money by the debtor, if it cannot be foreseen that there will be any ground on which the creditor will be denied his claim were the matter to be litigated".

In a sentence, and drawing on the judgment of Nicholls LJ, as he then was, in Re a Debtor [1989] 1 WLR 271, p.276, in addition to the above, the discretion under IR6.5(4)(d) is properly invoked and exercised in any case in which the court is satisfied that it would be unjust to allow the creditor to proceed to the next step, namely to present a bankruptcy petition.

Allegations of undue influence in the context of a guarantee to a bank given by a wife in respect of business lending to a husband or his company and where the wife raised a defence that the bank was on notice that her concurrence in the transaction had been procured by her husband's undue influence were the subject of appeals in eight cases considered by the House of Lords in 2001 and decided together under the lead name RBS v Etridge (No.2) [2001] UKHL 44.

Where a wife is a guarantor of lending to her husband or a business, the first task is to ascertain whether the guidance in Etridge is applicable to the lender/bank. In the ordinary course, there is no presumption of undue influence. There is a degree of sensitivity to the facts. However, the test is set at a very low level so that it should be a straightforward matter to decide. The short answer is, "[q]uite simply, that a bank is put on inquiry whenever a wife offers to stand surety for her husband's debts"[3]. To which I would add, that this is all the more so where the wife is not known to the lender/bank and is volunteered as a surety by the husband...." 

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Wednesday, 8 June 2011

Insolvency items in the news: bankruptcy from legal fees, no win no fee and some alleged misconduct

There are some interesting items in the news which have insolvency related themes. The Daily Telegraph is reporting that a magistrate who was recently acquitted of serious sexual assault is now facing bankruptcy as a result of his legal costs. Elsewhere, the BBC are reporting that bankruptcy costs are to rise. The story notes: 

"The rise in the cost of going bankrupt could discourage people with financial problems from seeking a solution, debt experts are warning.

The fee for petitioning for bankruptcy rose by £75 to £525 at the start of the month. With the court fee added on, the total upfront cost is £700.

The Insolvency Service said the increase was needed to cover the cost of administration.

The charges, including court fees, have gone up by 37% since March last year.

Insolvency practitioner Mark Sands, from RSM Tenon, has warned that the increase would put extra pressure on individuals who were likely to be under stress or depressed.

"So many people flounder around and do not see a way out," he said.

"They are going to be put off exploring bankruptcy as a solution."

The £525 charge is a deposit to cover the cost of managing a bankruptcy, which allows the bankrupt person to throw off the burden of debt and make a fresh start.

The Insolvency Service recovers a full administration fee of £1,715, less the deposit, from the bankrupt's assets or surplus income at a later stage. This sum is not being increased.

The Insolvency Service has seen its income squeezed because of the falling value of homes and other assets which are recovered from bankrupts.

Currently, the £1,715 fee is never fully paid in half of bankruptcies.

There has been some criticism of the rising cost.

"It is unfair to families who are struggling but I felt that any money I had was going to be taken anyway," said a recent bankrupt who spoke to BBC News,

Jon Elwes, from the Money Advice Trust, said: "This increase in the cost of going bankrupt is likely to swell the numbers of people falling through the net of the current insolvency regime.

"Our advisers at National Debtline speak to people everyday for whom bankruptcy would be the best solution to their debt problem, but for the fact they cannot afford the associated fees."

Lower cost
There is now a cheaper and easier alternative, the Debt Relief Order (DRO), which costs £90.

We have to strike a balance between giving bankrupts debt relief and a fresh start, and the need to provide some return to creditors”

...In the first quarter of this year there were 6,788 DROs, a 20% rise on the previous year.

However, people can only ask for a DRO if their debts are less than £15,000 and savings and assets are less than £300.

"What if you have £16,000 of debt?", said Mark Sands of RSM Tenon.

"You are faced with that barrier of hundreds of pounds before you can opt for bankruptcy to resolve your difficulties."

Una Farrell, from the Consumer Credit Counselling Service, said: "It is a very steep rise. We already have to do a lot of work helping our clients to get the money together to pay the fees."

But Mr Horne said the Insolvency Service was obliged by Parliament to break even, a task which had become increasingly difficult.

"It has always been our policy that if bankrupts can pay something towards their debts then they should," he said.

