Armistice Day - 11th hour on the 11th day of the 11th Month -lest we forget

Today is Armistice Day. It is a day on which we remember the great sacrifice, throughout the ages, of our war dead and all those who have died in times of conflict. I thought it might be appropriate today, instead of posting on insolvency issues, to remember some of those legal figures who have also had illustrious careers in the Armed Services. Dr Johnson once observed that: "Every man thinks meanly of himself for not having been a soldier, or not having been at sea." Boswell retorted: "Lord Mansfield does not." Johnson then stated: "Sir, if Lord Mansfield were in a company of General Officers and Admirals who have been in service, he would shrink; he'd wish to creep under the table."

The following men have the distinction, not shared by the Lord Mansfield of serving with distinction in both disciplines:

Sir Tasker Watkins VC GBE PC - Court of Appeal judge who won a Victoria Cross

Sir Tasker was a Court of Appeal judge who also won the Victoria Cross (obituaries in The Times, The Telegraph, The Independent, the BBC). As his Times obituary notes he won the VC for two acts of courage. The entry notes:

"The break-out southwards by the British 2nd Army began on July 18 with the gap between Falaise and Argentan as a key objective. This was to prevent the enemy using that route for reinforcement, once he realised that an Allied landing in the Pas de Calais area was no longer a threat. By August 12 the enemy had begun to pull back from around Mortain, but were fighting stubbornly and skilfully to stand their ground in the Falaise-Argentan pocket.

On August 18, 1/5th Battalion of The Welch Regiment was ordered to seize a series of local objectives along the railway at Bafour, near Falaise. It was still an hour until dusk as they crossed the start line, and German Spandau machineguns, sited beyond the standing corn, were soon inflicting casualties. The advance was held up when a German 88mm gun engaged the infantry’s supporting tank squadron.

As the only unwounded officer left in his company, Lieutenant Watkins took command and, with only short-range fire support, led charges on two of the enemy posts in succession, personally killing the occupants with short bursts of his Sten sub-machine-gun. On reaching the second objective, he found a German soldier manning an antitank gun but his Sten jammed when he tried to shoot him. Swiftly throwing the weapon in the man’s face, he drew his revolver and killed him before he could recover from the shock.

Having captured his objective, Watkins found he had only 30 men with him when the enemy counter-attacked with a scratch force of 50 infantry. He directed the fire of his men against the enemy and, as soon as they faltered, led a bayonet charge from which only a handful of the enemy escaped. Unknown to him, because the company radio had been damaged during the action, the battalion was at that moment ordered to withdraw.

Initially, Watkins prepared to hold his hard-won position but, as darkness fell, it became clear that his remnant of the company were alone and in danger of being surrounded. He therefore decided to rejoin his battalion by passing round the enemy’s flank. But while making their way back through the cornfields he and his men were challenged by an enemy post a few yards distant.

Shouting to his men to scatter, he charged the post alone with a Bren light machinegun and killed the occupants. He then led his remaining soldiers back to battalion headquarters. The following day the enemy pulled his tanks out of the Falaise pocket, leaving only infantry to cover their withdrawal.

Watkins was confirmed in command of his company and promoted captain. On September 22 he was appointed acting major. Perhaps not surprisingly in view of his aggressive attitude, he was wounded in action in the Netherlands on October 27 and evacuated to England. He received the Victoria Cross from King George VI on March 8, 1945, and was released from active military service on May 28 the following year."

Sir Kenneth Hollings MC - the High Court judge who won a Military Cross

As his Telegraph obituary notes, the Cambridge educated High Court judge, Mr Justice Hollings, won his MC whilst serving as a Captain in the Shropshire Light Infantry in the Second World War. The circumstances were as follows: "In 1944, south of Arno in Italy, Hollings's party was fired on over open sights by a German self-propelled gun. Placing his party under cover, Hollings rode off on his motorcycle – under fire, and with a wireless set on his back – to find a good vantage point. From his new position he directed fire on to the self-propelled gun, knocking both it and a Tiger tank out of action; he was later awarded an MC."

Sir Edward Milner Holland CBE QC (1902–1969) - chancery barrister, chair of the Bar Council, head of 7 New Square - the leading chancery set of the day.