"We have to strike a balance between giving bankrupts debt relief and a fresh start, and the need to provide some return to creditors."

Elsewhere, The Guardian and Accountancy Age are both reporting on the no win no fee issues surrounding IPs and the recently mooted reforms to legal aid. The Guardian story notes:

"But the move to restrict the use of conditional fee arrangements applies not just to personal injury cases but also to a range of other legal disputes, including insolvency situations. The plans have raised fears that insolvency practitioners may find it harder to pursue fraudulent company directors to recover cash for creditors. HMRC would be the biggest loser, with its losses due to insolvencies and fraud running into billions of pounds every year."

"Frances Coulson, president of R3,said: "Under these proposals it will be harder for insolvency practitioners to recoup money from dodgy directors, so creditors such as the business community and HMRC could be left with nothing. It is essential that insolvency is exempt from these proposals so that businesses and HMRC are not left out of pocket and wrongdoing is not seen to be excused. Every penny left in the pocket of a director in a carousel fraud case is likely to fund another fraud."

Finally, a sometime BCCI and Madoff estate legal advisor is also under investigation for alleged expenses irregularities

Picture Credit: BCCI

Tuesday, 7 June 2011

The Marquess of Reading and Debt

Sir Rufus Isaacs, the Most Honourable The Marquess of Reading, GCB, GCSI, GCIE, GCVO, PC, KC (10 October 1860 – 30 December 1935 - pictured) is a truly remearkable figure. We will leave to one side the fact that he used to bleed from his eyes through over work, and instead, concentrate on his contribution to the insolvency jurisdiction. First, we will undertake a brief biographical overview of the Lord Reading's life. Born in London, the son of a fruit merchant, Lord Reading attended University College School. He did not go to University, instead spending time in the the family fruit business and as a ship's boy. He became a member of the London Stock Exchange before being called to the Bar as a member of Middle Temple in 1887. The Lord Reading went on to take silk, become a Member of Parliament, become Solicitor-General, Attorney-General, Lord Chief Justice (1913-1921), Ambassador to America, and Viceroy of India (1921). The Reading Marquessate is the highest ever rank in the English peerage to be awarded to a Jew. The Lord Reading was sometimes referred to as the "Hebrew Earl."

We can now turn to a consideration of his contribution to the insolvency jurisdiction. The Courts (Emergency Powers) Act 1914 was the brainchild of the Marquess. The statute allowed the court to exercise it's discretion so as to allow a debtor more time to pay their creditors in the event of the war causing delay to payment. The Marquess had himself suffered some liquidity problems whilst at the London Stock Exchange. These may have been some inspiration for his war time debt amelioration activities due to this experience. Specifically, the statute provided a principle, "to place the remedies of creditors, whether judicial or by way of self-help, in the discretion of the Court, which can refuse the creditor to exercise his remedies of the debtor is unable to satisfy the debt of obligation as a result of the war."

As Lord Chief Justice, the Lord Reading has only one reported case to his name.  Savill v Dalton [1915] 3 K.B. 174 concerned the issue of whether an action is maintainable upon an order for the payment of money made by a county court in the exercise of its bankruptcy jurisdiction.

Four years after his death a similar statue was enacted to deal with World War II debt issues, namely, the Courts (Emergency Powers) Act 1939.

The 2nd Marquess, Colonel Sir Gerald Isaacs QC, was also a barrister, silk, sometime Treasurer and Bencher of Middle Temple, and Member of Parliament. He won a Military Cross in World War I. His son, the 3rd Marquess, Michael Alfred, also won the Military Cross.

Monday, 6 June 2011

Olympic Tickets: How I beat the System (and Boris!)

When John asked me to blog for his site, I am sure that he didn't think I would get him this much coverage!

This note is just to set out the approach I took to succeed in getting Olympic Tickets where so many appear to have failed. I also want to make it clear what risk I thought I was taking. I am by no means a mathematical or statistical expert and without any prior information on the odds of winning tickets I am not sure there could have been any accuracy in working out the odds before the recent ballot process.

If we take simple binomial theory, you can calculate the odds on certain events happening with a fixed number of attempts with fixed odds each time. In the case of a coin toss, the chances of it being heads on one toss is Evens, on two tosses the chances of getting at least one head is higher and the chances of them both being heads is lower. Add a third coin toss and the chances of getting at least one head goes up and the chances of all three tosses being heads becomes much greater. The Olympic ballot permitted bids for up to 20 events so if the odds of succeeding on each were the same as a coin toss then the chances of getting more than one event would be all but certain, with a guesstimate that you would expect about 10 events.

Of course I had to assume that the odds for each of the popular events would be more than evens. Even at 2:1 the odds change dramatically. At say 10:1 the odds of getting one or two tickets becomes quite low and all of them quite impossible.

But it is not that simple. You could bid for different tickets in a range for each event. In that case each event becomes its own binomial experiment. If there were say 10 tiers of ticket and the odds were 10:1 on each, you might expect to get at least one of each so overall you might succeed in getting one for each event applied for. If there happened to be a single tier of price for each event which was not oversubscribed then you would be certain of getting that ticket or better. Assuming that the ballot was held on each event on a reducing price basis starting with the most expensive tickets, you would also have a tendency to be successful for more than the cheapest. In fact, you might assume that most people would apply for the cheaper tickets so there would be much less competition for the top tiers. Against this you might assume that there were less of these which might even things up but LOCOG gave no information on this.

You can see that the combinations become mind-boggling, and without knowing whether the odds are 10:1 or 100:1 you cannot confidently predict the outcome. I did however make a working assumption that all tiers would be oversubscribed and therefore the general binomial principles would apply in that the chances of getting some increase with the amount of bids and the chances of getting them all reduce.

Having decided on my 20 choices it was of course important that I would be happy if I only received one of them. In my case the headline figure was £35,918 but that is the sum of the top tickets applied for in every tier. If I succeeded in half of them at the mid-price tier on average, you would expect the amount to be £9,000 if the prices were reducing evenly (but they are not. They are not even evenly priced in comparison to each other). Odds are all very well but in the case of the Olympics the top price of some of the tickets were huge. The Opening Ceremony costs run from £2012 to £20.12 and the maximum you could bid for was 4. The risk range on this event alone was therefore £8,048 to 80.48. If you happen to get the top rate then this makes the total sum potentially much larger and throw out any broad assumptions you might make.

This takes me on to the thorny issue of the credit limit provisions. The bidding rules seemed clear. By taking part in the application process you were not contracting to buy the tickets. If the funds were not in place at the time requested then the application would be rejected. This was very important for me as I could not be put in a position where the application left me financially embarrassed. What this provision did mean was that you could add an element of capping to the bid process. If you get your binomial-based guess completely wrong then your risk was limited to the amount of your bank balance or credit limit. It would be unfortunate if your application produced a request for an amount £10 over your limit but it did cap your risk. The existence of this provision led me to conclude that many people would bid beyond their credit limit and that all events would be greatly over-subscribed. It seems I was wrong. I have heard no stories of limits being exceeded except in my case, and I bid what appears to have been an exceptional amount! No doubt my error on this point alone meant that the chances of succeeding in more than one event was higher than I thought.

In my case I received an email saying that an attempt had been made to take funds and that this had been rejected. The polite email suggested that a second attempt would be made in a few days to give me a chance to put things right. The consequences of a second rejection was that they would not contact me again and I would not receive my allocation. No fuss and no financial penalty. The second chance was not in the bidding terms & conditions but the consequences of rejection were. I contacted by credit card company who confirmed the amount rejected. I then asked for an increase in my limit and explained the reasons for it and this was granted.

This was an unexpected twist and probably rendered much of the previous calculations moot. I had a simple and well-informed (at least in part) choice. I could choose to pay a large fixed sum for the certainty of some tickets from the 20 events I selected or choose to have none at all. In this I was more fortunate than most, including Boris. If I could meet the initial cost and wait, I could have some choice in how to use, sell or return some or all of the tickets. That comes at a price, but it is better than being powerless in a blind ballot.

As I write I wait to hear what my £11k successful bid actually amounts to. On the basis that I have set out above it is much more likely statistically that I have succeeded on one large event and one or two smaller ones than the sum of a lot of small events only. Hopefully in any case, my relatives and friends will recognise the value in getting THEIR bids in to me early, particularly before my credit card bill is due. Act now to save disappointment!!!!