As his ODNB entry notes Milner Holland was awarded a CBE for his services in the field during the Second World War. The entry notes: "Following the outbreak of war he joined the Royal Army Service Corps as a second lieutenant and he served in the army until 1945. In 1943 he became deputy director of personal services at the War Office with the rank of brigadier, and in that capacity he was heavily engaged in the negotiations with the Treasury concerning army pay, allowances, and pensions. In recognition of his services in this field he was appointed CBE in 1945."

For one remarkable and extremely significant year Professor David Graham QC had the great good fortune to occupy the pupils' room adjoining that of Milner Holland. He got to know this great chancery lawyer extremely well and many years later was fortunate to be led by him in relation to a complex equity matter. David remembers Milner Holland as the most friendly man at the bar. The clerk of 7 New Square, Jagot, was extremely well know at the time and used to reminisce about those who did not return.

Sir Valentine Holmes QC (1888–1956) - libel barrister

During the First World War Holmes served as an officer in the Royal Artillery. He did not fight in the Second World War but maintained his practice in London. As his ODNB entry notes: "Before the Second World War he worked from 9 a.m. one morning until 1 a.m. the next. During the war he worked from 3 a.m. until 6 or 7 p.m.—and firewatched as well. Holmes cannot qualify for the shortest judgment competition which this blog has been running for some time, but he might qualify for the shortest opinion. As his ODNB entry notes: "His opinion in one case was thirteen words long—‘The judgment of the Court of Appeal is wrong and will be reversed’ (private information, Lord Bridge): and so it was."

Professor Sir Robert Yewdall Jennings QC (1913–2004) - sometime Cambridge fellow and Whewell professor of international law

As his ODNB entry notes: "in 1940 Jennings duly found himself recruited into army intelligence. A good deal of the work, which appealed to him, involved the study of maps and aerial photographs, leaving him in turn with a fascination for the geographical which later came into play in his studies of territory and boundary disputes in international law. The work was centred in Oxford, which gave him the opportunity to eat his dinners at Lincoln's Inn and to get called to the bar in 1943 (although nothing like a legal practice developed until much later). A short final period of military service abroad, in India and Ceylon, preceded his demobilization in 1946, with the rank of major. It was then back to Cambridge, to his fellowship at Jesus and a university lectureship."

Professor Lord McNair CBE (Arnold Duncan McNair, first Baron McNair -1885–1975) - Cambridge Don, jurist and judge, sometime Whewell chair in international law at Cambridge

During the First World War he served under the coal controller and was gazetted CBE in 1918. He wrote, inter alia, Legal Effects of War (1920; 4th edn, 1966).

A number of learned authors have mentioned war, or remembered war dead in their work. Writing in 1920 Justice Salmond, a judge of the Supreme Court of New Zealand, dedicated his book on torts (Salmond, J. The Law of Torts: a treatise on the English law of liability for civil injuries. Sweet & Maxwell, London, 1920) to his soldier son. He wrote:

"To THE MEMORY OF

MY SON, 
WILLIAM GUTHRIE SALMOND, 
A CAPTAIN IN THE NEW ZEALAND ARMY, 
WHO IN FRANCE ON THE 1OTH DAY OF JULY, 1918, 
GAVE UP HIS LIFE IN THE TWENTY-SIXTH YEAR OF HIS AGE." 

Picture Credit: http://www.nationalarchives.gov.uk/cabinetpapers/images/cabinetpapers/he8a01-0253194-main.jpg - High Court judges at the opening of Parliament in 1946 - The judge on the far right is wearing his campaign medals.

4th Insolvency Research Conference hosted jointly by the Insolvency Service and the ICAEW on Tuesday 10th November 2009

I have just returned from the 4th Insolvency Service (IS) research day, which was co-hosted by the IS and the Institute of Chartered Accountants of England and Wales (ICAEW - symbol pictured). The day was very interesting and certainly showed, again, that the Insolvency Service are at the vanguard of thought leadership. It is particularly encouraging to insolvency academics that the IS are engaging with a wide range of academics who have a wide range of interests, including historical! I delivered a paper which was entitled, "Discharge in bankruptcy: An examination of personal insolvency relief." Here is the abstract:

"At its heart this paper critically examines the concept of discharge in English and Welsh personal insolvency law. This critique takes the shape of both an historical examination (Part One) and a comparative analysis (Part Two) of the concept of discharge and its deployment and use throughout the commonwealth jurisdictions that administer a personal insolvency regime, namely: England and Wales, Scotland, America, Canada, and Australia. In relation to formal discharge from bankruptcy there are, it could be argued, two schools of thought as to the length of the bankruptcy period before discharge occurs. The first school of thought states that less onerous discharge provisions (‘liberal regimes thesis’) will and have encouraged irresponsible borrowing activities by debtors, thus causing a rise in the number of people seeking redress to the bankruptcy system. Whether or not this is a desirable outcome for rehabilitation goals is also addressed. The second school of thought advocates the idea that the legislative changes have not caused additional redress to the bankruptcy procedure themselves, but that the changes in the legislation were accompanied by an increase in consumer credit availability generally and that this lead to a natural increase in debt related failure (‘credit generosity thesis’) and therefore redress to the bankruptcy laws. This paper examines these competing contentions through an examination of both historical and comparative sources. It is argued that countries with more ‘liberal regimes’, in terms of bankruptcy discharge provisions, have a lower incidence of bankruptcy usage caused by more cautious creditor behaviour."

Here are the details of the other papers:

"09:45	Welcome addresses Vernon Soare, Executive Director, Professional Standards, ICAEW Stephen Speed, Inspector General/Agency Chief Executive, Insolvency Service
10:00	The good, the bad, and the ugly: A survival guide to M&A in distressed times Maria Carapeto, Mergers and Acquisitions Research Centre, Cass Business School, City University, London
10:30	Pre-packs and Statement of Insolvency Practice 16 Mike Chapman, Insolvency Practitioner Policy Section, Insolvency Service Dr Sandra Frisby, Baker & McKenzie Associate Professor in Company and Commercial Law, University of Nottingham
11:00	Coffee
11:30	Making creditor protection effective Alan Katz and Michael Mumford, International Centre for Research in Accounting, Lancaster University
12:00	An independent review of the fee-charging debt management industry Sharon Collard, Personal Finance Research Centre, University of Bristol
12:30	Lunch
13:45	Debt Relief Orders Nick Howard, Insolvency Service
14:15	Individual insolvency, centres of main interest and bankruptcy tourism Chief Registrar Stephen Baister
14:45	Afternoon tea break
15:15	Discharge in bankruptcy: An examination of personal insolvency relief John Tribe, KPMG Lecturer in Restructuring, Kingston University
15:45 – 16:30	Personal over-indebtedness régime design :- A basis for a predictive model and empirical evidence from a small geography Michael Green, Research Fellow, University of Wales

Programme for the 4^th Insolvency Research Conference hosted jointly by the Insolvency Service and the ICAEW on Tuesday 10^th November 2009 at The Institute of Chartered Accountants in England and Wales, Chartered Accountants’ Hall, Moorgate Place, London EC2P 2BJ."

Picture Credit: http://www.seeklogo.com/images/I/Institute_of_Chartered_Accountants__England_and_Wales__2007-logo-FB30DD0F30-seeklogo.com.gif

The sister organisations of the Insolvency Service throughout the World

The English Parliament has rightly been named, "the mother of all Parliaments." The Insolvency Service cannot claim such an illustrious heritage. The organisation does, however, have many sister organisations throughout the world which might view it as the mother regulator. There is certainly close discussion and contact across the globe in relation to policy and regulation of this most important area amongst the various regulators. A perusal of their websites always makes interesting reading. Here are a small sample:

Australia - Insolvency and Trustee Service Australia

Canada - Office of the Superintendent of Bankruptcy Canada

Picture Credit: http://wisdom.eu-egee.fr/avianflu/pictures/EGEE%20countries%20map%20in%20the%20world.jpg

American and Canadian Bankruptcy Law Professors - some details

English insolvency law scholarship is in its infancy compared with our American and Canadian cousins. Professor Ian F Fletcher's first book, published in 1978, could be seen as the start point of academic consideration of the topic in England and Wales (Fletcher, IF. Law of Bankruptcy. Macdonald and Evans, Plymouth, 1978), although there were of course PhDs in 1965 (Cadwallader, FJJ. In pursuit of the merchant debtor and bankrupt: 1066-1732. Unpublished Ph.D. thesis. University College London, University of London. June 1965.) and 1927 (Treiman, I. A History of the English Law of Bankruptcy, with Special Reference to the Origins, Continental Sources, and Early Development of the Principal Features of the Law. University of Oxford. Unpublished D.Phil thesis. 1927) that sprung from these shores. I have addressed the supposed dearth of English personal insolvency scholarship elsewhere.

Having in mind the more advanced position of our cousins on the other side of the Atlantic I thought it might be expedient to list here the names of some current and past American and Canadian bankruptcy (and related subject) professors, so that easier reference may be had to their work. Some of the professor are bankruptcy professors in a strict sense. Other professor have published work on bankruptcy as part of their wider work. I have already done a fairly similar exercise in relation to English insolvency professors. I have not given details of our American and Canadian colleagues' particular specialisations as in many cases this is broad and encompasses both the corporate and personal side of the subject. In no particular order, the following professors have an interest in insolvency law:

America

• Professor Jay L Westbrook - University of Texas
• Professor Lynn LoPucki - UCLA
• Professor Douglas Baird - University of Chicago
• Professor Karen Gross - New York Law School - see blog entry on her work here.
• Professor Emily Kadens - University of Texas
• Professor Angela Littwin - University of Texas
• Professor Mechele Dickerson - University of Texas
• Professor Adam Levitin - Georgetown University
• Professor Deborah Thorne - Ohio University
• Professor Katherine Porter - University of Iowa
• Professor Susan Block-Lieb - Fordham University Law School
• Professor Elizabeth Warren (pictured) - Harvard Law School
• Professor John Pottow - University of Michigan
• Professor Charles D Booth - University of Hawai'i - quite possibly the best place to study insolvency law!
• Professor Charles Tabb - University of Illinois
• Professor Bob Lawless - University of Illinois
• Professor Thomas Jackson
• the late Professor Vern Countryman - Harvard Law School
• Professor Jason Kilborn - The John Marshall Law School
• Professor Stephen J Luben - Seton Hall Law School
• Professor Jean Braucher - The University of Arizona
• Dr Tara Twomey - Stanford University
• Professor Anna Gelpern - Rutgers
• Professor Jonathan C Lipson - Temple University
• Professor Nathalie Martin - UNM School of Law
• Professor James J White - University of Michigan
• Professor Edward J Janger - Brooklyn Law School
• Professor David Skeel - University of Pennsylvania

Canada

• Professor Jacob Ziegel - University of Toronto
• Professor Janis Sarra - University of British Columbia
• Professor Stephanie Ben-Ishal - Osgoode Hall Law School, York University
• Professor Karen A. Duncan, University of Manitoba
• Professor Ruth E. Berry, University of Manitoba
• Professor Saul Schwartz - Carleton University
• Professor Angela Redish - University of British Columbia
• Professor Margaret Schabas, University of British Columbia
• Professor Jocelyne Gosselin - Université du Québec à Trois-Rivières and Université de Moncton
• Professor Benoit Mario Papillon - Université du Québec à Trois-Rivières and Université de Moncton
• Professor Sébastien Deschênes - Université du Québec à Trois-Rivières and Université de Moncton

I apologise to any professors whose names I have omitted. I would be happy to address any lacunas in exchange for a visiting research fellowship at your institution - only joking! I will add your name either way. I will update this entry as and when any offers of a visiting research fellowship, I mean contact details, come in.

Picture Credit: http://eur.news1.yimg.com/eur.yimg.com/xp/afpji/20090421/newsmlmmd.f878718dac04485a774295b354eca78e.2812_prof--elizabeth-warren--chairman-of-the-congressiob.jpg

Insolvency in Private Eye, no.1248, 30 October-12 November 2009, at page 29

The current edition of Private Eye features an interesting and critical exposition of the administration of Premier Motorauctions (Private Eye, no.1248, 30 October-12 November 2009, at page 29). It is well worth a read.

Picture Credit: http://static.guim.co.uk/Guardian/media/gallery/2008/nov/03/1/Private-Eye-372.jpg

HOBS: More from Mr Justice Cave - wrongful trading in the 19th century

I have mentioned the 'Cave Orders' before on this blog. I would now like to briefly revisit Mr Justice Cave (pictured), but this time in the context of the 19th century equivalent of wrongful trading (s.214 IA86). In Re Stainton (1887) 4 Morr, 242, the learned judge remarked in relation to a bankrupt trader, "once he is insolvent, he is no longer going on at his own risk in case of failure: he is going on at the risk of his creditors."

Picture Credit: http://4.bp.blogspot.com/_YrPhWhp-AW0/So7YM038QPI/AAAAAAAAAlc/ASq4SQ8wMHM/s400/vf12793.jpg

Latest Insolvency Statistics published by the Insolvency Service today! 28.2% increase in personal insolvencies

As, inter alia, the Financial Times, BBC, Wall Street Journal, the Times, (whose sensationalist title, "Personal insolvency numbers soar to highest since start of the Sixties" seems to forget that we are NOT in the 1960s and that comparisons are virtually meaningless as bankruptcy law now performs a different function to that which it did it 2000, let alone 1961!), the Mirror, ("400 a day go bankrupt" - no wonder the Registrars are so busy!) and the Daily Mail (this article is particularly interesting because of the readers' response comments which indicate an alarming perception of English and Welsh insolvency laws as being a feckless debtors' charter) are reporting, the Insolvency Service have issued the latest insolvency statistics. As the Insolvency Service note, the figures show that there were 35,242 individual insolvencies in England and Wales in the third quarter of 2009. This was an increase of 28.2% on the same period a year ago. This was made up of 18,347 bankruptcies (which were up 6.4% on the corresponding quarter of the previous year), 12,390 Individual Voluntary Arrangements (IVAs), (which were up 20.9% on the corresponding quarter of the previous year) and 4,505 Debt Relief Orders (DROs).

On the corporate side there were 4,716 compulsory liquidations and creditors’ voluntary liquidations in total in England and Wales in the third quarter of 2009. This was a decrease of 4.7% on the previous quarter but an increase of 14.6% on the same period a year ago. This was made up of 1,301 compulsory liquidations (which are down 9.8% on the previous quarter and down 12.9% on the corresponding quarter of the previous year), and 3,415 creditors voluntary liquidations (which are down 2.6% on the previous quarter but up 30.2% on the corresponding quarter of the previous year).

Personal insolvency statistics always make interesting reading and these latest figures will add further food for thought for policy makers and others. Meanwhile, the chairwoman of the new All Party Insolvency Insolvency Law Group (APILG), Ms Natascha Engel MP, has been accosted by Sir Nicholas Winterton MP, whilst queuing for a drink in the members' tea room (reports the Mirror - "Tory shame as Sir Nicholas Winterton slaps a Labour MP's bottom"). This is less than chivalrous behaviour from a Knight of the Realm. I am going to the R3 APILG drinks reception on the 18th November at the House of Commons. I will have to watch myself when queuing for any drinks!

Picture Credit: Insolvency Service, 2009.

A Bankrupt Bond? No Miss MONEYpenny!

As previously discussed on this blog, there are a number of debilitations that can arise from indebtedness, not least the potential loss of a seat in the legislature, or damage to the family name. An unnamed source has now drawn my attention to the Secret Intelligence Service (SIS - MI6) and their recruitment rules in relation to debt. Their website notes that:

"Are there any other issues which may affect my application?

Yes. We cannot accept applications from anybody who is currently being treated for an addiction (alcohol, gambling, etc) or has received such treatment in the last 12 months; has ever suffered from manic depression or schizophrenia; is currently bankrupt or the subject of an Individual Voluntary Agreement (IVA)."

We will leave to one side issues regarding potential analogies relating bankrupts with schizophrenics and drug or gambling addicts. This is perhaps for a future post on stigma. The preclusion on prospective spooks being subject to personal insolvency procedures is perhaps similar in terms of rationale to the legislative issue cited above, i.e. people who cannot manage their fiscal affairs are not capable of passing laws, or are incapable of spying for their country.

If this is indeed the rationale, it does not take account of the honest but unfortunate debtor, or the failed entrepreneur who the legislature have done so much to encourage in recent years, particularly in relation to discharge reduction. It does however take account of the sensitive nature of the work undertaken by SIS and the potential for its employees (current and prospective) to be subject to financial pressures. As Professor Christopher Andrew's excellent recent book (Andrew, C. The Defence of the Realm. Allen Lane, London, 2009 - for a critical review (and references to positive reviews) see the Literary Review - "Spook in the Wheel" in Private Eye, no.1248, 30 October-12 November 2009, at page 26) shows, SIS's sister organisation, the Security Service (MI5) has had its fair share of bribery based treachery over the years. The Cambridge Five (Donald Maclean, Guy Burgess, Kim Philby, Anthony Blunt and John Cairncross) and Melita Norwood, and the like, may have been motivated by ideology, but a number of Government employees (not necesarilly employed by SIS or MI5) have betrayed their country for cold hard cash.

Sir Arthur Conan-Doyle's brilliant "The Adventure of the Bruce-Partington Plans", which relates to some missing top secret submarine plans, discusses an issue which is sadly not reserved to fiction, i.e. espionage for money. A recent example of this type of behaviour can be seen in the alleged conduct of the Territorial Army translator, Corporal Daniel James. A fiscally embarassed recruit to SIS or MI5 might be more susceptible to monetary approaches. This raises an important question - can discharged bankrupts apply? These are not issues that would bother Mr Bond (pictured). He would simply win all he needs from the gambling tables of Montenegro. He would not however be able to be Mr Bond, the spy anyway, as, if he had disclosed his penchant for gambling, he would not have been recruited! I will have an olive with my vodka martini please...

Picture Credit: http://mrtrivia.net/wp-content/uploads/2009/09/james_bond_craig_junio2006-1024x682.jpg

Draft Insolvency Amendment Rules published by the Insolvency Service

The Insolvency Service has published the Draft Insolvency Amendment Rules. See here. The recent reform process leading up to this event has been discussed on this blog before (see here). The new materials include an interesting and very comprehensive "Stakeholder Commentary." This lengthy document is divided into "themes." These include:

"· The revised draft Legislative Reform (Insolvency)(Miscellaneous Provisions) Order 2009 (paragraph 3)

· Advertising Rule changes (paragraph 4)

· Standard contents for “gazetting” (paragraph 5)

· Standard contents for advertising otherwise than in the Gazette (paragraph 6)

· Meetings (paragraph 7)

· Official receiver (paragraph 8)

· Creditors’ and liquidation committees (paragraph 9)

· Disclaimer procedure (paragraph 10)

· Court procedure and practice (paragraph 11)

· Applications for private examination under sections 236, 251N and 366 (paragraph 12)

· Public examination under sections 133(1) and 290(1) (paragraph 13)

· Filing in court: rationalisation and removal of unnecessary filings (paragraph 14)

· Affidavits (paragraph 15)

· Ex parte (paragraph 16)

· Leave of the court (paragraph 17)

· Deponents (paragraph 18)

· Parts 1 and 5 (CVAs and IVAs): miscellaneous modernisation and harmonisation (paragraph 19)

· Draft Legislative Reform (Insolvency)(Miscellaneous Provisions) Order 2009 (paragraph 20)

· Remuneration, expenses and reporting (paragraph 21)

· Provision of “receipts and payments” account on resignation of office holder (paragraph 22)

· Creditor and debtor bankruptcy petitions (paragraph 23)

· Block transfer orders (paragraph 24)

· Verification of a statement of affairs (paragraph 25)

· Claims and distributions (paragraph 26)

· Limited disclosure (paragraph 27)

· Amendments to Part 4 Chapter 22 (leave to act as director etc. of company with prohibited name) (paragraph 28)

· Part 3 (Administrative Receivership): miscellaneous amendments (paragraph 29)

· Amendments relating to the EC Regulation on Insolvency Proceedings (paragraph 30)

· Electronic delivery (paragraph 31)

· Service of court documents (paragraph 32)

· Prescribed forms (paragraph 33)

· Authentication (paragraph 34)

· Annulment Changes (paragraph 35)

· Insolvency Registers (paragraph 36)

· Victims of Violence (paragraph 37)

· Inland Revenue (paragraph 38)

· Deceased office-holders (paragraph 39)

· Definitions (paragraph 40)

· Schedule 2 (paragraph 41)

· Schedule 5 (paragraph (42)"

Picture Credit: http://www.insolvency.gov.uk/

Lord Sugar as a lobbyist for IPs and his knowledge of the Rescue Culture

The Times has published a very interesting article entitled, "Lord Sugar: struggling bosses are ‘moaners’ who 'live in Disneyland.'" In what could be good news for Insolvency Practitioners (IPs) the article reports that the Lord Sugar (pictured) has been less than sweet in relation to struggling small businesses. He has called them "moaners... in Disneyland." It is not the location of the struggling business, or their erstwhile bosses, that is of note, but their solvency as defined by the noble Lord. In a very broad application of his own version of s.123 IA86 Lord Sugar has apparently observed:

"Don’t just talk to me in inverted commas about ‘banks being horrible and nasty.’ Regretfully, when we delve into some examples of the companies that have gone to them saying lend me some money I wouldn’t lend them one penny...They are bust. The moaners are bust. They are bust and they don’t need the bank — they need an insolvency practitioner."

Whilst this may be sound advice it is hoped that the relevant IP will be conversant with the rescue culture ethos, unlike the Lord Sugar who is the Government's Enterprise Champion. He made these comments whilst in Manchester discussing viable business lending practices.

Picture Credit: http://media.photobucket.com/image/sir%20allan%20sugar/jenny_keuning/SirAlanSugar.jpg

My introductory post

I am delighted to be able to assist John with this blog. I will try and post some weekly thoughts that give readers a rough idea as to the types of case that we handle and how the field of insolvency law really develops in practice. I will also add comment, where necessary, with regard to some of the general cases of interest.

Insolvency cases do not always start off as insolvency cases - for example, the 4Eng case that John blogs about today started off its life as a case in fraudulent misrepresentation and this stage of the case is the latest twist in the attempt by the innocent parties to get their money back. We have followed the 4Eng case in a case we are running at the moment, because the initial judgment was very favourable to the innocent parties and is one of the few cases out there that stands for the proposition that parties can seek their own time costs as damages against a defendant and that damages for loss of a chance were recoverable in an action for deceit. In that case, the innocent parties attempted to sort out the mess themselves, so avoiding expensive external consultants, but were later able to seek the costs of the exercise from the defendants (they charged themselves out on a notional hourly rate).

Anyway, back to insolvency. In London, we run cases for the office holder (administrator, trustee in bankruptcy, liquidator) and act in certain cases for individuals who are being pursued by those self same office holders. We have recently committed a bankrupt for contempt of court for selling assets in Spain and so we have worked with our office in Spain. What you soon appreciate about insolvency law is the inherent international nature of the discipline. Very often, the assets and the individual are in different countries. There are fascinating debates to be had about the debtor's centre of main interests, but that is for another day.

One of the things you may think is that office holders do not use their powers to great effect with regard to challenging preferences and transactions at an undervalue. You must think again, but the reason that there are not vast numbers of reported cases out there is because so many of these cases settle. The reality is that the office holder can present the evidence quickly and forcefully and, for reasons John blogs about below regarding the required mental state, very often the case is quickly over. Directors are often not in a position to challenge the case, and it is not uncommon for those directors to be facing company director disqualification proceedings as well. Discretion is often the better part of valour.

A word about costs. Office holders are now turning more and more to third party litigation funders to bring their claims against former directors. The lack of money in an estate was often the reason for such claims never being pursued, but there is a growing market of funders who will fund an action if they see the money at the end of the tunnel. There is no doubt that the armoury of the office holder is as great now as it has ever been.

s. 423 of the Insolvency Act 1986 and MENTAL STATE considered - 4Eng Ltd v Harper & Ors [2009] EWHC 2633 (Ch) (26 October 2009)

Whilst sitting in the Chancery Division (pictured) the Honourable Mr Justice Sales has handed down his judgment in 4Eng Ltd v Harper & Ors [2009] EWHC 2633 (Ch) (26 October 2009). The case concerns section 423 of the Insolvency Act 1986 and attempts by creditors to set aside certain transactions entered into by Mr Barry Simpson transferring property owned by him to his wife. The section states:

"Transactions defrauding creditors

(1) This section relates to transactions entered into at an undervalue; and a person enters into such a transaction with another person if -

(a) he makes a gift to the other person or he otherwise enters into a transaction with the other on terms that provide for him to receive no consideration;

(b) he enters into a transaction with the other in consideration of marriage [or the formation of a civil partnership]; or

(c) he enters into a transaction with the other for a consideration the value of which, in money or money's worth, is significantly less than the value, in money or money's worth, of the consideration provided by himself."

Mr Justice Sales makes a number of interesting points in his judgment regarding the nature and purpose of s.426 IA86. He states: "A claim under s. 423 is a claim for some appropriate form of restorative remedy, to restore property to the transferor for the benefit of creditors, who may then seek to execute against that property in respect of obligations owed by the transferor to them. In an appropriate case, an order might be made to require the transferee to pay sums or transfer property direct to the creditors, if the position in relation to execution is clear and any further costs associated with execution ought to be avoided. But often the appropriate order will be for the transferee to pay sums or transfer property back to the transferor, leaving the distribution of those sums or property as between the creditors of the transferor to be governed by the general law. This may be particularly important if the transferor is bankrupt or in liquidation (or about to become bankrupt or go into liquidation) and has a range of creditors not all of whom are before the court on the application made under s. 423. In the present case, 4Eng primarily seeks orders requiring Mrs Simpson to pay monies and restore property to Mr Simpson to assist it in then executing against those monies and property."

He goes on to observe that:

"The trigger for an order to be made under s. 423 and s. 425 is that it is established that the transferor has entered into a transaction at an undervalue as defined in s. 423(1) in circumstances where the transferor entered into that transaction for the purpose of putting assets beyond the reach of a person who is making or might make a claim against him (s. 423(3)(a)) or of otherwise prejudicing the interests of such a person in relation to such claim (s. 423(3)(b)) (which I will refer to compendiously as "a relevant purpose")."

In terms of mental state the judge notes first that, "The statute does not specify any particular mental state or action on the part of the transferee as an ingredient of the trigger conditions for liability, but that does not mean that such matters are irrelevant for defining the extent of the liability to be imposed, or the order to be made, at the next stage in the analysis, when the court considers the question of remedy under s. 423(2) and s. 425." He then goes on to state that, "In my judgment, the nature of any order and the extent of the relief granted by the court under s. 423(2) and s. 425 should take into account the mental state of the transferee of property under a relevant transaction (or of any other person against whom an order is sought) and the degree of their involvement in the fraudulent scheme of the debtor/transferor to put assets out of the reach of his creditors. The principles in the application of this statutory regime should reflect in this respect general principles inherent in other areas of the law."

In relation to the facts under consideration in 4Eng he notes: "I conclude that up to about April/May 2003, Mr Simpson did not deal with his assets and effect transfers to Mrs Simpson for a relevant purpose; but that from that time on significant transfers of assets by him into Mrs Simpson's sole name were arranged for such a purpose."

Picture Credit: http://www.hmcourts-service.gov.uk/courtfinder/images/courts/thomas_more001.jpg

Welcome to a New Guest Blogger! - Mr Jeremy Marshall, partner and head of commercial litigation at Irwin Mitchell, London

Hot on the heels of Mr Bill Holohan, our new Irish solicitor guest blogger, we are now joined by Mr Jeremy Marshall (pictured) a partner at Irwin Mitchell solicitors, London.

This is a very exciting development as Jeremy is well placed to offer a practitioner's critical eye view of insolvency law practice and policy. Jeremy is the head of the Commercial Litigation department in London. He has worked in a number of leading litigation firms in London, New York and the Cayman Islands. Jeremy specialises in civil litigation arising out of financial or corporate disputes with an emphasis on corporate fraud, insolvency and shareholder redress. He also advises in relation to professional negligence actions as a result of the recent credit crunch as well as claims alleging breach of fiduciary duty and breach of contract against third party professionals.

Jeremy is a solicitor advocate and is also admitted to the Bar of the Cayman Islands. Jeremy has written on a number of areas, including fraud. Here is the citation to that work:

International Commercial Fraud. Sweet & Maxwell, London, 2001.

We are very fortunate that Jeremy has come on board, especially with his very busy schedule at Irwin Mitchell. His blog posts will focus on insolvency issues from a practical perspective. Welcome Jeremy!

With Jeremy joining the team this brings our guest blogging cadre up to a respectable four (Professor David Graham QC, Professor Emily Kadens, Mr Bill Holohan and Mr Jeremy Marshall). We are not quite yet at the level of CreditSlips, but it is hoped that our varying perspectives (academic, solicitor based practical insight, and historic) will provide a wide ranging critical insight into developments in our area. There is one current grave lacuna, or perhaps two. An insolvency practitioner (IP) and an Insolvency Service employee would make us fully representative. I am working on this as we speak. If anyone wants to volunteer please email me!