Picture Credit:

Friday, 3 June 2011

New BIS report: Credit, debt and financial difficulty in Britain, 2009/10. A report using data from the YouGov DebtTrack survey

BIS (pictured) have published a new report entitled "Credit, debt and financial difficulty in Britain, 2009/10. A report using data from the YouGov DebtTrack survey." (URN 11/963). The report uses data from the YouGov DebtTrack survey, a series of online surveys carried out between November 2009 and October 2010, to explore credit use and the extent of consumer indebtedness in Britain. The report notes that: "Overall, the analysis suggests a decrease in the proportion of households using unsecured credit since 2008/9, but an increase in the level of debt, both in absolute terms and as a proportion of household income. Evidence indicates that the incidence of financial difficulty may have declined during 2009/10; although the average proportion of households in structural arrears on payments remained unchanged compared with 2008/9, there has been a decrease in this indicator during 2009/10, as well as more subjective measures of financial stress."

Picture Credit: BIS.

Thursday, 2 June 2011

Evening Standard Features Bankruptcy Blogger

Stephen's Olympic ticket activities have been picked up by the Evening Standard. The story notes: 

"A man who discovered he had secured Olympic tickets costing £11,000 told today how he decided to keep them all - after crunch talks with his wife.

Stephen Hunt, a Bloomsbury insolvency practitioner, said there was initially not enough money in his account to cover the payment and he was forced to make the "horrible choice" between increasing his credit limit or losing the tickets.

When he applied for £36,000 worth he expected to get hardly any but now hopes the huge payment will mean a seat at one of the "big three" events - the opening and closing ceremonies or the men's 100 metres final.

Mr Hunt, 42, a father-of-three and West Ham fan from Hertfordshire, said: "I checked my card and there was no debit and then I received a helpful email from the ticket agency saying we've tried to take money, it's been refused but we'll give you a second chance.

"We agreed to go for it. We contacted our bank and the bank agreed to increase. It's about double what I was hoping for."

Speaking to the BBC, Mr Hunt, who specialises in fraud investigation and company liquidation, added: "I'd rather scrimp and save for a bit extra then be disappointed."

At least 250,000 people are thought to have lost out after last night's midnight cut-off, who the organisers said would be contacted through email. They include the Mayor of London, Boris Johnson, who said he was "cheesed off" after checking his account this morning to see he had lost out in the online ballot.


Families will have to wait for up to another three weeks to discover which 2012 events they will see.
Games organiser Locog reported 20 million applications from 1.8 million people bidding for 6.6 million public tickets.

There were more than one million bids to see the opening ceremony and men's 100 metres final.
Those who failed to secure tickets must join the scramble for any remaining tickets on a first-come, first-served tickets basis.

These are likely to include unsold seats at less popular events."

Picture Credit: The Olympic Movement. 

Wednesday, 1 June 2011

Publications: Two Insurance Insolvency documents published.

The Law Society (pictured) has published a practice note on the Insolvency of a Qualifying Insurer. The document outlines what should be done in the event of the insolvency of a solicitor's insurer. In a related 'insurance field' development the International Association of Insurance Supervisors has published a document outlining guidance on ICP 16 of it's remit, namely, "The legal and regulatory framework defines a range of options for the orderly exit of insurers from the marketplace. It defines insolvency and establishes the criteria and procedure for dealing with insolvency. In the event of winding-up proceedings, the legal framework gives priority to the protection of policyholders”.

Picture Credit:

Monday, 30 May 2011

New insolvency SI: The Investment Bank Special Administration (England and Wales) Rules 2011

The Investment Bank Special Administration (England and Wales) Rules 2011 have been published. These Rules set out the procedure for the Investment Bank Special Administration process under the Investment Bank Special Administration Regulations 2011(a) (“the Regulations”). The main features of Investment Bank Special Administration are that:

(a) the investment bank enters the procedure by court order;
(b) the order appoints an administrator;
(c) the administrator is to pursue the special administration objectives in accordance with the statement of proposals approved by the meeting of creditors and clients and, in certain circumstances, the FSA; and
(d) in other respects the procedure is similar to administration under Schedule B1 of the Insolvency Act 1986(b).

Where the investment bank is also a deposit-taking bank, the Rules also apply in relation to the Special Administration (Bank Insolvency) and Special Administration (Bank Administration) processes under Schedules 1 and 2 of the Regulations.

Picture Credit: